Using the Right Financial Tool for the Right Job
Financial planning is a valuable tool, but only when properly applied. A comprehensive financial plan will incorporate all your resources, needs and possible life circumstances into one. It is important to remember that this will not be a static plan.
One of the big mistakes people make is that they create a financial plan and forget about it. As things change in the economy and in their lives they will need to readdress their financial condition. In fact, a good comprehensive financial planner will proactively reach out and ask to review the client’s plan with them at regular intervals.
The financial advisor will ask questions pertaining to the individual’s current and forecast situation. The financial plan will then be adjusted if necessary to keep them on track with their retirement goals.
One of the ways this can go wrong is if the financial advisor does not have the client’s best interest at heart. Most will trust their financial advisor and willingly enter into any transaction they recommend. Unfortunately, this can be a costly error.
Second Opinions May Eliminate Financial Errors
Recently, I was asked to review a case where although the individual had done a lot of things right in preparing for retirement she had also misplaced her trust in her financial broker. Money was lost when he transferred her funds out of a safe investment into a long-term risky bond. A bond that would not mature until she was 115 years old. A bond that lost money instantly due to a rising interest rate environment. A bond that never should have been recommended.
Many have a trust prepared by their lawyer but never go through the steps necessary to fill that trust with assets. Without this, that trust does not function as it was intended.
Another common problem involves retirement accounts and a lack of beneficiary designation. Even with a trust, individual retirement accounts should have an assigned beneficiary as these accounts are not owned by the trust.
A living trust should also have a secondary trustee listed in most cases. For instance, if the trustee becomes incompetent or unable to serve, a successor trustee is able to step in and manage the financial affairs pursuant to the trust owner’s wishes.
Tax implications will also have to be taken into consideration. When it is time to begin using those retirement funds or transferring ownership the financial planner will need to work closely with a CPA and estate planning attorney to provide the proper comprehensive plan that will keep the assets out of probate and lessen the taxation as well as eliminate unnecessary expenses.
The Best Time to Create a Comprehensive Financial Plan is Now
Many assume they will have time in the future to make these plans. Unfortunately, this is not always the case. Lack of proactive financial planning and wealth management can be expensive. Why allow a large portion of your hard earned money to go to taxes, probate costs and other unnecessary expenses when your planned legacy could be stress-free?
Seek out reputable guidance. Don’t be afraid to ask questions. Get a second opinion if you are unsure. It is your financial future that you are entrusting. Be completely sure you are trusting the right people.
This information is not intended to give specific recommendations, investment, legal or tax advice. Advisory services offered through Nepsis Advisor Services, Inc.; an SEC Registered Investment Advisor.