You found the one. You put in the extra time and energy to choose the right financial planner in a thoughtful manner (if you didn’t, be sure to check out our list of questions to ask your financial planner). This person “gets” you—your hopes and dreams, lifestyle, and priorities. The time has come to make it official and launch into your first year together.
We’re not talking about marriage, but the same sage advice can apply. Communicate, do your homework, and keep your eye on your mutual goal—in this case, your personalized strategy for a sound financial future.
Here are some tips to lay a foundation for success.
Define the Relationship
Make sure that you and your financial advisor draw up a document (a scope of engagement letter or agreement) that describes what you can expect from your partnership.
This document may include:
- All services the advisor will provide (goal creation, review of current assets, retirement planning, estate planning, financial management strategy, etc.)
- Compensation (flat fee, commission, or other billing arrangement)
- Statement on conflicts of interest
- Client responsibilities
- Confidentiality terms
Organize Your Finances
This may require some heavy lifting on your part, but the returns will far exceed the effort. It’s a helpful exercise to gain an understanding of your finances and the knowledge to steer towards the future you want.
Your advisor will request information such as:
- A list of your financial assets and liabilities (investment summaries, bank accounts, retirement accounts)
- Expected cash flows (payroll statement, rental income, social security statement, pension statement, family budget)
- Tax information (previous two years federal and state returns)
- Estate planning documents (will, trust(s), power of attorney, medical directives)
- Real estate documents (market value, mortgage note)
- Insurance information (medical, property and casualty, life, long-term care, disability)
- Employee benefits (deferred compensation, group insurance benefits)
Your advisor will review, analyze, and compile all the information and present a financial snapshot so you can view your financial world all in one place. Your advisor will also highlight any gaps and make recommendations as needed.
Discuss Financial & Investment Goals
Now that you have a detailed description of where you stand, you and your advisor can map out steps toward your desired financial goals.
Together, you will:
- Determine your needs, wants, and wishes – not only in your financial realm, but in your personal and professional life.
- Identify your time horizon for each goal. Your advisor will help you balance short (travel, new car), medium (wedding, new house), and long-term (education, retirement) needs. Are you just starting in the professional world, nearing retirement age, or already out of the workforce? All these factors and more will influence your time horizons
- Dive into investment philosophy. Most advisors focus on a diversified portfolio that keeps costs as low as possible (low transactions costs, no analyst fees) and place assets in tax-advantaged accounts.
- Restructure your portfolio to meet risk tolerance. Factors that affect your risk tolerance include income flow, time horizon, and your investment personality.
Create a Plan
Once your finances are organized and your goals in place, your financial advisor will create a customized plan to achieve your desired outcomes.
Some elements of this plan include:
- A customized savings, investment, and/or withdrawal plan.
- A Monte Calo simulation – a common tool in the financial world that factors in the probability of different outcomes based on risk impact and other variables.
- Plans to mitigate risk for both your hoped-for scenarios as well as possible negative outcomes.
Develop a Trusted Relationship
The most important outcome of the first year working with your advisor is a feeling that you have a trusted partner to help you reach your life goals. You want your advisor to act as the quarterback of your financial world. They will also function as a receiver, connecting with other professionals, such as an estate-planning attorney, CPA, or insurance agent, to work as a team to accomplish your goals.
Reach out to the FJY team of financial advisors for certified professionals with a track record of earning clients’ trust and business during the first year and for many years beyond.