I was raised in a family of medical people: father, brother, son, to name a few. Where other kids in our neighborhood might have had a Cross or a Star of David hanging over their beds, I had a caduceus. Thus, you must immediately ask, why am I writing columns such as this? Well, the answer is relatively simple. To repeat the famous cliche, I really couldn't stand the sight of blood, especially my own.
In fact, on weekends, as a kid, I used to drive with my father and make rounds at various hospitals after, of course, we had a gigantic bacon and egg breakfast at a diner where the truckers stopped. Entering a hospital and seeing what was there didn't rest too well with those bacon and eggs. I needed a safer, more digestible profession.
All of this leads to financial health, in one way or another. We three boys were brought up to understand what medical health meant and to know how to take care of ourselves. It wasn't going to be left to a wife to become another mother. So, we followed the roadmap of annual medical checkups. As we got older and our own lives became financially more complicated, we realized that we had to apply the same map to our financial health. Thus, the fine connection with the financial planning process.
Van Sievers, a financial planner with the Financial Solutions Group in Montgomery, Alabama, specializes in investment planning, financial planning, and and estate planning. He feels that the annual financial checkup is perhaps the most important of the financial planning process. And he's right!
A goodly number of financial planners, and even their clients, don't quite grasp the important of this checkup. Why? Because they don't realize that such an annual review gives everybody a really good opportunity--a ringside seat, if you will--to measure the plan of action originally taken and the end result. In other words, to answer the question, has any progress been made?
Most people, as Sievers points out, may not grasp that lives are seldom static and that's why financial plans shouldn't just be executed and then put away. They should be an active, vital part of what is happening to a client's life.
For example, have the goals been met by any specific action? Or is everything now off the track? Secondly, are the strategies, whether short-term or long-term, still applicable? Sievers notes that "new research shows the escalating costs of nursing homes or health care in retirement wouldn't change the goal of secure long-term retirement, but it would change the strategy to achieve that goal."
Also, certain rules may change how finances are handled because of the introduction of the new Medicare Part D or the Roth 401(k). And, let's not forget changes in estate tax laws that could conceivably alter whatever plan of action has previously been taken.
These annual reviews or checkups clearly provide the planner a golden opportunity to examine the client's goals and to determine whether the client is on course or needs a bit of an adjustment. For instance, consider the investment portfolio. Does it have to be changed any? What's been the performance of those investments? It should be kept firmly in the forefront of the mind that meeting certain investment goals is considerably more important than whether such investments are underperforming or over performing.
Just as with an annual medical checkup, the financial checkup affords the planner the x-rays to determine whether the financial condition of the client is still in the pink.
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