5 topics your adviser should cover during a portfolio review
Everyone has different financial needs, and proper planning is a critical step to ensure you are on track to meet your goals. When we are young, life seems simple, but as we age our lives become more complex and this requires more planning.
When you meet with a financial adviser, it is important for the adviser to understand every component of your life. During a portfolio review meeting, you and your adviser should cover these five topics.
Life events, including health/family/work
All financial planning meetings should include a review of your health, family, and work life. Life events, such as marriage, your job situation, children, a new home, or retirement should always be discussed. Your adviser needs to know if anything in your life has changed or is anticipated to change. Your adviser should fully understand your unique situation to make sure your portfolio construction is best suited for your personal circumstance.
If your adviser does not know your situation, he/she could be investing too aggressively or too conservatively. Further, many life events require advance planning, so making your adviser fully aware of future life events will allow time to be financially ready.
Income needs
Your adviser should cover your income needs to make sure you have enough funds available to meet upcoming expenses. Panic selling to raise funds to pay expenses is one of the worst investing mistakes. If an adviser reviews your cash flow with your income needs in mind, there is time to create an appropriate investment plan, eliminating the need to sell assets at perhaps a less than optimal time (when markets are down).
Alternatively, your adviser needs to make sure you are not receiving too much income that might just be sitting in savings earning little to no interest. With rates at historic lows, that extra income could potentially be earning higher interest if invested.
Beneficiary Review
One of the most important functions of a financial adviser is to make sure your wishes are known and can be implemented upon death. Every year, a review of your beneficiaries should be completed to ensure they are correct and up to date.
Since your beneficiaries can change over time, it is extremely important to make sure that the person or persons you wish to receive your assets after death is current. It is critical to understand that beneficiaries supersede wills and/or trusts. Even if you update your will and trust, you still need to update beneficiaries, so that your wishes are followed.
Nest egg and life expectancy
Your financial adviser should not only focus on when you want to retire, but also review your genetics and your health to assess probable longevity. Obviously, no one can say with certainty how long they will live. However, your financial adviser needs to have a discussion to make sure you have realistic expectations on how long your nest egg will last.
Performance
Your adviser should be looking back at past performance to see if it continues to match your investment objectives. They should review the markets to make sure your current asset allocation is on track to meet your expectations. If you are expecting a 20% annual return and your portfolio includes an 80% investment in bonds, a 20% return would be difficult to obtain.
At a minimum, an annual portfolio review is necessary with your adviser. Depending on your situation, quarterly reviews may be warranted. Be prepared to be open with your adviser about all aspects of your life so that you and your adviser are creating a strategic financial plan that is right for you.
Kevin Harris, CRPC® is Vice President, Financial Advisor at WSFS Wealth Investments, where he guides clients in all areas of wealth management, including, but not limited to, retirement and education planning, portfolio construction, liability management, and insurance needs. He can be reached at KHarris@wsfsinvestments.com.