We don't bother with lists, IME at 3 or 4 they just want to put thousands of things on it because they don't understand how to prioritise, or totally random things that pop into their heads like "A yellow and orange shell" that they won't actually care about on Christmas day.
I look at what they play with that they already have which could be expanded, I look at what they enjoy playing with at other's houses or nursery or playgroups, I think about what I remember playing with as a child, I go to toy shops and look at toys, I get random ideas from seeing adverts or posts online too.
If they see something in a shop that they want and I don't want to buy it at that moment then I say "Let's put it on your Christmas/birthday list", maybe even take a photo if they are really insistent and it might go into the mental suggestion box, but in general there isn't a physical list. The photos is a good technique though because for example DS2 asked for playdough in shops multiple times and I kept forgetting because it didn't seem very exciting to me, but having recalled all the photos I got some for their stockings and he was soo happy.
DH and I both do this and we seem to end up with a good selection... I was happy with how we did this year. And even though on Christmas eve DS2 asked for a remote control aeroplane, he did not in fact miss the lack of a remote control aeroplane (that I wouldn't get him because he wouldn't be able to control it and it would frustrate him).
The teenager I actively ask for suggestions because he stumps me 