Wealth management is the process of using the financial assets you have accumulated over a lifetime to create the best lifestyle possible.
Wealth management can be broken down into three different parts. All three must work together and are necessary for success.
- A financial plan that spells out your goals and how they will be achieved
- An investment portfolio designed to fund those goals
- A trusted financial advisor to keep you committed to the plan and portfolio and make adjustments
Like a three-legged stool, the whole wealth management process only works if all three are in place. If any one piece is missing, the whole stool falls over. Let’s talk about each of the individual pieces and why they are so important, starting with a financial plan.
Wealth Management Requires Having a Financial Plan
Wealth management starts with a financial plan. A financial plan will help you determine the goals you are trying to achieve with the wealth you have, and provide a clear plan of action for how to make that happen.
Most often people require the expertise of a financial planner to build a plan. A financial planner will help you clarify your goals and objectives, evaluate your current financial status, and build a financial plan that bridges that gap between the two. They will often help you implement those recommendations and monitor the plan and your finances to make sure you are on track.
A financial plan is a critical piece of the wealth management puzzle as it drives all investment decisions from an objective, mathematical perspective. A plan is essential because if you only have an advisor and an investment portfolio, but no financial plan, how will you know the portfolio your advisor recommends is appropriate to achieve your goals? How likely are you to get to your destination without a roadmap?
Wealth Management Requires a Portfolio That Funds Your Goals
A well-designed investment portfolio is essential to reaching your goals. Your investment portfolio serves as the funding mechanism for your important financial goals, and investment decisions have an enormous impact on your ability to achieve those goals.
It is important that all investment portfolio decisions be made with respect to a financial plan. With a plan in place, all investment decisions become a simple matter of choosing the most appropriate investment allocation to achieve the goals of the plan.
An investment portfolio is an essential piece of the wealth management puzzle because even if you have a great financial plan and financial advisor, a poor investment portfolio can cost you your ability to achieve your goals.
Wealth Management Requires a Financial Advisor Throughout Your Life
As we mentioned above, a financial advisor or financial planner will help you develop a plan to achieve your goals and create a portfolio to fund those goals. But their job doesn’t end at that point.
A financial advisor will also provide ongoing advice, monitor the status of your plan, adjust the plan when necessary, and remain your trusted advisor for decades. A good advisor will understand you as a person – your particular quirks, fears, and attitudes about investing and retirement. This allows them to go above and beyond to make sure you have a great experience and nothing slips through the cracks.
If you have a great portfolio and financial plan, but no financial advisor, you leave yourself at risk of panicking during a market decline and abandoning a perfectly good plan and portfolio. There is also the potential for you to make a mistake when life throws you a financial curve ball that changes your plans. It is imperative to have a level head to talk to in times of crisis, to make sure you don’t derail your financial plans.
Wealth Management and Retirement Planning Go Hand in Hand
Financial advisors with clients nearing retirement, or recently retired, have to be ready to address some natural questions and concerns that arise as people transition from living off their paycheck, to living off their assets.
What will my retirement look like given my resources and expenses? How will my portfolio support my retired lifestyle? When should I claim my social security?
These questions can be difficult for people to address on their own and require looking beyond their investment portfolio. People don’t always give enough consideration into the next phase of their life, and require the help of a wealth management firm to help them develop a vision and a highly successful, manageable roadmap for their retirement.
Read: 9 Ways to Prepare for Your Dream Retirement
The most effective financial planners will remain your partner throughout retirement. They’ll keep an open dialogue about how your portfolio is being managed, including the allocation, withdrawals, and any tax-optimization strategies.
They understand and work with you through the emotional and mental facets of retirement and, above all, serve as a continuous source of support, knowledge and perspective to keep you on track through sudden bumps in the road.
Wealth management sounds simple when you break it down into the three components mentioned earlier. But anyone attempting to manage their wealth on their own knows there are a lot of moving parts. It is easy to become overwhelmed and mistakes can have a huge impact on your lifestyle.
The main purpose of a wealth management company is to manage all these moving parts so you can spend your time actually enjoying your wealth instead of managing it! These firms often have a team of financial advisors and experience, offering guidance across a wide spectrum of financial planning and investment management issues. They help you sort through important financial decisions like:
- When can/should I retire?
- How much can I spend each year?
- How should I be invested?
- In which order should I withdraw from my accounts?
- When should I claim social security?
Here at Ruedi Wealth Management, we specialize in wealth management and retirement planning. It’s never too early to start planning your retirement, so schedule your free consultation with us today.
Paul R. Ruedi, CFP® is a financial advisor at Ruedi Wealth Management in Plano, Texas.
Paul has been cited in news publications including The New York Times, Dallas Morning News, Forbes, Inc.com, Business Insider, US News and World Report, GoBankingRates, The Street, and NerdWallet. He also writes articles that have been featured in CNBC, Investopedia, Yahoo Finance, Nasdaq, and MSN Money. He was named one of Investopedia's Top 100 Most Influential Financial Advisors in 2018.
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