Recently, while meeting with a prospective client, I was asked what value comprehensive financial planning adds to the wealth management process. It’s a good question—and a common one.
It’s true that opposites sometimes attract. But what do you do when you and your significant other are opposites when it comes to investment strategy? You might be an aggressive, pedal-to-the-metal investor, while your partner is more financially conservative. (Or vice versa.) A difference like that can be a huge obstacle to developing a sound financial plan.
So what can you do?
As full time financial planners, our Wealth Managers spend a lot of time getting to know the daily struggles and triumphs of their clients, and have picked up a number of helpful life lessons along the way.
Here are our top seven:
As we come to the close of 2013, financial advisors focus our conversations with clients on assessing where they are and what there is to wrap up before year’s end. If we conclude that they’ll owe taxes, we look for ways to reduce what they’ll have to pay, which often leads to a discussion of the tax benefits of charitable giving. For example, if some of a person’s income is the result of required minimum distributions (RMDs) from an IRA because they are over 70 ½, we discuss donating some or all of the distribution (up to $100,000) directly to a charity before the end of the year. This is called a qualified charitable distribution; if they don’t need the income and hate taking the distribution, this can be a favorable strategy because it removes up to $100,000 of income from the tax return and helps a charity.
When it comes to the subject of financial planning, people often have the wrong idea. Whether they confuse planners with accountants, or assume that the planning process is only helpful for those with a lot of money, the misunderstandings endure. Unfortunately, these misconceptions prevent those who would benefit from planning from ever considering the service.
In an effort to clear that up, here are five common mistakes people make about financial planning.
Jean and Carl are your everyday couple. They are looking forward to retirement in a few years and don’t have a very complex tax picture. Like many of us, they procrastinated on preparing their taxes but know they have to get them filed so they can get their refund. They have a cruise planned for the beginning of May and their tax refund will pay the balance owed for the trip, and give them spending money for souvenirs.
We are adults in our 30s and 40s, born between 1965 and 1980 (Generation X). As children of the Baby Boomers, we benefited from our parents’ desire for us to go to college and further our education, even if they had not gone to college themselves. However, when the first Gen-Xers entered high school, America was in a recession, unemployment and inflation were high, and interest rates were in the double digits. By the time we started graduating from college, the stock market crashed and left us wondering if we had any financial future at all.