When it comes to tax and financial planning, all of us — especially those with a high net worth — try to be proactive by maximizing the power of our money. To that end, many hire a financial advisor early on to help them get started with a solid spending and investment plan. But after a few years as your needs evolve, it can be difficult to know whether your financial advisor relationship is serving your future goals.
What got you this far may not be what takes you to your longer-term goals, and a financial planning checklist is one of the simplest ways to determine whether you have someone who is proactively presenting you with wealth strategies that go beyond basic advice to achieve financial independence.
You may consider transitioning from a financial advisor to a wealth manager. Besides having a high level of experience in the field, they’re also privy to the latest financial planning news and resources necessary to build a comprehensive plan for your situation.
Importance of Financial Planning
Financial planning involves staying up-to-date on changes in laws and spotting new opportunities to grow and apply your wealth to achieve life goals. These are very easy to miss unless you’re a financial expert.
When should you start financial planning? Right away. Many people wait until the end of December to start assessing their finances. However, by then, it’s usually too late to act, particularly when it comes to tax strategies. For instance, we recently identified a way to restructure one of our client’s businesses to take advantage of a new state tax law, saving him upward of $250,000 over the next two years. However, all that could have been lost if we hadn’t identified it well ahead of the filing date.
Here are 6 financial planning goals your advisor should be asking you about proactively.
6 Financial Goals To Talk with Your Advisor About
There’s never a better time than now, so don’t delay reviewing your finances. Just be mindful of important aspects of financial planning that you can do anytime. Here are six critical areas to include on your financial planning checklist:
1. Income Tax Planning
Give yourself plenty of time before the end of the year to review taxes. Find ways to reduce, defer, or accelerate your tax obligations.
Consider giving to nonprofits and charitable organizations as a great option to support the causes you care about. Keep track of your monetary and property donations so that you can take advantage of deductions to reduce your taxes.
As an added benefit, a Roth conversion allows you to transfer money from a traditional IRA, pay the taxes up front, and generate tax-free income. You can also spread those payments out over time. So, rather than paying a boatload of taxes later in retirement, you can pay lower taxes now and potentially save in the long run.
2. Estate Planning
If you have a high net worth, one way to minimize estate taxes is to utilize the annual exclusion. This allows you to gift a set amount of money every year without being subject to estate taxes.
Remember: In 2026, the estate and gift exemption goes back to the levels seen before the Tax Cuts and Jobs Act (TCJA) changes that occurred in 2018. Despite popular opinion, this exclusion can be used now, not only by the estate of a deceased person.
Another trap those who currently work with an advisor fall prey to is letting your will and trust go stale or out of date. It's critical your will and trusts are current and contain any changes in assets or desires for distributing them. A good advisor will ask you about changes you may want (or become pertinent as laws change) at least every few years.
3. Tax Loss Harvesting
Tax loss harvesting is a way to monetize unrealized capital losses.
If you sell an investment for less money than you paid for it, you can use the difference as a capital loss. This allows you to offset capital gains you realized (or expect to realize this year) and carry over the rest of the loss.
If your capital losses exceed the gains, the excess reduces your gross income up to $3,000. In some cases, that reduction might also bring a drop in taxes, generally allowing you to take advantage of available deductions.
4. Equity Compensation
Equity compensation (e.g., stock options) is a great benefit that come with success in your career. They also serve an important, but often complex, role in your financial plan. For example, you may be able to defer or reduce taxes using equity compensation, but these plans require the use of strategies to avoid mistakes and surprisingly hefty tax bills that can come when you sell or exchange outside of certain windows. That’s because companies often offer benefits packages with various equity awards that are subject to their own tax rules.
TCJA tax provisions, encompassing changes in the income tax rates and ranges for all brackets, expire at the end of 2025. This includes a reduction in the top rate changes in the calculation of the alternative minimum tax. It’s crucial to be aware of these changes early to maximize your tax savings. If equity compensation is a part of your benefits package, but your current financial advisor isn't talking to you about setting your long-term strategy for those assets, it could be a costly mistake.
5. Retirement Planning
Before the SECURE Act took effect in 2020, and more recently the Secure Act 2.0 kicking off in 2023, you were forced to take the required minimum distributions (RMDs) from your retirement plan at age 70 1/2. Now, if you were born in 1960 or later, this requirement does not begin until age 75, giving you more years of tax-deferred growth if your financial plan doesn't compel you to begin withdrawing earlier.
Failure to take your RMDs at the appropriate time can mean you'll face issues such as the excess accumulation penalty. This penalty involves an excise tax for any years you fail to take your RMDs.
6. Benefits Planning
If your advisor isn't assisting you in reviewing all of your employee benefits, you're likely missing out. Look over your employee benefits package, including everything from medical insurance and tuition reimbursement to retirement plan contributions and employer matching.
If your company offers a Flexible Spending Account (FSA), set a plan to strategically use FSA money before the end of the year so you aren't rushing and spending it on unnecessary items so you don't lose it. You also have the option of setting some aside to pay for next year’s healthcare expenses, an option many don't know about.
Lastly, review your company’s 401(k) plan, if available. When you enroll, make sure you’re contributing enough to take advantage of any employer match — it’s truly one of the only "free money" opportunities out there that you can use to invest in mutual funds and other assets to help you achieve your long-term goals. Be sure to consult with an investment advisor to help you determine the right allocation of funds within your 401(k) plan.
Working with a Plancorp Advisor
Most importantly remember it's okay to outgrow an advisor that helped you get on your feet. Whether taking advantage of tax-saving strategies, reviewing your retirement plan options, managing your equity compensation, or making investment decisions, staying on top of your finances and making proactive decisions ensures your wealth stays protected and grows over time.
It’s common to find yourself looking through the rearview mirror because your past plan was inadequate for meeting your current financial goals. A component of avoiding that regret is to regularly assess whether your current advisor is a match for your goals and proactively asking the important questions that will help set you up for success. This goals-based financial planning approach to personal finance is a great idea, regardless of your financial situation. It can reduce the stress that comes with over-monitoring your assets or trying to game any system. Remaining focused on your goals and an evidence-based approach builds confidence and keeps you focused on what's most important for you.
You can seek the financial advice of a trusted financial advisor or wealth manager to help guide you. Pro tip to narrow your search: Ensure that they carry the appropriate designation, such as Certified Financial Planner (CFP) or certified public accountant (CPA), and look for firms that carry a certification in their fiduciary standard like CEFEX.
If your advisor isn’t bringing the level of support that encompasses these six financial goals, it might be time to make the change to a wealth manager like Plancorp. Your financial life and financial future can be affected by many things, from unexpected life events and changes in the stock market. That's why it's key to have the right team of personal financial advisors on your side. We can help you based on your risk tolerance as it pertains to everything, such as investment portfolios, mutual funds, life insurance, and more. Take our financial assessment and schedule a consultation to learn more about our investment products and services.