My role as a financial planner is varied but I break it down to two basic areas:
- Help my clients make money
- Help my clients keep as much of their money as possible
This sounds simple enough but it encompasses many different areas of expertise. This is the single most important reason why I decided to become a Certified Financial Planner (CFP®). This intensive certification provides training in taxes, investments, retirement planning, estate planning, financial planning and insurance. Not to mention, the ongoing continuing education (CE) required.
In this vein, here are some of the services “I” provide for my clients. Most of these tasks involve either saving on taxes or managing risk. They also “help my clients keep as much of their money as possible”.
Every one hates paying income taxes. This time of year is typically when I work with clients to harvest the gains and losses in their taxable accounts. One way to minimize the pain from Uncle Sam is to take advantage of the lower capital gains tax while you can.
Now is the time to look for stock/mutual fund holdings that may be “over-weighted” –translation - you have too much of one type investment in your portfolio. I recommend owning no more than 5-7% in any one individual stock. Remember Enron? Their employees had their entire retirement savings wiped out because the only investment in the company retirement plan was Enron stock! Diversification is an important part of managing portfolio risk.
It is also a good time to reassess your personal risk level. This includes analyzing your current investments, diversification and asset allocation. Is your ratio of stocks to bonds still appropriate for your time horizon and risk level? Does your portfolio have any alternative investments? If your current advisor does not review your account(s) at least annually, it might be time for a second opinion.
Insurance is another important component of risk analysis. This covers a wide range of products such as Life, Disability, Long-term Care and Final Expense Insurance. But it also may include Variable, Immediate and Fixed Annuities. These products may provide guaranteed rates and/or income in retirement. If you are lucky enough to have a pension from your company, this pool of money will be converted to an Immediate Annuity upon your retirement. This annuity will provide you monthly income for life (assuming this is the option you sign up for).
Do you have an old 401(k) plan? Another tax savings move is to do an IRA rollover. This tax-free transfer keeps your money growing tax-deferred. It also provides you with more flexibility when choosing your beneficiaries as well as your investments.
Of course, my overriding duty is to take care of my client, the investor. Their future depends on my attention, expertise and advice. My reputation depends on their satisfaction.
They say that there is no “I” in team, but as a member of my client’s professional team, it is important that I keep an eye on all of the ”I”s.
*Note to Investors – it’s your money, make sure you pay attention to it also.
“Do what you can, with what you have, where you are”
~ Theodore Roosevelt
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