It’s a common misconception when working with a wealth manager or financial advisor that you suddenly have to get permission or be given an allowance to make big purchases or financial moves.
A wealth manager’s role is to proactively guide you through the process of achieving absolute wealth alignment, which means advising on large money moves, but not holding your cash out of reach until they approve of your plan.
In this article, we’ll debunk the myth that you’re handing over all control to your advisor and walk you through what a relationship with your wealth manager should look like, and will look like if you partner with Plancorp.
(Before we dive in, it’s important to know up front that if the idea of seeking advice on large money decisions like big purchases or early retirement makes you uncomfortable, you may not be ready to work with an advisor. We still encourage you to read on to see if our approach eases your concerns.)
The Crucial First Step: The Financial Independence Analysis
Our service model begins with financial planning from the onset. As we start a relationship with a new client, we begin by building out a baseline financial independence analysis (FIA).
We discuss your goals and objectives, and agree upon inputs for the analysis (i.e. retirement age, day-to-day expenses, income sources, planned large spending like funding education or purchasing additional real estate property, etc).
With the goals and inputs in place, we discuss the results of the financial independence analysis, which in short, addresses the question: with what we know today, what are your chances of meeting your financial goals?
We understand life and goals will change over time, thus changing our inputs and the analysis outputs. That’s why it’s incredibly important to meet with clients on a routine basis to make sure these changes are accounted for and they’re still on track to meet their goals.
The financial independence analysis becomes the backbone of our clients’ financial plans, so as big purchase decisions come up, we believe it’s key to take a look at how the FIA results will change if certain money moves are made.
The goal is never to say you can’t spend a large sum of cash on a certain thing, but rather to make sure that spending that amount won’t throw you off your plan. While you might expect an advisor to always recommend saving, ironically we find ourselves more often coaching clients into feeling confident they can make a big purchase to achieve a goal and remain on a good path.
Let’s get into a few examples of large money moves our clients desire to make, and how we partner with them to advise on whether it’s a smart move.
Big Purchases: New Car, Vacation Home, Big International Trip
I think we can all agree – what's the point of preserving and growing our money if we can’t enjoy it at some point?
If your wealth manager or financial advisor doesn’t work with you to help make your spending goals a reality, but rather questions every purchase you want to make, we’d throw a flag on that and suggest you seek out a new partnership.
Our goal is not to be stingy with your money, but to help you reach your goals. If your goal is a vacation home in the south of France or a month-long international trip, we’ll help make it happen (and maybe stow away in your luggage) with this process:
Depending on the cash needed to fund the purchase, we may run another iteration of the FIA to make sure this spending plan won’t put your overall financial goals at risk.
If the analysis results still look good and you feel comfortable with how the spending will adjust your probability of success, our team will generate a withdrawal from the appropriate account.
We’ll of course keep tax implications in mind and make sure that any large withdrawals won’t result in penalties or unexpected tax burdens.
You’re then free to book that vacation, buy that car, or invest in the vacation home. It’s time to enjoy what you’ve worked so hard for—and if you’re traveling, we’ll take the window seat, please!
Early Retirement
Pursuing early retirement is likely a much bigger financial decision than a vacation, so it’s incredibly important to revisit the financial independence analysis.
Because retirement marks a major change to both your income and planned distributions, adjusting that date by even a year can have a major impact on the analysis results.
We’ll review several things to help you determine if early retirement is possible. For example, we may look to the FIA to address the following questions:
- How will your post-retirement day-to-day budget change from what it is today?
- What are you planning to do in retirement and are the funds available to support that?
- If additional income is needed to support your desired lifestyle, are you able to generate the amount needed with your investments and other assets?
If you’re comfortable with the results of the FIA after these input adjustments, you can hang up that suit coat and kick the briefcase to the curb.
Changing Your Investment Strategy
If you’re considering an adjustment to your investment strategy as a whole, we’ll dig in a bit deeper. We'll ask one big question: What is driving your desire for change?
Depending on your answers, we continue our discussion and revisit the backbone of your plan – the FIA. This projection will address both the impact the change will have on your risk as well as the potential size of your future account. With these projections, we’ll see how your desired adjustment will change your probability of success.
If you’re comfortable with the results and your desired investment strategy still aligns with our firm’s approach, we’ll update and adjust accordingly.
The Bottom Line
The right advisor will be a champion for their clients’ goals and desires while protecting their overall financial well-being and success.
After all, it’s the client’s hard-earned money that they have entrusted us with. It’s not our job to stand in their way. We’re here to guide our clients’ plans, keep them on track, and make sure their dreams can become a reality.
Are you ready to have a trusted financial advocate on your side? Take our Money Match Quiz today to see what type of financial professional we’d recommend for your specific situation and goals.
