Travis Forman, Portfolio Manager at Strategic Private Wealth Counsel – Harbourfront Wealth Management.
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When it comes to personal finance, we can all agree it’s vital to plan ahead. But getting started is not always easy.
Using a financial advisor can help ensure you meet your financial goals. They know the industry, the market and how to map out your goals and turn them into results. Most of all, they keep you accountable.
Not all industry professionals provide equal value, however. With so many scandals nowadays, you need to vet advisors before you instill faith and trust into them. They need to understand what you’re looking to achieve and how to take you there and keep you looped into the process at all times.
If you’re seeking professional guidance, evaluate and vet advisors based on the services they offer and how well they understand your financial goals. Ask the hard questions. Inherently they should be able to do five things for you: portfolio management, cash flow management, financial planning, tax planning and estate preparations.
Portfolio Management
Investment guidance is what advisors are known for, but it’s not the only thing they should be able to do for you.
Beyond being well versed in the financial markets, their offerings should include portfolio management involving complex diversification strategies. These should be used to create a portfolio that is designed to boost returns while lowering the overall risk.
Diversification is typically achieved by holding assets across numerous asset classes. This means having a selection of assets that fall into the conventional asset classes, such as stocks and bonds, and also alternative investments.
Your financial advisor should be knowledgeable in enhanced diversification and offer guidance around what alternative asset classes are most suitable for you and also if they are not. They should be able to select specific investments within each asset class and educate you along the way.
Cash Flow Management
The impact of cash flow management can be felt in your day-to-day life. You could have substantial savings and investments, but if you have no cash in your pocket to spend at the grocery store, you sure won’t feel wealthy.
Once you enter into a partnership with a financial advisor, part of their role is to help generate the cash flow you need for daily expenditures. They should help to facilitate regular withdrawals from your investment or registered accounts and ensure you feel comfortable meeting your everyday spending needs.
Creating a plan around how to cover the cost of a major purchase is also part of their responsibilities. They should be able to organize lump-sum withdrawals in a timely manner and manage any tax implications associated with the purchase. This goes for whether you are buying a new property, buying a new business or starting a charitable foundation.
Financial Planning
The benefits of financial planning are often overlooked, but they’re essential if you want to build and maintain your wealth. Financial plans are the cornerstone and foundation of financial management. Financial planning includes multiple aspects, such as retirement planning, education planning and debt reduction, while generating strategies to enhance your wealth.
These plans help set the tone for the relationship with your advisor and provide clarity. Both you and your advisor can continuously rely on the developed plan, which will lead the trajectory of actions and outcomes ahead.
Tax Planning
While you may initially think of an accountant for your tax planning needs, financial advisors should be consulted during this process, as well. Together these two professionals make a great team to help you manage and minimize your taxes while taking advantage of any planning strategies.
A good example of how your financial advisor can help with tax planning is through guidance and specific recommendations for what and how much to contribute toward your registered investment accounts. If applicable to your situation, your advisor can help to maximize your tax-sheltered investments, ultimately putting more money in your pocket.
You can also rely on your advisor to help with annual tax loss selling. With this tax strategy, it may be possible to offset any realized gains on your investments by divesting losing positions in your non-registered accounts. The process can be complicated, so relying on the help of an advisor is key.
Estate Preparations
Planning for what happens when you pass away is something many people put off. Though it may be tempting to postpone estate planning, it is a critical component of your financial well-being. When selecting a wealth advisor, be sure to look for one who understands the importance of planning for the future, including what happens with your estate.
Estate planning frequently neglects insurance. Often thought of as a backup to be used in only the most dire situations, insurance is much more than that and can be a valuable addition to many estate plans. Your advisor should evaluate your financial situation and provide guidance about how insurance might benefit you and your loved ones.
Takeaway
Working with a wealth advisor can enhance your financial wellness, especially when they offer portfolio management, cash flow management, financial planning, tax planning and guidance on estate preparations.
Even if your advisor does all these things, that does not automatically mean they are a good fit for you, though. You should feel comfortable with your financial advisor and be confident they know the intricate details of your current financial situation and future goals. Wealth management requires a holistic approach and communication from all parties, so it is essential to work with an advisor who understands this.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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