This article was originally published in Investopedia.
When you start asking clients probing questions about what they really want to do with their life, it’s amazing how often you hear something like: “I’ve been thinking more about retirement and what I’d really like to do is make olive oil in Spain.”
Helping clients achieve financial well-being requires more than just investment advice. At the same time, they are expecting more personalization when it comes to their financial plans.
During annual checkups, take the time to go beyond portfolio performance because life changes, such as a child entering college or new retirement goals, can leave serious gaps in financial plans. Especially when those plans involve moving to the Mediterranean.
Here are seven things to remember when going over annual reviews:
Beneficiaries and estate plan
Beneficiary reviews should be completed for all qualified accounts including IRAs, 401(k)s, 403(b)s and others, in addition to all life insurance policies and any annuity contracts. A review of the overall estate plan, including wills, trusts and power of attorney should be completed, to make sure the estate plan in place is still appropriate.
It is also important to remind clients to check in with their estate planning attorney periodically to confirm that the estate plan is up to date or if it needs updating.
Where important estate documents are kept is also worth discussing, as well as the name and contact information for trustees.
Finally, confirm that assets meant to be placed in a trust have actually been placed in the trust. It is staggering how many times we have come across a client who has spent the time and money to develop a thorough estate plan, but then never actually re-titled assets.
Obviously, a major change, such as having another baby or getting remarried, will necessitate a change in strategy. But even small tweaks to retirement plans, like where clients want to live, are important to keep on top of as well. The farther out you discuss these kinds of changes, the better chance you’ll have to plan and prepare for them.
What’s coming in and what’s going out? Has income changed? Expenses? Is there a specific cash need in the next one to three years that has not been discussed yet?
When creating a financial plan, the client’s budget drives so much of the ultimate output, and therefore, the final recommendations, that it is vital to continue to monitor the cash flow to determine if changes need to be made to the plan along the way.
One of our favorite sayings is “without adequate cash reserves, you are not investing, you are gambling.”
Quote“Without adequate cash reserves, you are not investing, you are gambling.”
For employed people, at least three months’ worth of cash reserves are recommended and six months is ideal. For those who are self-employed, six months of reserves are recommended, and 12 to 24 months is ideal, depending on the type and stability of the client’s business.
Life, disability, long-term care and health insurance should all be reviewed. Again.
As mentioned earlier, beneficiaries should be updated if necessary and comparing what is available through a client’s employer versus what might be available in the open market makes sense too. There are pros and cons to each — which are worth investigating.
“Do you have any significant outstanding debt?”
Reviewing the terms and rates of all existing debt is a good idea. Each case is different, so analyzing each one to determine if paying them off, refinancing the terms, consolidating, or keeping them as is, is the best course of action.
Reviewing items such as address, phone number, email address and trusted contact information is crucial. It’s definitely a good place to start, but it is surprising how often it is overlooked.
The result can be anything from missed correspondence from the advisor or custodian, to checks or statements being sent to the wrong place. This is especially important as clients get older, as many are relying on distributions for living expenses. If anything happens with the client or their accounts, it is imperative to have the right information on file for whom to contact.