Do you have a financial advisor or are you considering working with one? To get the most from your relationship, it helps to think of your advisor as your accountability partner. The right one will help you chart a path toward your long-term goals, suggest course corrections as needed, and cheer you on along the way.
To get the full benefits of the relationship, having an ongoing dialogue with your advisor is key. No matter what your specific goals are, here are five topics you’ll want to bring up at least annually.
1. How Could I Better Manage My Cash Flow?
It’s hard to plan if you don’t know what you’re working with. New clients sometimes cringe when I ask them to complete a budget worksheet. Often it’s because they have no idea how much they’re spending. Other times it’s because they do, and are sensitive about it!
Getting it all down in black and white — the good, the bad, and the ugly — doesn’t just help you see what’s what from a dollars and cents perspective. It gives you the chance to see how your spending lines up with your values. Then you can adjust things that are out of whack. Do you think travel is important but consistently spend your funds on other things, then wind up frustrated when you can’t afford to take those trips you planned? Are you spending a lot on things that aren’t important to you?
Your financial advisor can help you set realistic spending targets, assess how you’re tracking against them, and suggest opportunities to redirect some of your spending to better reflect your priorities.
There are lots of spending trackers and budgeting tools out there to help you break down your spending, so you get the most out of your conversations with your advisor. Mint and You Need A Budget (YNAB) are two popular ones. If Excel’s more your style, by all means, use it.
2. What Adjustments Do I Need To Make To My Savings Strategy?
- What are you saving for?
- How much do you need?
- What is a realistic target given your other financial obligations?
- Where should you stash savings you’ll need in 1 year versus those you’ll need in 3, or 5?
These are questions that impact both your day-to-day and your long-term cash flow and budgeting decisions, the funds you have available to invest, and even your tax planning. Going through them with your advisor once a year can be like getting a financial tune-up.
It can also be a great motivator. I spoke with a client recently who’d just met the savings goal we initially set for her. Her sense of accomplishment was palpable.
3. What Tax Planning Opportunities Should I Consider?
There’s a saying among financial practitioners, “don’t let the tax tail wag the dog.” Basically, this means that tax consequences should not drive your decisions. It’s good advice to keep in mind.
What you do want to know though, is how decisions you are contemplating could impact your taxes. Talking to your advisor before you make a big financial decision — for instance, buying or leasing a car, selling property, or pulling funds from a retirement account — can save you a lot of future headaches. Your advisor can analyze potential scenarios, strategize with you on the pros and cons, and come up with potential ways to minimize the tax bite.
The other benefit of talking regularly with your advisor is the chance to be proactive with tax planning. Maybe you’re on track to earn more this year than last and want to blunt the increase in your income taxes, or maybe you earned less, so this could be a good year to contribute to a Backdoor Roth.
Pro Tip: Think of your advisor as the strategist who can think big picture and recommend tax-minimizing techniques. Meanwhile, your tax expert is the technician — tackling the nuts and bolts and implementing the strategies, in accordance with tax rules and regulations.
4. Do I Need to Update My Estate Plan?
Think estate planning is just for the wealthy? Think again. If you have children or other dependents, own real estate, have a business, or a cause you care about that you’d like to continue supporting after you’re gone, you want to make sure to set things up for a smooth transition.
Reviewing your beneficiary designations for retirement, savings, and investment accounts once a year is good practice, especially if you’ve gone through changes like getting divorced, remarrying, or becoming a guardian. You might also be caring for aging parents, which could mean you’re wondering what adjustments you’d need to make to move them in with you, buy a joint property, or help with their financial support.
Life insurance should be in the mix too. Your existing coverage may no longer reflect your needs, if say, you bought them when you had minor kids, and now your kids are grown. Talking with your advisor can help you decide what coverages still make sense for you, and which might not be worth the continuing expense. You can also talk through when and how best to add long-term care coverage or figure out how to self-fund your future care, so you have a plan in place as you age.
5. How Are My Investments Doing?
Your investment portfolio, the mix of financial assets you own, is one piece of the puzzle to helping you reach your long-term financial goals, including a secure retirement. Understanding what’s going on with it — what’s in it, how it performed, and how that compared to markets in general and why — are some things to discuss with your advisor.
You also want to make sure your investments line up with your attitude to risk. When I discuss this with clients, I often ask them to consider how they’d feel if their portfolio lost 10 percent of its value overnight. What if it lost 20 percent in a week?
Financial markets (stocks, bonds, and some other types of investments) can move down suddenly, and snap back just as quickly. They can also move down and stay down for a while. Your advisor can work with you to come up with a balance of investments that lets you sleep at night.
They should also rebalance your investments regularly. That’s so things don’t get too much out of whack as markets move, and to reflect changes to your time horizon (how long you are investing for) and investment objectives (what you want to achieve). The shorter your time horizon, the fewer risky investments (think tech stocks and crypto) you want in your portfolio, and the more you’ll want stable, income-generating (think utility stocks and bonds) ones.
The more you treat your advisor as an integral part of your team of experts, the more they are in a position to understand your goals and support you in achieving them. And that increases your odds of not just surviving, but thriving financially.
For more on making plans and hitting your goals, financial and otherwise, take a look at these articles:
- 8 Ways To Build A Realistic Retirement Bucket List
- Renting Vs. Buying In Retirement: Why I Decided To Do Both
- 5 Ways To Make Retirement A Reality, Even If You’re Short On Savings
You can find more retirement content here.