Your investment strategy has the greatest chance for success when you’re an engaged participant. You hired a financial planner to support your hopes and dreams, after all. Come to your next (or first!) portfolio review ready to understand your options and work as a team with these questions:
1. Am I on track to reach my goals for debt reduction, savings, and investment?
2. If not, what adjustments are needed?
These are the opening questions to ask during any portfolio review. Your financial planner should explain how they measure your portfolio’s performance and what it means to be on track. Don’t wait for a regularly scheduled review when you’ve had a major change in life circumstances, such as a new job, change in marital status, child entering college, or health crisis. Call a meeting to determine whether you need to set new goals and shift your investment objectives.
3. Does my portfolio reflect a diversified balance?
Investments categories include growth, income, international holdings, or some combination of the three. A diversified portfolio considers your risk tolerance and avoids heavy investment in any one industry. The right mix also depends on a host of other factors unique to your circumstances. Ask your financial planner to explain why a particular diversification strategy suits your needs.
4. Do my time horizons match my financial goals?
Most investors have a variety of goals that are months, years, and decades away. How long you can wait until you need the proceeds of an investment is the main driver of where you put your money. An experienced financial advisor also understands that life happens and when it does, your investment priorities can change.
5. Is each investment in my portfolio performing as expected?
Good investment strategies aren’t carved in stone. They respond to changing economic realities. Find out how your financial planner measures success. Ask if all your investments are performing up to standard and where to move your money if they aren’t.
6. What is my total annual all-in cost?
Your all-in cost encompasses every fee associated with your portfolio. That includes what your advisor charges (flat fee, a percentage of assets, or commission) and the costs associated with financial transactions. Some examples are expense ratios for mutual and exchange-traded funds, trading costs, and account maintenance fees. These charges can add up over time.
7. Is there anything I need to do differently track to reach my retirement goals?
If you’ve changed your mind about retirement—age, lifestyle, location—a shift in investments may be in order. You may want to save more money, take bigger or smaller risks, or—if you’ve hit your monetary goal—consider investing for the next generation.
8. What are the tax implications of my investments?
There’s an old adage in financial planning: “Don’t let the tax tail wag the investment dog.” That means it’s not wise to make investment decisions based solely on tax implications. Still, your financial planner should advise you on the tax advantages/disadvantages for your investments. He or she can also help you leverage tax-advantaged accounts for college tuition, retirement, and more.
9. What if die or become incapacitated?
Your financial planner can help you implement your estate plan, including confirming titling and beneficiary designations are in order. You want your assets to transfer smoothly to the people, institutions, and causes you care about when you pass. You can also provide for your care as you physically and/or cognitively decline and protect your assets from unscrupulous individuals.
10. How do you factor in assets that are not under your management?
Ask your planner how assets outside her management have been accounted for in planning for your long term goals. Business interests, stock awards, rental properties, or possible inheritances are examples of some factors that impact your ability to achieve your goals and they should be considered when determining whether you are on track.
FJY Financial encourages client questions and considers them an important part of building an investment strategy that suits your unique needs. Contact us if you value a financial relationship based on transparency and integrity as much as we do.