When we see that only one in five Americans[i] takes their financial advice from a professional wealth manager, preferring instead to turn to family and friends, we can understand why. As wealth planning professionals, we know how important it is to talk to someone you trust. Your financial life is very personal, and sharing it with an advisor can make you feel vulnerable. And if your investments and giving goals reflect your deeply-held values that requires even more trust.
We also know people sometimes think they need to meet some definition of wealthy to have a wealth plan. We get it. But your finances are important to your overall well-being regardless of where you are on your financial journey. It’s like the Chinese proverb: “The best time to plant a tree was 20 years ago. The second best time is now.” You certainly don’t need to meet a certain financial threshold to start your wealth planning.
Everyone can benefit from a wealth plan. Its purpose? To help you achieve your financial goals, such as saving and investing for the future or giving to the causes you care about. It can also help you maximize the positive impact you and your money can have out in the world by prioritizing investing and giving based on your values.
What should a wealth plan do for you?
- Provide a financial roadmap so you can start channeling your income toward your financial goals
- Enable you to get your financial life more organized, with dates and objectives to work toward
- Give you an immediately clearer understanding of how to prioritize your spending, saving, and investing
- Allow for financial stability and flexibility, even during an emergency or when you stop working
- Help you build a legacy to leave to your family
- Provide peace of mind that you’re on track to achieve your priorities such as owning a home or building your kid’s college fund
- Ensure that your investments are making positive changes you’d like to see in the world
For a comprehensive, tailored wealth plan that adapts as your life changes, you need a financial advisor.
Here are some key questions to ask your advisor—and what you should expect to hear.
6 Questions to Ask Your Advisor About Wealth Planning
What is a wealth plan?
When you speak to a financial advisor, make sure their idea of a wealth plan aligns with yours—because if it doesn’t, that’ll tell you a lot.
We define a wealth plan as a comprehensive financial plan that reflects your goals and values, and evolves as your life changes. Early in life, it can be as simple as investing in a tax-efficient way and saving for a home, but as your life gets more complex, in addition to your financial plan, your wealth plan should include a will, powers of attorney, healthcare directives, trusts, advanced estate planning and insurance. A sound financial plan is the cornerstone of a good wealth plan, which we believe needs to be a holistic plan that includes solutions you may not have thought of to minimize your tax bill, for example, or enhance the growth of your investments, and protect your finances throughout your life. Other advisors may have their own ideas and definitions of wealth planning, which is why it’s important to ask this question.
“We define a wealth plan as a comprehensive financial plan that reflects your goals and values, and evolves as your life changes.”
Why do I need a wealth plan?
A wealth plan can help you be financially prepared for life’s milestones—getting married (or divorced), having a child, taking a job overseas, buying an investment property, starting a business, or selling a business. These life changes can be smoother and less stressful when a wealth plan removes financial uncertainty from the equation and you have a trusted advisor by your side. A wealth plan can also help ensure your financial decisions take environmental, social, and governance (ESG) factors into account and align as closely as possible with your values throughout your life. (What’s ESG again? Read more here.)
People tend to put off setting up a wealth plan until a major financial change or emergency—but being prepared before the unexpected happens can be a huge benefit. Life can change on a dime—a job loss, medical emergency, or family crisis could happen to any one of us. That’s why we suggest you think about wealth planning as soon as you start your career and begin saving money or paying into a retirement plan.
“If you have anything of value, you have wealth—and you need a plan.”
Do I have enough money to have a wealth plan? Or too much?
Don’t confuse “wealth” with “wealthy.” For planning purposes, the most important Merriam-Webster definition of wealth is “all property that has a money value or an exchangeable value.” If you have anything of value, you have wealth—and you need a plan for yourself and to support and protect those you love and help meet their long-term needs.
At the other end of the spectrum, very wealthy folks often don’t think they need a plan because they think they will never run out of money. I’ve had clients say, “When I die, I’m just going to let my estate go to probate court.” That may not be the best idea as it is expensive, long, and puts everything in public view. It also leaves a big mess for your loved ones to untangle after you’re gone.
My partner and I disagree about money. Will a wealth plan work for us?
A big reason couples put off wealth planning is that they don’t agree on their financial priorities or even their values. People are complex, marriage is about compromise, and money can be a huge trigger point in relationships. A skilled advisor is not a marriage counselor, but they can help you identify any common financial ground that exists. They could also potentially create two wealth plans so each partner can define their own priorities.
Can you incorporate my ESG and philanthropic goals into my plan?
What if you want your wealth plan to support environmentally sustainable investments or reflect other values? Everyone has different values, but a good advisor will walk you through the different ways you can use ESG investing strategies or philanthropic giving to make a difference, if that’s where your priorities lie.
Impact investing* can help you achieve the maximum impact with the resources you have. We know that ESG investing can bring about positive, systemic change in the world—all while giving you a financial return too. Right now, around a third of wealth planners are currently using ESG investment strategies with their clients.[ii]
You might not be there yet, but in the future you may want to align your investment plan with strategic philanthropy. Between giving and values-based investing, you can ensure your wealth does the most good it can in the world. Your values can even be an important element of tax planning—some of the biggest tax benefits could come from your ESG investments, philanthropic contributions, or other financial decisions. For instance, you could pocket a $7,500 federal tax credit by buying an electric car[iv], receive a tax credit for investing in certain ESG funds[v], or be eligible for a tax deduction through philanthropic giving.
I'm an entrepreneur. What should my wealth plan look like?
Business owners often have complex finances and irregular or unpredictable incomes—meaning they often put off wealth planning, even though they can really benefit from it. Entrepreneurs may have business goals, personal goals, and charitable goals, so leaning on a professional to coordinate them all can be a big help.
Wealth planning can maximize your company’s impact on your community and your legacy to your family. You might need to think about succession, what to do with a lump sum from selling a business, protection for yourself and your family, or how to fund your retirement.
These six questions can help ensure you and your advisor take a holistic view of your financial situation and your goals today and into the future. With a solid wealth plan in place, the key to executing is to be consistent and comprehensive. A good advisor can help you create a plan and then work with their broader financial team to help you stay on track to achieve your wealth plan’s goals.
Ready to connect with an experienced advisor who prioritizes your values? At Bank of the West, we’ve got a team ready to guide you, and investing with impact is in our DNA. Contact us today.
[i] National Association of Personal Financial Advisors (NAPFA), “Seeking Guidance for the Future, Younger Generations are Turning to Social Media for Advice” December 2021 http://s3.napfa.cql-aws.com.s3.amazonaws.com/files/Consumer/NAPFA%20Fall%202021%20Full%20Report.pdf
[ii] Financial Planning Association (FPA), “2022 Trends in Investing” https://www.financialplanningassociation.org/sites/default/files/2022-05/2022_Trends_in_Investing_Report_FIN.pdf
[iii] IRC 30D New Qualified Plug-In Electric Drive Motor Vehicle Credit https://www.irs.gov/businesses/irc-30d-new-qualified-plug-in-electric-drive-motor-vehicle-credit
[iv] Forbes, “Tax Equity And ESG Investing: The Best Of Both Worlds” https://www.forbes.com/sites/forbesfinancecouncil/2020/11/09/tax-equity-and-esg-investing-the-best-of-both-worlds/?sh=999cf187dc3e
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