Written by You are getting ready to meet your financial planner for the first time. You are not sure if this relationship is going to work out, but you want to make sure you have the necessary documents in case it does. To make the most of your visit, here are a list of the most common items an advisor will need and why.
Your goals and aspirations
When you prepare to meet a financial planner, the first thing you need to do is define what success looks like. Are you simply trying to accumulate money for money’s sake? This a rhetorical question of course, but a question to get you to recognize money has a purpose. Most people are looking to accumulate money for the life experiences it can create for you and your loved ones. You want the freedom to choose when to work, where to work and what to work on. Most people are excited about Friday because that is their little taste of freedom each week. Even performers and professional athletes are sacrificing their time to perfect their craft. It is not until they retire that they can choose what to eat and how to spend their time.
A good financial planner is going to ask you what success look like. Another way to ask this question is to describe what you would do if you didn’t need to think about money. As peculiar as the question may seem, your financial planner wants to see what your life would look like without financial constraints. If you had no responsibilities and every day was a Friday, how would you spend your time? Once your financial planner knows where you want to be, they can create a roadmap to get you there.
Consider the needs of your family
A good financial plan is going to ensure you don’t run out of money. Most people want to make sure they don’t run out of money from living too long, but they don’t consider whether their family will run out of money from them dying too soon. Life insurance can protect your loved ones from running out of money from a premature death. You live in a world where most required insurance is to protect you from financial catastrophe.
- Home insurance will make sure you don’t lose your wealth due to an accident in your home.
- Car insurance ensures you don’t lose your wealth due to an accident in your car.
- Health insurance will make sure you don’t lose your wealth due to accident regarding your health.
Life insurance is the only insurance that is designed to make sure your loved ones don’t lose their wealth due to your death. It is also remains one of the few insurances not required by law for an individual to possess. In the insurance portion of your meeting, you will also be able to discuss disability, long-term care and property/casualty insurance.
Create your own personal balance sheet
Just like any well-run business, your personal balance sheet needs to be taken into consideration. Your net worth is the difference between your assets and your liabilities. Your assets are everything you own. This can include your home and your investments. Your liabilities are everything you owe. This can include the balance of your mortgage, credit card debt, and student loan balances. To have an accurate balance sheet, you need to have current information on your debt and investments.
It is not always easy for you to share your personal financial information, so if you’d rather give averages, that is fine. Just know the numbers you put into the plan, dictate the numbers that come out of your plan. Meaning, if you tell your financial planner, you have $100,000 in student loan debt when you really have $150,000, your plan will not account for $50,000 of debt. This will impact your debt-free projections and could impact other portions of your plan too.
Chart your income and expenses
To discuss your finances with your financial planner, you need an idea of the money you have coming in and where that money is going. You probably have an idea of where you are spending your money and how much you have coming in, but it is best to look at a typical month of income and expenses. This information is used to create your budget and will play a role in the design of your retirement plan. While it is not always possible, sometimes you can reallocate where your money is spent each month to create an efficient plan that does not increase your monthly expenses. Other times, just having a plan feels so good, you enjoy increasing the contributions. You know you are purchasing your freedom, while maintaining your peace of mind and that is something everyone enjoys.
Your money working for you
Whether you have started investing or not, the goal is to create a plan where you stop trading time for money and start trading money for time. It is important to have the most recent statement of all of your investments. Providing your documents will allow your advisor to assess the fees you are paying and to analyze whether your plan is designed in a tax-efficient manner. Your investments could include your business, real estate, the stock market, an annuity or cash-value life insurance. Gathering all of your investment information is a critical step that allows your plan to work in a succinct, efficient manner. Most people make their investments independent of each other, which can create excessive risk or a cumbersome tax-burden. When your plan takes all of your investments into consideration, you can find synergies among them that can help you reach your financial goals quicker.
Tax and Estate Planning
Let’s cut to the chase. You do not want to pay any more in taxes than you need to in retirement. Taxes are often an overlooked aspect of retirement income. How much of your money is tax-deferred versus tax-free? If all of your retirement income is going to be taxed, then you need to make sure you are considering the financial impact. The same holds true when it comes to passing your wealth onto your loved ones. Estate planning is not just for the wealthy. Your estate plan should include just as many considerations for your death as it does your life. You should have provisions that address what happens to your home when you pass, who makes your financial decisions should your mental health decline and who are your beneficiaries.
Most believe estate planning is just about your will and trust. While both are important and should be included, you also need to make sure you have a durable power of attorney. This document will inform your advisor who can act on your behalf should you become mentally unable to do so. When discussing your taxes, you want to bring two to three years of tax returns to your meeting. Your power of attorney, will and trusts will need to be created by an estate attorney. If you have them already drafted, your financial planner can align your wealth transfer plans with your legal documents. If you don’t have any drafted, your financial planner can help to ensure your legal team is on the same page with your financial team.
Final thoughts
To prepare to meet your financial planner, you want to make sure you have an idea of where you are and where you want to be. Oftentimes, you will have a clear picture of where you want to be, but are not sure exactly where you are. Without accurate numbers, your plan may be off on dollar amount or length of time needed to accomplish your goal. Imagine having a plan that did not take your future tax bracket into consideration. This could amount to your income being reduced by 30% each year in retirement. Look at your financial plan as your roadmap to accomplish your life goals. Don’t shortchange yourself by providing subpar and incomplete information. Give yourself every opportunity to never need to worry about money again.
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