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Financial Planning Part 3: Sizing Up Your PortfolioReviewing your portfolio is an important step to your retirement. Here’s what you need to know and how to go about it.
Illustration by Gabriel Lefrancois
Inject new life into your financial portfolio by following these tips.
“ You can arrive at how much you can afford to invest by creating a budget comparing how much you earn to how much you spend.”
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In continuing on in the six-part series on financial planning, part three addresses the review of one’s portfolio—what you should expect from your financial advisor as he/she goes over it with you—and what you should have prepared and ready in the way of paperwork prior to a meeting with them.
A quick review: The first installments in this series covered questions you should come to expect your financial advisor to ask you when taking you on as a client in order to become familiar with your financial situation. In the second segment, I discussed what questions you may want to answer as you go about planning for retirement (links to both are at the bottom). In sum, these two initial installments were geared to help you and your financial planner better understand your wants, needs and concerns as you ponder retirement.
In this third installment, I will share with you what our teams do as we go about helping our clients review their investment portfolio. This article was put together with substantial assistance from Steve Solys of Legacy Private Capital, a colleague of mine, and part of our financial team. It is through this assessment that a couple can best put their money and assets to work. The starting point should include an agenda and should also include the following:
* Objectives: What is the overall goal? For example, does a person want to retire at a certain age? Accumulate enough wealth to leave a large sum to heirs? Live on "X" amount each year starting at a given age? Bequeath to a charity?
* Expectations: How is a couple presently living? Lavishly? Conservatively? How do they envision their respective net worth in the coming years: larger, smaller? How will they use their assets in the future?
* Statement of investment policy: This is an assessment of a client’s risk tolerance, timeframe and liquidity needs. In sum, this evaluation serves as a roadmap for getting them to where they want to go and also specifies when they want to get "there."
* Cash flow and principal needs: Is a client looking for an assessment monthly, yearly? We can calculate within any time frame. It depends on how often and how close a client wants to keep tabs on their portfolio and their interest in altering it. For instance, if they are currently living off investment resources, those numbers are subject to fluctuation, which may require a closer eye on one’s cash flow.
* Asset allocation: This is an evaluation of how best to diversify a couple's resources to smooth out the peaks and valleys. The team is not trying to hit home runs for a client, but rather a series of doubles. How we suggest that a client reallocate money could be critical to the overall picture. We always assess whether or not the assets are being put to the best use, and if not, how we can make that happen.
* A view of the most recent summary report—monthly or quarterly: This typically includes a look at the paperwork a client receives from their stockbrokerage firm, bank, credit union, or other financial institution where assets are held. Naturally, a review of this information helps a client make important decisions along the way.
Prior to setting up a meeting with your financial advisor or financial team to examine each of the above will require some preliminary exploration on your part. A person needs to determine if they have discretionary income to invest (in order to have a portfolio). You can arrive at how much you can afford to invest by creating a budget comparing how much you earn to how much you spend.
Often, I am asked at what age a person should start this process and how much they should allocate to build their portfolio? This will always depend on the facts and circumstances, as well as the goals and objectives of the individual or couple.
For instance, is the client saving up to buy a house or are they saving for retirement? Should they put aside a certain amount for the children? I always advise that a client think about their needs before they begin to consider and plan for those of their children. No matter what your financial goals, it's never too early to start planning.
RELATED ARTICLES
Financial Planning Part 1: Don’t Be Afraid to Ask
Financial Planning Part 2: Retirement Planning
Simon Singer is the founder of the Advisor Consulting Group, a Southern California financial and estate planning firm designed to provide assistance to affluent clients and to those CPA and tax attorney firms that handle complex financial matters. He has been in the business of Financial Services since 1966, and is a mentor and advisor to many multi-millionaires and billionaires. Singer is an author and speaker who also provides regular commentary to media on various financial topics of the day.
A quick review: The first installments in this series covered questions you should come to expect your financial advisor to ask you when taking you on as a client in order to become familiar with your financial situation. In the second segment, I discussed what questions you may want to answer as you go about planning for retirement (links to both are at the bottom). In sum, these two initial installments were geared to help you and your financial planner better understand your wants, needs and concerns as you ponder retirement.
In this third installment, I will share with you what our teams do as we go about helping our clients review their investment portfolio. This article was put together with substantial assistance from Steve Solys of Legacy Private Capital, a colleague of mine, and part of our financial team. It is through this assessment that a couple can best put their money and assets to work. The starting point should include an agenda and should also include the following:
* Objectives: What is the overall goal? For example, does a person want to retire at a certain age? Accumulate enough wealth to leave a large sum to heirs? Live on "X" amount each year starting at a given age? Bequeath to a charity?
* Expectations: How is a couple presently living? Lavishly? Conservatively? How do they envision their respective net worth in the coming years: larger, smaller? How will they use their assets in the future?
* Statement of investment policy: This is an assessment of a client’s risk tolerance, timeframe and liquidity needs. In sum, this evaluation serves as a roadmap for getting them to where they want to go and also specifies when they want to get "there."
* Cash flow and principal needs: Is a client looking for an assessment monthly, yearly? We can calculate within any time frame. It depends on how often and how close a client wants to keep tabs on their portfolio and their interest in altering it. For instance, if they are currently living off investment resources, those numbers are subject to fluctuation, which may require a closer eye on one’s cash flow.
* Asset allocation: This is an evaluation of how best to diversify a couple's resources to smooth out the peaks and valleys. The team is not trying to hit home runs for a client, but rather a series of doubles. How we suggest that a client reallocate money could be critical to the overall picture. We always assess whether or not the assets are being put to the best use, and if not, how we can make that happen.
* A view of the most recent summary report—monthly or quarterly: This typically includes a look at the paperwork a client receives from their stockbrokerage firm, bank, credit union, or other financial institution where assets are held. Naturally, a review of this information helps a client make important decisions along the way.
Prior to setting up a meeting with your financial advisor or financial team to examine each of the above will require some preliminary exploration on your part. A person needs to determine if they have discretionary income to invest (in order to have a portfolio). You can arrive at how much you can afford to invest by creating a budget comparing how much you earn to how much you spend.
Often, I am asked at what age a person should start this process and how much they should allocate to build their portfolio? This will always depend on the facts and circumstances, as well as the goals and objectives of the individual or couple.
For instance, is the client saving up to buy a house or are they saving for retirement? Should they put aside a certain amount for the children? I always advise that a client think about their needs before they begin to consider and plan for those of their children. No matter what your financial goals, it's never too early to start planning.
RELATED ARTICLES
Financial Planning Part 1: Don’t Be Afraid to Ask
Financial Planning Part 2: Retirement Planning
Simon Singer is the founder of the Advisor Consulting Group, a Southern California financial and estate planning firm designed to provide assistance to affluent clients and to those CPA and tax attorney firms that handle complex financial matters. He has been in the business of Financial Services since 1966, and is a mentor and advisor to many multi-millionaires and billionaires. Singer is an author and speaker who also provides regular commentary to media on various financial topics of the day.
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