A financial plan isn't just about your investments. It's a strategy for pursuing your long-term goals, taking into account your family's values, risk tolerance, and liquidity needs. Over the years, that strategy will likely need to be adjusted and refined, based on life circumstances, family changes, the economic climate, and new laws that may be passed.
A financial professional such as financial advisor can work with you to create—and periodically adjust—a personalized investment plan. They can also be a steadying hand when markets are volatile, helping you to stay the course and avoid making decisions based on emotion that could undermine your portfolio's long-term growth potential. These 5 questions can help you make the most of a meeting with a financial advisor—whether it's your first time or for a regular check-in.
1. Am I on track to meet all my financial goals?
In initial meetings, an advisor will likely analyze your current financial picture and discuss where you might hope to be in 10 years, 20 years, and even beyond. Besides long-term goals like retirement, you may have other short- or medium-term goals, such as buying a house, sending kids to college, or providing ongoing support for family members.
"Many of us have multiple goals that are competing for our financial resources," says Terri Lyders, an advanced planner with Fidelity. "An advisor can help you prioritize these goals and figure out appropriate strategies for achieving them." For example, where you might hope to retire, and what do you want that retirement to look like? Do you expect to travel frequently, or move to a different home or state? Are you hoping to cover all the costs of your children's education, or do you expect your kids to contribute to that expense? Once you've articulated these values, an advisor can help you map out an asset allocation and savings strategy that makes sense for your cash flow needs and ability to tolerate market risk.
2. Am I prepared to handle unexpected events?
Volatile markets, job loss, illness, divorce—these are just some of the unexpected events that can throw a financial plan off track. An advisor can help develop contingency plans for scenarios that have the potential to jeopardize your family's financial future.
For events that would dramatically change your family's income, such as job loss or disability, an advisor can help you determine how much cash to keep in a liquid account for emergencies, as well help assess whether you have the right amount of insurance coverage.
And while volatile markets can be challenging for investors, investing decisions driven by emotion are rarely in your best interest. An advisor can help offer assurance during these times, by putting the market environment into a broader context and encouraging you to stay invested.
3. Is my investment strategy in line with my long-term goals and the current market environment?
Especially when markets are volatile it can be tempting to play it safe, opting for a conservative portfolio or even cash in an effort to avoid losses. But an overly conservative portfolio could result in lower long-term returns and can be risky even if you're in or close to retirement, because inflation erodes purchasing power over time. An advisor can help identify a well-diversified mix of investments appropriate for your situation that can potentially allow for essential long-term growth. Should the market move higher, an advisor might propose rebalancing your portfolio or harvesting some gains.
4. Am I maximizing tax savings and other tax-smart strategies?
Taxes can have a significant impact on the long-term performance of your portfolio. But the strategies designed to help lower investment taxes can be complex. An advisor can help you concentrate less tax-efficient assets in tax-deferred accounts, while helping you identify assets that generate little taxable income for taxable brokerage accounts. Post-retirement, an advisor can help you determine a withdrawal strategy designed to reduce taxes from your tax-deferred account distributions.
When markets are volatile, an advisor may propose tax-loss harvesting techniques, which use realized capital losses to offset realized capital gains and, potentially, a small portion of ordinary income. For assets that have significantly increased in value, an advisor may be able to suggest strategies to help reduce capital gains, such as charitable gifting.
5. What will my legacy look like?
Your financial goals may include not just protection for yourself, but your loved ones too—and the chance to pass on assets that can offer them a boost toward their own financial goals. An advisor can help you explore how and when to transfer assets, whether during your lifetime or after your death, considering your full financial picture and current tax laws.
A financial professional may also be able to help you begin the process of putting together an estate plan. "It can be very helpful to have a high-level discussion about how the estate-planning process works, as well as your wishes, before you begin drafting any documents with an attorney," says Lyders. Together, you can discuss the types of decisions you will need to make, such as who you might want to inherit your property and other assets, who will step in for you to make medical and financial decisions in the event you become incapacitated, or who would act as guardian for minor children. You can then work with an attorney to help draft appropriate legal documents such as a will, power of attorney, and health care directive.
Depending on the complexity of your estate, an advisor may also suggest consulting an estate-planning specialist, who can help structure a legacy plan to pass your assets to the next generation in an orderly and tax-efficient manner.
A trusted partner
Life is filled with changes, and your financial plan will need to evolve too. Consider meeting with an advisor or other financial professional on a regular basis, and whenever you have a significant life change, to make sure your financial plan is up to date and reflects your family's current needs and goals.