A goals-based plan pays most when the client ranks the goals

A hypothetical household that decides which goals to fund before deciding how to fund them ends up with 15.09% more utility-adjusted wealth than one that saves toward retirement alone, according to a 2015 Journal of Financial Planning paper by David Blanchett, then head of retirement research at Morningstar Investment Management. Blanchett prices that gap for the advisor's fee conversation at the equivalent of 1.65% of annual alpha, sustained across the life of the paper's base scenario.

The paper is a sequel: Blanchett's earlier work with Kaplan had already put a number on gamma in 2013, finding that five fundamental planning decisions produced 22.6% more certainty-equivalent retirement income, and the 2015 study moves from whether to plan to which goals get funded, and in what sequence. Retirement itself is broken into replacement bands, with the first 50% of pre-retirement income treated as critical for nondiscretionary spending and each further band, on up toward full replacement, carrying progressively less weight in the household's preferences, which are ranked through a prospect-theory utility function rather than a planner's rule of thumb. The Journal later gave Blanchett its 2015 Montgomery-Warschauer Award for a separate May 2014 paper on the retirement consumption puzzle.

Applying it is unglamorous. The advisor walks the household through the replacement bands, asks where the client's preference curve actually turns, and writes the ranking down. Two clients with identical balance sheets and different answers get different plans.

The paper asks a practice to produce a funding order rather than a portfolio, and that distinction has teeth at the review meeting. A household that funds discretionary goals with the same urgency as its income floor has mispriced its own preferences; a plan built around a single retirement target never surfaces that mistake, but a plan built on ranked bands does.

The 1.65% deserves skepticism: it is a utility-model output for a hypothetical household, and the paper's own language says the results suggest the gain rather than demonstrate it. Read it as the size of the decision. Even discounted hard, it reframes what the client is buying: the ranking session costs the firm an hour, while the security selection costs the client basis points every year, and the arithmetic tilts the value toward the first. As this publication has argued, the last mile of retirement is where the next advisory franchise gets built, and this is the machinery for it; households that never seek advice are the harder problem, as our reporting on MissionSquare's public-sector research showed.

The practical test takes one meeting: ask the household to rank its goals in writing before the next portfolio review, then check whether the funding order in the plan matches what the client wrote down. If it does not, the plan is funding the planner's priorities.