Let’s paint a picture of your financial future. What does it look like? Will you be painting it yourself, or will you hire a professional to help you? For many people, financial planning is not a one-stop shop. Over time, you encounter different companies, several advisors, and hold many investments in your portfolio. This may feel like diversification, but it’s not. You probably wouldn’t hire 5 different painters to create one image of your home or family, so why do we utilize several advisors, working with different ideas? How can this potential lack of coordination impact your financial picture?
Let’s assume you have one advisor to manage your 401(k), one to manage an IRA rolled over from a former employer, one managing your liquid assets at the bank, and one to manage a college saving plan and taxable mutual funds. Are those advisors communicating? Are they on the same page with you and your plan? How do they know if there is unnecessary overlap/similarity in your investments? Do they have a relationship with your life insurance agent, accountant, and your attorney for tax and estate planning purposes? Coordination is key when developing your plan, or you may be missing opportunities or taking unnecessary risks with your assets. Although financial planning is not an exact science, the right advisor will have the tools and experience you need to develop a holistic financial picture.
Financial objectives and strategies are constantly in flux as your life changes and our economic and political climate evolves. Consider how your personal situation changes over time. In beginning your career and family, perhaps you have limited liquid assets, rent or mortgage, and only the start of a retirement savings account. But, as your career, home, and family grow, you may experience job changes, have children and aging family members, and overall greater financial assets and commitments. Has your plan adapted to this increased complexity? Is your hired advisor touching up and reshaping your financial picture to account for these changes as a good artist would do to a treasured landscape?
When you meet with an advisor to discuss your goals and needs, you can’t get a quality recommendation without disclosing information about your assets and debts. If you only show them half of your financial situation, they can only paint half of a picture. Although it may feel like an invasion of privacy, good advisors ask lots of questions and require specific details about your circumstances. The art of financial planning is built on a foundation of trust and confidence between an advisor and client. If those elements are lacking, schedule more face-to-face meetings to build a better relationship or find a new advisor.
If you feel more comfortable having several advisors, make sure to share your whole picture with each of them so that you are all on the same team – painting the same dream. Otherwise, many hands can lead to an incohesive financial plan with elements that don’t quite work together. Don’t settle on an abstract image; work with an advisor to paint a realistic portrait that confidently captures your financial future.