Maximize your experience with a financial advisor

As I think about meeting with my clients, my first thoughts turn to the wonderful relationships we have; it’s all about people, first and foremost. I find that my meetings always begin with “catching up,” much as I would with an old friend. That said, the catching up conversations are also a integral part of the financial decisions my clients and I make together – as you will see …

1. Have there been any changes in my world that could affect my financial life? There are many personal and professional events that affect our finances, like a change or loss of job, retirement, marriage, new child, new grandchild, a divorce, death, inheritance, educational (private school or college), grown children coming home, parents needing support, pursuit of hobbies, vacations, bucket list items – the list goes on. There’s not much that doesn’t have some impact on finances; any changes should be part of the conversation so your financial advisor can make adjustments and recommendations, or offer guidance.

2. Should I re-visit time horizons? When you first meet with your financial advisor, they will want to know when you plan on using the money you are investing, and will you plan to withdraw funds in a lump sum or in monthly payments; these questions establish your “time horizons.” This information is a critical part of any investment or financial plan, i.e. if funds are needed for college expenses five years from now, they will generally be invested more conservatively than if they are needed for retirement in 20 years. If you have any events that have changed your original time horizon, for example an earlier or later retirement target date, then this should be clearly communicated.

3. Do I have enough cash, or too little cash? Cash comes into play for two primary reasons; first the rainy day or emergency fund, second as part of portfolio management. A general rule for the working folks is that you have ample savings to cover six to 12 months of expenses in the event of job loss. For the retired crowd, it gets a bit more detailed as you anticipate potential needs that can’t be covered by your retirement income; for example a new car, a new roof, travel or hobby. In terms of cash as part of portfolio management, advisors may recommend a percentage of your funds be kept in cash either to meet unanticipated events or as part of a well diversified portfolio.

4. How is my risk tolerance? With the swings in the stock market in the past 10 to 15 years, most of my clients have found that their original tolerance for risk has changed, and generally have moved to more conservative investments. That said, we are having a bit of an upswing in the market, and in consumer confidence, so some folks are feeling that with long term investments they can afford to take some risk.

5. Is my retirement income plan in good shape? Whether you are planning for retirement, or in retirement, it is always a good idea to include this in your meetings. For some clients, Social Security and pensions can provide for a pretty straight forward income plan – however, that is not usually the case. As we have moved from a pension based work-to-retirement environment to a 401(k) you’re-on-your-own environment much has changed. It’s not unusual to have clients with scattered assets – a couple of IRAs, a 401(k) or two, perhaps a small pension from a long ago job. Throw in the need to address the IRS requirement to withdraw from your IRA at age 70 1/2 to avoid 50 percent penalties. Add to that the question of when to apply for Social Security to maximize your benefits. It can all very quickly become a swirl.

6. Is there any way to improve my tax situation? Your financial advisor, ideally working with your legal and tax professionals, can often make recommendations for more favorable tax treatments. More common strategies may be increasing contributions to 401(k)s or IRAs, establishing trusts and/or the use of insurance products or municipal bonds. As we look at potentially higher taxes in 2013 these may be viable options.

7. Are my affairs in good order? As once recent client simply said, “I want things to be tidy.” I cannot stress enough the need for planning for your passing and transfer of assets. It can be an uncomfortable conversation, but it truly is the last gift you can share with your loved ones. Without proper planning and communication, settling an estate can be down right messy – and it can split families. It is enough to grieve, it is too much to have to deal with all the issues that arise from a lack of planning. Communicate with your professionals and request a team approach. Communicate with your family and loved ones in a family meeting. It may take a fair amount of effort to get your house in good order, but speaking from much experience, you will sleep better when it is done. And once it is done, continue to communicate and review at least once a year.

I often say, “It’s not all about the money, it’s about life.” The first question and the last question I presented – these are all about life – and death too. The middle questions are about managing financial components. You can not manage the financial components well unless the life and death parts are communicated clearly; they are your foundations for successful living and successful passing. Planning and caring for your loved ones; as I said, “It’s all about people, first and foremost.”