Cut through the Wall Street fog machine and define potentially perplexing terms
Timothy J. Keating //August 1, 2017//
Cut through the Wall Street fog machine and define potentially perplexing terms
Timothy J. Keating //August 1, 2017//
Colorado’s economy is booming.
As of April, we now have the nation’s lowest unemployment rate (2.3 percent), the startup scene is thriving, and there’s so much construction in downtown Denver that there’s even a “crane watch” to track all the new development. Inevitably, this is going to create increased wealth and more Coloradans than ever will be seeking financial planning and investment advisory services.
In many cases, financial advisers will offer to provide those seeking this type of advice with “comprehensive financial services” – but what exactly does that mean?
Consider some of the mystifying jargon that has entered the financial services lexicon in just the last decade:
What do those terms mean?
Do you need to understand them?
Should you even care?
The short answer is you don’t need to know or care about any of this bewildering lingo.
Despite the noble work of about 300,000 well-trained, highly competent and caring financial advisers in the United States, Wall Street can be a dangerous – and expensive – place to learn, for the uninformed. So we thought it would be instructive to cut through the Wall Street fog machine and define some potentially perplexing terms in a way that will make sense to anyone seeking financial planning and/or investment advisory services.
Below, we present a list of 10 deliverables across five disciplines – financial planning, investment management, tax, estate planning and insurance – that we believe are necessary for truly comprehensive financial services.
Depending on its size, scope and range of services, a financial advisory firm may deliver some or all of these services directly or through a coordinated approach with a client’s other professional advisers in areas such as tax, insurance and legal matters.
FINANCIAL PLANNING
Most importantly, your written financial plan should determine the probability of achieving your goals.
Masterpiece Financial Plan A masterpiece financial plan begins with what’s most important to you: your financial goals. With such a plan: · You will clearly understand how you can use your financial resources to accomplish your goals. · The results will be straightforward and comprehensible. · What-if scenarios will enable you to explore multiple alternatives and see how sensitive your plan is to tax changes or increased longevity. · Stress testing and risk management will show you what might happen to your plan in the event of real-world uncertainties such as down markets, premature death, or the need for long-term care. · You’ll be able to see how likely you are to achieve your goals. |
Many financial advisers offer value propositions emphasizing market timing or fund/security selection to justify their fees. We think that’s nonsense. And though there is no such thing as a good one-size-fits-all approach, for financially successful people and families who want to do something else with their valuable time besides managing their money, this list should be a good starting point and should be helpful in identifying an investment adviser who provides truly comprehensive financial services.
Behavioral Takeaway
The Paradox of Choice is a behavioral finance doctrine that describes how the presence of too many choices is paralyzing and debilitating, hindering decision-making. To avoid this situation when shopping for a financial adviser, ask candidates to provide a brief list of the services that they offer, in plain English, along with the price. This will provide a simple basis for comparison, eliminating paralysis and helping you make an informed decision.