Why Defined Outcomes Matter in Investing

Many investment strategies focus on generalised portfolio types rather than specific client objectives. However, for investors who need certainty in achieving financial goals, a goal-based approach that secures defined outcomes is far superior.

This article explores how Fowler Drew’s investment approach focuses on customisation, risk control, and certainty of results—rather than just chasing market performance.

The Limitations of Conventional Investing

1. Lack of Personalisation

• Traditional portfolio models group clients into broad risk categories (e.g., "balanced" or "aggressive").
• These models fail to account for specific financial goals, such as retirement income stability or inheritance planning.

2. Disregard for Time Horizons

• Many investment strategies ignore the importance of time-specific needs.
• Clients with spending goals in the near future require a different approach from those investing for long-term wealth growth.

3. Risk Is Defined Incorrectly

• Most investment firms define risk as short-term portfolio volatility.
• For goal-based investors, the real risk is failing to meet future spending needs.

A Better Approach: Goal-Based Investing

1. Aligning Investments with Specific Goals

• Instead of a one-size-fits-all portfolio, Fowler Drew structures investments to match each client’s defined outcomes.
• Example: A retiree needing stable income for 30 years is invested differently from someone building wealth for future generations.

2. Using Risk-Free Assets for Short-Term Goals

• Index-linked gilts (ILGs) and cash are used for spending needs in the next few years.
• This eliminates the risk of being forced to sell equities in a downturn.

3. Equity Exposure for Long-Term Growth

• Money not needed in the short term is allocated to globally diversified equities.
• Equities provide the highest probability of long-term real returns, helping to secure higher future spending power.

4. Dynamic Risk Adjustments Over Time

• The balance between risky and risk-free assets changes as the investment horizon shortens.
• This ensures predictability and stability in meeting future financial needs.

How Defined Outcome Investing Helps in Real Life

1. Retirement Income Planning

• Investors avoid the risk of outliving their assets.
• Cashflow planning is based on probability models, ensuring spending needs are met.

2. DB Pension Transfers

• Fowler Drew’s model allows transferees to compare whether taking a lump sum or keeping a DB pension offers greater long-term certainty.

3. Wealth Preservation and Legacy Planning

• Intergenerational investments focus on maximising real wealth over decades.
• Long-term planning ensures future generations benefit without unnecessary risk exposure.

Why This Approach Works Better Than Traditional Advice

1. It Eliminates Uncertainty

• Instead of guessing how markets will behave, the focus is on guaranteeing specific outcomes at defined time points.

2. It Removes Emotional Investing

• Investors avoid panic selling in market downturns because near-term spending is already secured.

3. It Is Mathematically Robust

• Probability models ensure every financial decision is backed by data, not speculation.

2025 Update: The Growth of Defined Outcome Investing

Since 2023, more investors have been shifting towards goal-based strategies:

• Market volatility and inflation concerns have made outcome-driven investing more attractive.
• Technology-driven platforms now allow more firms to offer customised solutions at scale.
• Regulators are pushing for better client-centric models, emphasising real financial security over speculative gains.

As more investors demand certainty and customisation, goal-based investing is becoming the standard for securing long-term financial success.

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