You might say that I have seen it all. Thirty years of teaching Personal Finance at BYU has taught me nearly as much as I have been privileged to convey as an educator. Some days were surprisingly unpredictable. However, in many more cases, over and over, I have seen completely different students struggling with the same financial issues and behaviors.
This blog post is intended to help remedy some of the most common recurring financial issues and/or behaviors. Nothing that follows is intended as official advising or any sort of one-size-fits-all wealth financial planning solution. At the same time, I believe that much of it could help you get started on your way toward establishing a legacy of generational prosperity.
This article considers the following:
- It is always the right time to start thinking about and planning for your future
- Bad financial advice may be worse than no advice
- Beware of “safe” investments
- How you feel about an investment or decision is important
It Is Always the Right Time To Start Planning for the Future
If you are 40 years old and just now considering retirement, you certainly have less time to save than someone in their 20s. Nevertheless, please know that your situation is not hopeless: Financial planning, at any age, is an investment in improving your future.
Wealth managers have the knowledge and skills to help you make objective, informed decisions about both your short and long-term financial well-being.
Don’t Go It Alone
There are multiple benefits to hiring a professional financial advisor. First and foremost, you no longer have to tackle complex financial issues on your own. Having an experienced wealth manager in your corner means access to insights from someone who has managed savings and investments through all varieties of market weather.
When considering which financial professional to hire, it’s wise to work with someone who has weathered many different types of market conditions. This is especially important during inflationary times like these: The purchasing power of your money isn’t what it used to be. Similarly, an experienced advisor may suggest, for example, rebalancing your portfolio with assets that tend to thrive when interest rates are rising.
Bad Financial Advice May be Worse Than No Advice
Selecting someone to assist you in managing your financial future should not be taken lightly. Did you know that anyone can call themselves a “financial planner” today, regardless of whether or not they have the necessary education, accreditation, or track record?
This makes hiring a fiduciary to oversee your assets an essential part of your selection process. Fiduciaries are sworn to put the best financial interests of their clients ahead of their own at all times. Additionally, fiduciaries are regulated by the SEC: Individuals and firms found to have violated their fiduciary duty are subject to fines (some of which can run well into millions of dollars).
Know Your Objectives and Risk Tolerance
There is more to investing than knowing that you want to collect as much as possible in returns. Investing with a long-term strategy is a significant part of the endeavor, but you also need to know your risk tolerance limits. In other words, you need to know exactly how much money you are willing to lose should an asset lose its value over time.
This varies with people’s ages and other factors. For instance, a 25-year-old will often feel more comfortable with a higher amount of risk since they have years left to make a recovery, should that be necessary. Conversely, those nearing retirement cannot afford losses as easily since they have little or no time to wait out a worst-case scenario.
Beware of “Safe” Investments
It is natural to crave financial security, especially during market volatility. However, not every asset suggested as a “safe” investment is always wise. Especially with regard to securities, keep a degree of healthy skepticism: Salespeople will sometimes appear in hordes when the market is volatile.
Playing on investors’ fears, they present opportunities to make money that sound financially lifesaving. Given time, however, many of these turn out to be anything but safe investments. Some may pitch underwhelming financial products—and non-fiduciaries looking to earn a commission may not always have your best interests at heart.
The Tax Code Was Not Written for You (or Your Benefit)
The Internal Revenue Service makes no secret of singling out high-income earners for audits. The hard truth is that they want every possible penny that they can assess you as owing. It is possible to defend yourself by strategizing the timing of your retirement distributions (withdrawals from your savings), but this is never something you want to attempt at the last minute.
The longer the time period over which you plan your taxes, the greater your potential savings for doing so; the more money you can potentially keep. This is one of many areas in which professional wealth management can prove invaluable.
Avoid Paying Commissions To “Manage” Your Money
We highly suggest you consider working with a fiduciary financial advisor vs. someone who does not hold the designation. We recommend developing a list of objective questions that will help you understand each candidate’s education, knowledge, certifications, and skills. You never want to select a financial planner on their personality alone.
This makes asking questions a must. Any registered investment advisor worth considering will have no problem providing clear answers as well as disclosing any possible conflicts of interest. Conversely, anyone refusing to discuss the details of their background or provide you with information on how they are compensated should be a red flag. That indicates a potential problem(s) going forward.
How You Feel About an Investment or Decision Is Important
Successful investors work far more from their brain (logically) than from their gut, (emotionally). However, you do not want a cold, robotic approach to your portfolio, either.
While objective metrics are important, you should be at peace, fundamentally, with how your portfolio is structured. When, for example, someone advocates a potentially profitable stock that conflicts with your personal faith, you may be better off without it. If you believe there is more to your existence than money, no advisor worth your time will urge you to pretend otherwise.
Similarly, don’t be afraid to ask questions. We know that Wall Street has done a good job of making the investment process complex, so if you don’t understand something that your advisor is suggesting, don’t back down. Be persistent and ask questions, so you feel comfortable with the suggestion that is being presented to you.
For example, if your advisor is talking about the sometimes-maze-like U.S. tax code, it is their job to help you increase your financial literacy. As a rule of thumb, simple, easy-to-understand solutions are nearly always preferable.
About Scott Marsh Financial
Scott Marsh Financial is a fiduciary, fee-only CERTIFIED FINANCIAL PLANNER™ in Utah. Our investment advisors leverage Scott’s insights from decades of experience teaching Personal Finance at BYU. Our team is eager to help you create a legacy of prosperity using transparency and mutually earned trust. Contact us today to find out why we could be the Best financial advisors in Utah.