If you work with a financial advisor, certain questions need addressing on an annual basis. Like working with any professional, you expect your advisor to deliver a quality product and to ensure that your entire financial life is in order. Does that mean what the return on your portfolio was? No, it does not just mean that goes far beyond just your investments. A trusted financial advisor will ensure that everything is in proper order at least annually if not more often. So what should they be asking you on an annual basis? Next, we will examine seven areas of importance that they should inquire about. While this is not an all-inclusive list, it is a starting point.
Personal Information
A trusted advisor should know if you have moved or changed phone numbers because they will have been in contact with you throughout the year. But never the less, they should confirm that none of your contact information has indeed changed. In addition to your address and phone number, they should inquire about email addresses and trusted contact information. While this may seem obvious, often overlooked by many, and issues can and do arise from not having the correct information. You, as the client, must be receiving all of your statements and, in some instances, checks required for day to day living.
Estate Planning
When it comes to estate planning, most people would rather not discuss it. But it is a vital conversation to have, so if nothing else, you make your wishes known and accomplished through the use of wills, trusts, transfer on death or TOA, and beneficiaries. All of these documents need to be current and up to date or issues will arise at the most inappropriate time. All too often, people have a trust yet fail to place their assets inside of it. This happened to my sister when she was the executor of a friend’s estate. When he passed, they discovered the house was indeed not placed in his trust, causing issues for the estate and delaying tye heirs of the house from having access to it. So it is important that your advisor either review this or recommend your estate attorney have a look at them to ensure things are in order.
Cash Flow
Cash flow is what is coming in and going out when it comes to your money. Without knowing this vital bit of information, it is difficult for an advisor to help enact a plan that addresses your values and goals. How can you properly save for retirement or college if you carry high-interest credit card debt? How can your advisor plan for these events if you are spending more than you make? All are important and need to be reviewed at least on an annual, if not semi-annual basis.
Cash Reserves
Your cash reserves is money set aside for emergencies or future opportunities. There is an adage that if you do not have a sufficient cash reserve, you are not doing anything other than gambling. It is inevitable that at some point in your future, you will have issues such as expensive car repairs or a new roof. While these are things expected, no one seems to save for the “unexpected” events. A sufficient cash reserve can mitigate such events when they occur.
How much do people consider sufficient as a cash reserve? If you are employed in a safe, stable job, three months at a minimum with six months as being ideal. If you are self-employed, six months would be a minimum when, ideally, you would have 12-24 months of cash saved. As we have just learned with the COVID pandemic, we need to expect and plan for the worst-case scenario.
Insurance
This is a category that needs addressing as things can and do change from year to year. Did the beneficiary of your life insurance change? Did you get married and now need additional insurance? Is now the time to consider long-term care insurance? If your advisor is not looking at your insurance situation, then they are not managing your risks properly. And you pay them to monitor and manage all things financial in your life.
Debt
Yes, people with financial advisors can and do have debt. Some are working with their advisor to get out of debt while others wish to manage and control their debts. This is where a trusted financial advisor can assist you in maintaining order in your debt or management of debt.
Goals
Let us face the fact that a financial advisor that does not know your values and the goals you have based on those values will most likely not be doing the best possible job on your behalf. Like the need for different insurance products at different times, goals can and do change as well. Your advisor needs to know if something has changed in regards to your values or goals so that they can properly advise you.
A trusted financial advisor is a valuable asset in one’s life. If for no other reason, they can guide you on your path towards financial success with that being what you value the most. As a fee-only Registered Financial Consultant, I am here to assist you in any way I can. Feel free to reach out to me at any time.
