As people begin filing their taxes, they realize what worked well for them and what they could have improved regarding their finances in the previous year. Figuring out the following steps to increase financial wealth and knowledge is a daunting task, which is why people often turn to the support of a financial advisor.
Because the world of finance is constantly evolving, financial advisors need to keep clients informed and up to date on the steps, they should take to build a better financial future. When meeting with clients this year, some conversations to have with them include estate planning, retirement planning, college planning, and investing.
Estate Planning
Although a difficult conversation, estate planning is critical in preparing for what will happen after someone’s death. No one wants to plan for their death, but having a will, trust, and power of attorney in place is an act that will leave those who care for your estate grateful. Financial advisors must encourage everyone to have a plan for their estate, even if the client is young and healthy.
Estate planning is essential for individuals because it helps ensure that their assets and property are distributed according to their wishes and that their loved ones are cared for after they’re gone. While it may seem daunting, financial estate planning software is available to guide financial advisors and their clients through each step.
Related: A Young Family’s Roadmap to Building Generational Wealth
Retirement Planning
No one wants to work forever, so helping clients with retirement planning will set them up for success to ensure they don’t have to. Retirement planning is vital in assisting individuals in determining what financial resources they need to live comfortably throughout retirement at their same standard of living. Retirement planning involves exploring and setting up retirement accounts, such as IRAs, pensions, and 401Ks.
Some of these are employer-sponsored, and clients should be sure they have them set up to their full potential. Individuals should also have the plan to manage and distribute their assets upon retirement. The earlier people start saving and planning, the more time they have to develop financial growth and maximize their retirement.
College Planning
If a client has a goal to leave lasting wealth for their children or grandchildren, it is beneficial to help them consider college planning options. As college costs continue to increase along with the cost of living, leaving financial support to your loved ones will help them with their education without stressing about taking on significant student loans. Some options to discuss include 529 Plans and Coverdell Education Savings Accounts.
Contributions to a 529 Plan can be eligible for state tax deductions. Account withdrawals are tax-free for qualifying education expenses, such as tuition, room and board, school feeds, books, etc. Coverdell Education Savings Accounts contributions are not tax deductible; withdrawals for education expenses are tax-free. Exploring these two options is a good starting place for discussing college planning with clients.
Investing
There are numerous options for investing, and it can be overwhelming for the average person to understand where to put their money for the best return. Every few months, there seems to be a hot new way to invest that seemingly follows with a crash. Financial advisors need to be up to date on the best ways to invest in the current economic climate so they can guide clients to make the best choices.
Spreading out money across different investments, including stocks, bonds, and real estate, is a great way to be set against fluctuations in the market. All investments have benefits and risks, so weighing both with clients is essential. For example, real estate investments allow for a consistent cash flow and allow for instant equity. However, home values and rental costs can drop, and there can be a high maintenance cost for real estate investment.
In Summary
As a financial advisor, it is crucial to have honest conversations with clients about the best ways to reach financial success. Clients trust you to give them peace of mind and to make the right choices with their money, so it is important to stay informed and up to date on what is happening with the financial climate and trends.
Mark is the founder of Financial Pilgrimage, a blog dedicated to helping young families pay down debt and live financially free. Mark has a Bachelor’s degree in financial management and a Master’s degree in economics and finance. He is a husband of one and father of two and calls St. Louis, MO, home. He also loves playing in old man baseball leagues, working out, and being anywhere near the water. Mark has been featured in Yahoo! Finance, NerdWallet, and the Plutus Awards Showcase.