Wealth Management & Financial Planning

Wealth Management & Financial Planning

Financial Planning In an Ever Changing World

Second guessing yourself is a common trait. We uses processes and checklist to make sure we don’t second guess ourselves but even at that things don’t always go as expected. Tax rules change, earnings announcements can be less than expected and of course there are the Presidential tweets! Seriously, we have to be prepared to deal with both the expected and the unexpected and make the necessary changes.

A friend of mine used to say “Joe, don’t confuse me with the facts!” It was the early 1990s and I had learned to use investment products like annuities and life insurance to help people with their retirement assets. While I always recommended what I thought was best, by definition I was not functioning as a fiduciary. While studying to obtain the CFP® (Certified Financial Planner) designation, I learned that there were other financial planning options available. My access to knowledge had changed and that forced me to alter my recommendations. Change needed to take place.

There are other issues that change over time like the tax code. Life insurance can have some of the best tax benefits but also full of cost and expense. In my professional opinion those expenses made sense until the creation of the Roth reduced the families that should say yes to insurance for retirement planning purposes. The Roth IRA could be used starting in 1998 and the Roth 401(k) became available in 2006. When the facts change we have to be able to make changes.

A major challenge I had under the suitability rules and regulations was the inability to make those changes.  For instance, if I recommended, and you bought a bond and then something changed in the economy or tax code, the industry would consider it churning if I made a new recommendation to sell that bond and buy something different. That conflict still bothers me today. There is no financial crystal ball that assures my answers yesterday will always be correct. We have to be open to making changes but if our guidance comes from an industry that doesn’t allow for change what do we do?

Game changers are things that require you take notice. The Department of Labor (DOL) rule that required you only work with fiduciaries regarding your retirement and IRA accounts was a game changer. The fact that DOL rule has been sidelined is also a game changer.

They say there are only two certainties (death and taxes) but I argue for a third: change. In my firm, we use the Fiduciary Focus to help look at the decisions we have to make objectively. Risk and volatility, fees and expenses, taxes both today and tomorrow and the real return you receive make up the four parts of the Fiduciary Focus. Every investment we own, strategy we apply and recommendation we make goes through that process to find what can be improved, requires change today or works as it is. Change is certain. Be confident you are working in an environment that can make changes as necessary.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.

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