by Andy Gagnon, CRPC Financial Advisor, Gagnon & Bigalke
When most people think of a financial advisor, they tend to think in terms of a money manager. In all actuality, working with a good financial advisor who delivers sound and comprehensive financial advice, managing client’s assets is a relatively small piece of financial planning.
As you read this I encourage you to complete a personal checklist on each of the topics: What are you doing well? Where is there room for improvement?
Here are several areas where a quality financial advisor can really add significant value to a client relationship.
Some of this is done with your tax professional or accountant, but your financial advisor should be helping you to make decisions on how to save tax efficiently based on your goals. For example, based on your household income should you be investing in a 401k, a SEP IRA, a Roth IRA or a combination of them? If you are eligible for an HSA (Health Savings Account), how can this benefit you tax wise? Each household is unique in their retirement goals and tax situation and this is where a quality financial advisor can really add value. Just imagine if a small change in your savings plan could help you save $500 or more in taxes, this can significantly add up over time.
Most of us own some sort of life insurance, disability insurance, or long term care insurance. But how much is the right amount to protect you and your family in case of premature death or disability? A number of people are either under-insured or over-insured or are potentially overpaying and could update their policies to save on premiums. The last thing you want is to be paying unnecessary high cost premiums by being significantly over-insured, or not have enough insurance to take care of your family if you die prematurely. This conversation with a financial advisor can help to clarify what is best for you.
Saving for retirement is only a small piece of the retirement puzzle. There are so many variables that go into a well-planned retirement. For example, based on you and your spouse’s income needs and life expectancy how can you maximize Social Security benefits? Do I claim at age 62 or wait all the way to age 70 for a higher benefit? How do I take distributions from my IRA’s or 401k’s without paying too much in tax? How do I decrease investment risk as I age so I ensure a market crash won’t wipe out my savings? Should I use an annuity product or stay invested in a mutual fund? A quality advisor can help you to make informed decisions to get the planning right for your unique situation.
Are all of your assets currently on course to pass to your beneficiaries in the most efficient and least expensive way? Is a Trust or a Will truly in your best interest or are there other less expensive ways to pass along assets at time of death. Are you on pace to avoid probate proceedings which can be very time consuming and costly for your beneficiaries.
For clients with significant assets, it may be in your best interest to diversify your portfolio beyond the traditional stock and bond portfolio. Real Estate investments in the form of REITS or other dividend paying alternatives can help to balance your portfolio in times of market stress, balancing the ups and downs of the traditional market.
As you finish reading this if you can say that you have considered all or most of the aforementioned topics, then job well done, your financial house is most likely in good order. If there are major lapses in any of these areas, consider working with a financial advisor that has a good reputation for being a fiduciary or doing what is in the best interest of his/her clients.