When you sit down with clients to plan for a year-end review, it’s common to spend a few minutes catching up, and finding out what’s been going on in their lives. This is far from idle chit chat, however, as each milestone in life that clients pass is accompanied by a new set of risks, and as an advisor, you can help them make critical decisions about handling those risks.
“Working with clients on a goals-based planning approach, you can help them to identify and think about the risks they bear and address them appropriately,” noted Chad Smith, a wealth management strategist at HD Vest Financial Services. “This is one of the most valuable services advisors can provide,” he added.
It is therefore important to stay in close enough contact with clients to know when a significant event has occurred. While there are often tax planning implications, other issues arise that facilitate developing deeper client relationships.
Here are a few examples of risks associated with common major life events (posed as questions) and the risk management opportunities that flow from them. A “No” means there is a risk management task to be accomplished.
- Does each partner share a common vision of their financial goals?
- If both partners are financially dependent upon each other, are they protected in the event of a premature death?
- Are assets titled appropriately to their needs, and is a proper estate plan in place?
- Has each member of the couple been transparent about their finances, such as any accumulated debts?
- Have high-value tangible assets that will be divided been appraised, to ensure an equitable division?
- Have members of the couple each created a realistic budget so that they can live within their means going forward?
The birth of a child:
- Are there plans for who would care for the child if the parent(s) were to die prior to the child’s becoming self-sufficient?
- Is there a plan to save and invest sufficiently to support the child’s educational needs?
- Are the savings and investments intended for the child’s future benefit harbored in suitable accounts, such as a 529 plan?
Imminent or actual retirement:
- Has a financial analysis been performed to ascertain whether retirement is affordable at the time?
- Have plans been made to optimize Social Security benefits, as well as securing appropriate medical insurance coverage to supplement Medicare?
- Is a plan in place to draw from retirement savings accounts in the most tax-efficient manner?
A death in the family:
- Beyond friends and family, have the appropriate individuals, agencies and companies (e.g., life insurers, credit card issuers, etc.) been notified?
- Are the deceased’s residual financial assets being properly managed by a trustee or joint owner?
- Are estate plans being carried out?
- Are plans in place for the preparation of a final tax return or estate tax return?
The questions (and the implicit risks) associated with life’s milestones are manifold. “Educating clients about these issues, in many cases before they reach the milestones, is the first step towards managing them,” Smith said. “It begins an important dialogue that will both lead to better risk management, and also more enduring client relationships,” he added.
Published in partnership with HD Vest.
For more information about HD Vest Financial Services and how they can help you transfer a client’s wealth, visit hdvest.com/join or contact a Business Development Consultant at (800) 742-7950.
HD Vest Financial Services® and its affiliates (collectively, “H.D. Vest, Inc.”) do not provide tax or accounting services. You should consult your tax professional regarding the tax implications of any investments.
The views and opinions presented in this article are those of Chad Smith and not of HD Vest Financial Services® or its subsidiaries.
HD Vest Financial Services® is the holding company for the group of companies providing financial services under the HD Vest name.
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