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7 Things Your Advisor Should Review Annually

Financial advisors strive to advise their clients in all things financial, not just success in investing, but in all of their financial goals and endeavors. When meeting with clients, financial advisors should go over more than just the performance of their investment accounts because there are other things that can have a huge impact on someone's financial life.

Here are seven things your financial advisor should review with you annually:

1. Personal Information

Reviewing items such as address, phone number, email address and trusted contact information is crucial. This seems an obvious place to start, but it is surprising how often it is overlooked. The result can be anything from missed correspondence from the advisor or custodian, to checks or statements being sent to the wrong place. This is especially important as clients get older, as many are relying on distributions for living expenses. If anything happens with the client or their accounts, it is imperative to have the right information on file for whom to contact. (For related reading, see: Financial Planning: It's About More Than Money.)

2. Beneficiaries and Estate Plan

Beneficiary reviews should be completed for all qualified accounts (IRAs, 401(k)s, 403(b)s, etc.), all life insurance policies (private and work), and any annuity contracts. A review of the overall estate plan, including wills, trusts and power of attorney (POA) should be completed, to make sure the estate plan in place is still appropriate. It is also important to remind clients to check in with their estate planning attorney periodically to confirm that the estate plan is up to date or if it needs updating.

Where important estate documents are kept is also worth discussing, as well as the name and contact information for trustee(s) and POAs. Finally, confirm that assets meant to be placed in a trust have actually been placed in the trust. It is staggering how many times we have come across a client who has spent the time and money to develop a thorough estate plan, but then never actually re-titled assets (particularly their home) in the name of the trust.

3. Cash Flow

What is coming in and what is going out? Has your income changed? Your expenses? Is there a specific cash need in the next one to three years that has not been discussed yet? If so, in most cases, these dollars should not be invested in your long-term portfolio. When creating a financial plan, the client’s budget drives so much of the ultimate output, and therefore, the final recommendations, that it is vital to continue to monitor the cash flow to determine if changes need to be made to the plan along the way.

4. Cash Reserves

Cash reserves are money set aside for an emergency or opportunity. One of our favorite sayings is “without adequate cash reserves, you are not investing, you’re gambling." The reason is that if any little financial bump in the road (job loss, new roof, car trouble, etc.) will cause you to tap into your long-term investments or retirement savings, you are always in danger of not achieving the long-term returns expected from those investments in the first place. For employed people, at least three months worth of cash reserves are recommended and six months is ideal. For those who are self employed, six months of reserves are recommended, and 12 to 24 months is ideal, depending on the type and stability of your business. (For more, see: Why You Absolutely Need an Emergency Fund.)

5. Insurance 

Life, disability, long-term care and health insurance should all be reviewed. Again, “without adequate insurance, you are not investing, you’re gambling,” for all of the reasons noted above. As mentioned earlier, beneficiaries should be reviewed and comparing what you are offered at work versus what might be available in the open market makes sense too. There are pros and cons to each, which are worth investigating.

6. Debt 

Do you have any significant outstanding debt? Reviewing the terms and rates of all existing debt is a good idea. Each case is different, so analyzing each one to determine if paying them off, refinancing the terms, consolidating, or keeping them as is, is the best course of action.

7. Changing Goals 

It’s amazing how often, when you start to ask probing questions about what a client really wants to do with their life, you hear something like: “You know, I just don’t want to work until I’m 65 anymore” or “I’ve been thinking more and more that what I’d really like to do is make olive oil in Spain when I retire.” Obviously, a major change, such as having another baby or getting re-married, will necessitate a change in strategy. But these other types of shifting goals are important to keep on top of as well, because the farther out you discuss these kinds of changes, the better chance you’ll have to plan and prepare for them.

This is by no means an exhaustive list, and there are many other issues that can and do crop up in the role of financial quarterback on a daily basis. But if you have a financial advisor and they never inquire about at least some of these topics on a regular basis, it may be time for a conversation about why not. (For more from this author, see: What Happens to a 401(k) After You Leave Your Job?)