There is a lot more to the role of a personal financial advisor than simply managing your investments. A financial advisor provides you with holistic recommendations so you can reach your personal and financial goals throughout your life. This includes anything from building a well-constructed investment portfolio to helping you plan for retirement, plus a lot in between.
The services you choose to employ through a financial advisor will vary depending on your age, lifestyle, and assets. Here are five distinct duties of a personal financial advisor that you can reference to help you manage your wealth throughout your lifetime.
One of the most fundamental financial advisor responsibilities is managing your investment portfolio. An advisor will tailor your asset allocation to help you meet your unique short-term and long-term goals in addition to managing risk along the way. Part of an advisor’s role in crafting your portfolio is incorporating a risk tolerance that meets your comfort level and your growth needs. Depending on the time horizon of your financial goals, your advisor may recommend a more aggressive or more conservative portfolio. As time goes on, they’ll monitor your portfolio (at D&Y, we do it daily) and rebalance as necessary to maintain the proper allocation.
Your advisor should also seek to minimize expenses. This means limiting your trading costs, expense ratios, and advisor fees. Finally, your advisor should also make sure your accounts allow for the liquidity you need to weather unexpected events or fund planned expenses.
Your financial advisor should also help to manage your investments in a tax efficient manner. For example, by using investment accounts that offer different tax savings features, such as a traditional IRA or a Roth IRA, they can optimize your total portfolio’s after-tax return by choosing the ideal investments to hold in those accounts through asset location. Some investment strategies can also help minimize your taxes, like tax loss harvesting. Your advisor may sell certain positions that have a loss to offset current or future gains while still maintaining your desired asset allocation.
Another important job of a financial advisor is to help you prepare for and navigate major life events. The best way to accomplish this is through a comprehensive financial plan to help guide your financial decisions, such as your spending and saving, insurance, and debt. Advisors can also provide income projections to forecast future results for different scenarios. Most importantly, financial planning helps put your portfolio management in context with your overall financial picture. More specifically, financial planning makes sure your risk tolerance remains aligned with your portfolio’s asset allocation.
Financial planning should occur early in your relationship and be updated as your situation and needs change. Through financial planning, your advisor will be better informed and equipped to offer strategies to achieve your goals, as well as navigate issues like life insurance, Social Security, Medicare, and IRA required minimum distributions, to name just a few.
Another key element of financial planning is saving for college. No matter the age of your child or grandchild, your advisor will walk you through the various savings vehicles available for college tuition and expenses, along with the tax implications of each option.
An advisor is also trained to help you through life’s unexpected moments. Life’s uncertainties range from going through a divorce, losing a loved one, and receiving sudden wealth from events like an inheritance or a business exit. While these aren’t everyday occurrences for any individual, a professional deals with these events on a regular basis with multiple clients and can apply that knowledge and expertise to your unique situation. Plus, a firm like D&Y has a team with diverse experience so that you can access the expertise of a range of advisors.
As your financial situation evolves throughout your life, an advisor’s role is to help you navigate the decision-making process to build your wealth and achieve your goals. From cash management strategies to choosing appropriate insurance policies, you’ll be better prepared for these choices with the input of an experienced advisor.
A great financial advisor also has regular, open lines of communication with clients, which may take a few different forms. First, advisors at a wealth management firm like D&Y have technology capabilities that enable you to access your accounts through a personalized platform. This gives you the flexibility to track your portfolio and customize reports for information that is important to you. You’ll be able to review up-to-date details such as:
Despite having access to an online dashboard 24/7 for account information, frequent communication still remains vitally important. It’s imperative to connect frequently with your advisor throughout the year with calls, video conferences, and emails. A Dowling & Yahnke Lead Advisor typically meets in person (safely) with clients at least once per year, but can meet as often as a client would like!
Some firms may limit the amount of contact you have with your advisor and automated platforms, like robo-advisors, may not even offer the option to speak with a financial advisor. Dowling & Yahnke advisors, on the other hand, encourage ongoing communication no matter how big or small your question or concern may be. It’s important to have complete concierge-style service with your financial advisor in order to get the advice you truly need — when you need it.
While a financial advisor offers a suite of investment and planning services for you to choose from, they also collaborate with your other financial professionals to provide a holistic approach to your financial needs.
Proper estate planning involves both legal and financial issues, which is why many people choose to work with both an estate planning attorney alongside their regular financial advisor. An attorney can provide you with advice on the legal aspects of estate planning as well as actually draft any legal documents you need, like a will or trust. Your financial advisor will work in tandem with your attorney to help recommend the best vehicles for protecting your assets and passing on your wealth while minimizing taxes for your heirs.
Managing your financial situation in the most tax-efficient way possible should be a collaborative effort by partnering with your tax professional. This is especially important as your financials become more complex. Working with your tax professional can help to optimize your charitable giving and tax planning strategies, such as Roth conversions.
As you grow your assets and have an increasingly complex financial situation, the importance of partnering with a financial advisor is magnified. It’s your private wealth advisor’s job to manage more complex portfolios and continue working with other professionals, such as your tax professional and/or estate planning attorney. Your advisor can help create a strategy for you to pass on assets to your heirs, support charitable causes, or both, using strategies like a trust, family limited partnership, or private foundation.
Another important aspect for financial advisors specializing in private wealth is asset protection. Your advisor will offer suggestions on how to protect your wealth by ensuring you have the appropriate insurance coverage or structuring irrevocable trusts that may offer protection from creditors. There are a range of unexpected scenarios that can threaten the wealth you’ve built over the years. And unfortunately, it becomes more of a risk the more you accumulate.
A financial advisor plays an important role in any individual’s holistic financial picture. From managing your investment portfolio to helping you prepare for life’s biggest moments through financial planning, a financial advisor helps you to align your strategies as you navigate changes throughout your life.
Contact us today at Dowling & Yahnke Wealth Advisors to learn how our financial assets can help you manage your wealth in San Diego.
Interested in learning more? Head to our financial services glossary for a breakdown of more common financial terms to know.