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Financial Fitness For 2017 And Beyond

1/11/2017 7:58:35 PM by Morgan Wendlandt Edited for Rick Durkee Leave a Comment
Ahhh . . . New Year’s. It’s that fateful time when we all vow to take control of our bad habits. It is the time each year when we sit, ponder, and reflect on the wrongs in our lives and take action to fix them. For most of us, our resolutions focus on two things: our physical and financial fitness. Most of the time, those both start with an appointments.

Believe it or not, those two check-ups, to a doctor and a financial advisor, are pretty similar.

When we go to the doctor, we are all used to hearing those basic questions that they start their check-ups with: “Do you drink?… Do you smoke?… How much exercise do you get a week?… Are you experiencing any pain?” Those questions, although simple, are critical to doctors. They use those questions to establish a baseline for how they will conduct the rest of the appointment and their advice and recommendations moving forward. An appointment with your financial planner works the same way. There are specific things about your life, your spending habits, and your future plans that are critical to the plan that your advisor will lay out for you.

Your visit can be a lot more effective, and a lot more comfortable, if you know these basics ahead of time. In order to be prepared for your visit with a financial planner, make sure you think about these five points before you walk through the door.

What’s Your Goal?

This is the first question that must be addressed. It’s absolutely impossible to create a successful financial plan of action if it’s not clear what you want that future to look like. Be prepared to give specifics of where you want to be, and what you would like to accomplish with your finances in the years ahead. Is there a target figure you want for retirement? Do you want to be able to finance your kids’ college education? Are you looking to leave a legacy? These goals can be just a few years down the road or decades into the future, but be prepared to give a clear picture of what you are looking for.

What’s Your Current Situation?

As they say, tomorrow is a gift, but today is the present! Once the future is laid out, it’s critical to nail down what your current situation is. Before an advisor can work out a plan moving forward, they need to know what you have to work with now. Be prepared to give a realistic account of your total current assets. Be honest about what you are bringing in now in terms of cash flow as well as how you expect that cash flow to change in the future.

A retirement specialist must also understand if you are in the accumulation or distribution phase of your financial life. This is critical, since oftentimes you can take on more risk in the accumulation phase of your life. On the other hand, when we enter those distribution years, well, more risk may not be our friend. The appropriateness of any investment vehicle is based greatly on what you have now, what you expect to have moving forward, and what phase of your financial life you are currently in.

Do You Have A Budget?

All of us run a business and that business is your household. Every successful business must have a budget. It is our blueprint to success. Questions such as, “Do you have a formal budget?” become extremely critical. If the answer is no, take action and create one.

If you do have one, it’s important that you lay out your budget for your advisor. If you are in your accumulation phase, it helps the specialist know what cash you have available to invest each month to help hit your goal. If you are in your distribution phase, it helps the specialist design an income system, so you don’t run out of money. Be straightforward and honest with your planner so that they can be straightforward and honest about what plans and steps are right for you.

What’s Your Role?

It’s also important to have an idea of the role you want to play in any financial planning. In other words: how involved do you want to be in the process? Especially if you are going into the appointment as a married couple, set expectations regarding who the best contact person is. Do you prefer e-mail or phone for the form of contact? What times of the day are you available to chat? Be clear about what type of involvement you want in the planning process and how you want that involvement to be carried out.

What’s Your Standard?

This is important because there are two basic industry standards and you need to know what side of the fence your retirement specialist is operating from. The two standards are suitability and fiduciary standard of care.

The fiduciary standard requires that an adviser put the clients interest first and is adhered to by Registered Investment Advisors (RIA) and enforced by the Securities and Exchange Commission (SEC). The fiduciary standard offers “best advice”. This best advice must take into account the needs of each individual client . . . period. Common licenses required to operate from this standard will be a Series 65.

On the other hand, the suitability standard requires that a broker make recommendations that are suitable based on a client’s personal situation, but the standard does not require the advice to be in the client’s best interest. Brokers, also known as registered representatives, are held to this suitability standard, which is enforced through a self-regulatory organization called the Financial Industry Regulatory Authority (FINRA). Common licenses required to operate from this standard are a Series, 7, 6, and 66.

Ask your retirement specialist to formally list all the areas in which they and their company can receive commissions and fees. If they cannot or will not, well, you may want to consider whose best interests they have at heart.

Making an appointment with an advisor is a critical step in your taking control of your financial future. Just as you go to an expert for a check up on your physical health, you need to do the same with your financial health. Often times, it’s a wake-up call for future investors as they see where they stand now, and where they could stand down the road. Don’t start the year with your head in the sand.

Questions? Comments? Ask Rick!





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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by radical promoting and their editorial staff based on the original articles written by jeff cutter in the falmouth enterprise. This article has been rewritten for Rick Durkeeand the readers of Rick's Weekly. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.