Managing wealth is about much more than just dollars and cents. It’s more than “picking stocks.” It’s about achieving goals, mitigating risks and securing legacies over generations. Success comes as the result of long-term relationships built on trust and communication.
So how should you be communicating with your advisor? Here are five great questions everyone should be asking to drive meaningful conversations:
1. Am I on track to achieve my financial goals?
Financial goals should be: realistic, definable and measurable. Work with your advisor to monitor progress towards your goals over time while accounting for life and market events. Understanding the impact of portfolio value changes or events such as a promotion or job change can be extremely valuable information for you and your advisor.
2. What potential risks could keep me from achieving my goals?
Sometimes it’s not about how much you win, it’s how little you lose. In these volatile markets, preservation of capital is of utmost importance. Be sure your portfolio is diversified according to your risk tolerance using non-correlating assets and hedging tools where appropriate.
Also, remember that investment performance is not the only risk to your goals. Discuss the implications of such drastic issues as lack of savings, tax law changes, job loss, disability, or even death. All of these issues could have enormous repercussions.
3. Should I be concerned with inflation?
Albert Einstein once said that the most powerful force in the universe is compound interest. Inflation turns that force against your wealth by eroding the purchasing power of your resources. It is one of the biggest risks to wealth and your ability to fund your personal goals. Be sure you discuss this with your advisor and take the appropriate steps to address this in your financial plans.
4. Am I prepared to leave behind the legacy I desire?
When your time on Earth has passed, how would you like to be remembered? Who would you like to protect? What are your financial responsibilities? Do you have charitable intentions? Discuss these goals with your advisor to be sure you have the legal framework to cement your legacy for generations to come.
5. Income and estate tax laws, both federal and state, have changed. Am I positioned to capitalize and benefit?
Income and estate tax laws create many of the largest risks to intergenerational wealth in America. They live in a land of constantly moving targets and as a result it is crucial for you to discuss these changes annually in relation to your own unique needs. Be sure your estate documents are flexible in their ability to maximize tax efficiency while accomplishing life and legacy goals.
In the end, successfully managing your wealth takes more than investment performance. Be sure you have a trustworthy advisor and use these questions to facilitate high value conversations and keep you driving towards your goals.
Timothy Golas is a partner and director of wealth services at Spurstone Wealth Management in Simsbury. Reach him through the firm’s website at www.spurstone.com.
