Search the internet for financial advisor websites. You’ll find pretty pictures, words describing expertise and service offerings, and paragraphs about what makes this one or that one unique. Most of them blur together, and it’s hard to choose.
We’ll leave the question of how to find a good advisor for another day. This blog explains why folks in mid- to late-career who are accumulating retirement savings should be working with a competent financial advisor.
At its core, financial advice helps you with your money. Kind of obvious, you say? Yes, but let’s talk about what it is about your money that makes it susceptible to help. What is it that a financial advisor can do for you?
What is it about money?
1. Money is complicated.
Invest it or put it under your mattress? Buy individual stocks or bonds or invest in mutual funds or ETFs? Which investments should be in a tax-deferred account, or a tax-paid account, or a tax-free account? What’s a reasonable assumption about how much my portfolio should grow during retirement? What about taxes? Am I sufficiently diversified? When should I claim Social Security benefits? Am I investing more aggressively than I need to?
You can raise money questions faster than you can research money answers.
In other spheres of life, many of us get help on matters like filing taxes, buying insurance, obtaining a will, appealing a property tax assessment, fixing the car’s transmission, or even checking for termites.
Yes, it’s possible to attempt to do all those yourself, especially with the help of the internet. But the point is, sometimes between the complexity of the task and the consequences of not doing it correctly, we opt to pay for knowledgeable, experienced assistance.
Can you manage your own money without a financial advisor? Certainly. Will you make mistakes or overlook opportunities if you do? Possibly. Should you at least consider working with a competent advisor? We think so—read on.
2. Money is important.
Most of us have a few dreams in us of things we’d like to do—places to go, gifts to give, grandchildren to educate, legacies to bequeath, and the like. Most of our dreams require money.
Do we have to realize these dreams? Of course not.
Will our lives (and the lives of family and friends touched by the realization of our dreams) be fuller and more rewarding as a consequence? Yes.
We buy homeowner insurance to protect the dream of owning our home. We purchase life insurance to protect the vision of providing for loved ones in the event we’re out of the picture. Some of us even exercise regularly and watch what we eat and drink to protect the goal of staying healthy.
What are you doing to protect the money you have to make your dreams a reality in the coming years? We’d suggest working with an experienced, knowledgeable financial advisor.
3. Money is feelings.
Carl Richards, the New York Times “Sketch Guy,” has a beautiful but simple sketch that says “Money = Feelings.”1 Richards has made the point in a recent column that while many people think money belongs in the math department—Excel spreadsheets, budget projections, calculators and all—in reality, money belongs in the psychology department.2
Money is an emotionally charged subject. And it’s hard to talk about feelings.
Marriages have been destroyed over money issues. Fear and greed drive the stock market. Think of discussions with your kids about spending or inheritances or the importance of getting a job that keeps food in the fridge.
In our practice, we sometimes come out of client meetings confused about whether we’re financial advisors or marriage counselors. It’s rarely an argument whether the investment return is high enough. It’s more often a case of conflicting views on how to leave money to the kids. Or whether one feels secure enough, given the projections on the screen.
Such issues are less frequently resolved with a spreadsheet than by voicing emotions. Sometimes it’s a case of helping the client verbalize what those dreams really are and assuring her that she’ll be all right taking that trip or setting up that educational plan for the grandkids.
Maybe you’re skillful enough to avoid money arguments in your household. But recognize that dealing with emotions can be tricky, and just as folks go to counselors for family issues, it may be prudent to work through your financial plans, dreams, and concerns with an objective advisor.
4. Money is dynamic.
Your bank account balance, your 401(k) balance, the value of your house, and your net worth are constantly fluctuating. You can take virtual snapshots from time to time, but the numbers rarely stay the same.
Tax laws change periodically—some say tax laws are written in pencil. Have you thought through whether your kids are now equipped to handle needing to empty the IRA they inherit in ten years? How about estate taxes? Limits on itemized deductions?
The point here is that managing your money well requires ongoing thought and activity, responding appropriately to changing market conditions, legislative initiatives, and your own evolving goals.
While a buy-and-hold investing philosophy may generally be appropriate for you, managing your money is not something you want to put on auto-pilot.
And like it or not, most of us may have diminished financial capability as we age. We may worry about the unexpected death of the primary financial decision-maker in the family. We should care about what shape things might be in for our loved ones if we’re suddenly out of the picture.
Can you keep your financial affairs up-to-date with investment markets and legislative changes and provide financial continuity in the event of your passing? Possibly. Might it be worthwhile to have a trusted contact whose job is to be knowledgeable about your financial affairs and how they may be impacted by changing circumstances? We think so.
Life is full of trade-offs. Every decision has consequences. Inaction? Well, that’s a decision, too. If you are within five years of retirement and have $1M in investable assets, we’d be glad to explore how the services we offer can help you and your money. Give us a call. Let’s talk.
Disclaimer: The information provided here is general and intended as educational in nature. It is not intended nor should it be considered as tax, accounting, or legal advice. Investec Wealth Strategies and its advisors do not provide tax, accounting, or legal advice. We recommend you seek the counsel of your attorney, accountant or other qualified tax advisor concerning your situation.