Who Should Be on Your Financial Planning Team?
As you start your financial planning journey to retirement and beyond, you’ll need to assemble a trusted team of professionals to help you set up and execute your financial plan. Similar to how sports teams employ players with various skillsets, your team will consist of a diverse group of professionals. Each member of your team serves a purpose by specializing in a function that ultimately benefits your financial plan and your goal of financial freedom.
Also, just like how sports teams have their most valuable players, your financial planning team will have professionals who are most valuable to you. Without these core players, your team will not have a solid foundation to build on.
Your financial advisor should act as your quarterback – working closely with the rest of the team to help make sure your plan to “win” in retirement is reached. When choosing a financial advisor to work with, he or she should have connections with these other key players to ensure your financial plan is fully implemented and coordinated. For example, at Financial Freedom, we work closely with your other professionals, such as an estate attorney, CPA and insurance and mortgage professionals. Once we have completed an initial financial plan for you, we coordinate your requirements with your other professionals, or we can recommend you to our team of vetted specialists for cost-effective results. This allows us to handle all of the planning, match your requirements with the right professionals and then make sure your plan is tailored specifically for you.
Let’s go through your roster and identify the members that should be a part of your team.
Continuing the football analogy, you should look at your financial advisor as the quarterback of your financial planning team; the most important player on your roster. Identifying a financial advisor should be your top priority. However, it is also the most challenging task, since there are a countless number of professionals who identify themselves as “financial advisors.” Unfortunately, they are not all the same. Choosing the wrong financial advisor could cost you a significant portion of your nest egg.
The first thing you should be aware of when choosing a financial advisor is knowing the importance of hiring a fee-only financial advisor. While their titles may sound the same, a fee-only financial advisor is entirely different from an advisor who works on commission. Financial advisors who work on commission and referral fees can present a major conflict of interest, because they are incentivized by selling you investment products and keeping you in their referral network. Fee-only financial advisors are the exact opposite. Because they charge you an upfront fee and do not receive any commissions or referral fees, you can be confident that they’re working for you and not for themselves.
A fee-only financial advisor will be eager to learn your financial situation inside and out, so that he or she can make recommendations based on what’s best for you.
The other key members of the team include:
Another critical player on your financial planning team is an accountant who specializes in tax preparation. You are likely familiar with the CPA (Certified Public Accountant) designation, but many people do not know that not all CPAs are tax professionals. Some accountants specialize in record keeping while others specialize in tax preparation.
You will want to hire a tax accountant who has experience in your specific type of income and can file your annual tax returns accurately. Depending on your situation, a CPA might also need to help you with quarterly tax filings. A good tax accountant can pay for their fees many times over by minimizing your tax liability and maximizing your tax refunds.
If you’re not currently working with a CPA, your financial advisor should be able to recommend one.
In a best-case scenario, you buy insurance and hope that you will never have to use it. However, just because you don’t plan on having any hiccups during your financial planning journey does not mean that you should skimp on having the right type of insurance that covers the worst-case scenarios.
You most likely have auto, home and health insurance already. But you may want to talk to your financial advisor about any other types of insurance you might need. Again, working as an independent third party, a good fee-only financial advisor should have trusted insurance contacts they can recommend without receiving commissions for referring you. If they seem like they’re pushing (i.e., selling) their favorite insurance agent, buyer beware. They may have ulterior motives.
Estate Planning Lawyer
Succession planning is a big part of financial planning. After all, you’re planning not just for you, but also for your loved ones. Having an estate planning lawyer on your team can ease your burden on responsibilities like setting up trusts, writing a will and identifying other necessary legal paperwork, like a power of attorney or health care directive.
No one wants to think about dying, and rightfully so. Estate planning might seem far away still, but the sooner you establish an estate plan, the less stress you, your family and the executor of your estate will encounter when the time comes.
Even if there’s a low likelihood of you ever needing a general counsel, it is nonetheless essential to keep it in the back of your mind. It is especially true if you have a substantial nest egg. A trusted attorney can protect you if anyone ever tries to sue you for any reason.
I strongly suggest anchoring your financial planning team with a fee-only financial advisor who has the fiduciary responsibility to put your interests above theirs. Your financial advisor should serve as the most important player on your team and can help you put the rest of your team together.
Add a tax professional, an insurance agent and an estate planning lawyer to round out your group of trusted professionals. They all play essential roles in your financial planning team and specialize in areas that your financial advisor may not have expertise in.
Also remember that once you assemble your financial planning team, make sure that everyone stays updated on your situation regularly. Let your team know if you go through a life-changing event, such as getting married or divorced, becoming a parent or receiving an inheritance. By doing so, you’ll maximize your chances of a smooth transition as well as keep your assets growing for yourself and your loved ones.