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Prescription before Diagnosis is Malpractice!

stethoscope with financial graph

Your financial health could suffer if your financial advisor offers you a financial prescription before diagnosis of your financial health.

When we visit our doctor, we expect that they will ask us a whole bunch of questions, check our heart rate, blood pressure, poke and prod us before we walk out with a prescription for what ails us. Shouldn’t our financial health be treated in the same way?

Many individuals and households have an investment plan, a tax plan, an insurance plan and/or an estate plan, usually done in isolation of each other.  However they do not have a plan that coordinates all areas of their financial life, (personal and business) ensuring that they are not sacrificing one part of their finances for another.

The reality is; all too often households are bombarded with inconsistent information from financial experts in the media and have multiple advisors offering conflicting and often incomplete advice which can result in them making random investment, life insurance, tax, trust, business and estate planning decisions that happen in isolation of each other. The result is a collection of investments, insurance, business and trust structures that are fragmented and not tax efficient, resulting in missed opportunities unnecessary expense, unforeseen tax liability, duplication of obligations and at worst catastrophic consequences. At minimum you do not know where you stand!

So that’s the problem, but is there a solution?  Absolutely!  It’s called an Integrated Wealth Plan, That’s a technical-sounding name for a simple idea. An Integrated Wealth Plan combines professional investment management with, insurance, tax, business or farm succession and estate planning services all rolled into one service for the same fee or even less than what you may already be paying your current investment advisor just for investment advice!

An Integrated Wealth Plan should help you answer these four key questions:

  1. Is my investment portfolio constructed to grow my nest egg tax efficiently, while also keeping investment risk within my comfort zone?
  2. What will happen to my family if I were to pass away or contract a serious illness?
  3. What will happen to my business if I were to contract a serious illness or pass away?
  4. What will happen to my estate when I pass away?

An Integrated Wealth Plan looks at four key components to provide a detailed analysis of your personal financial circumstances:

  • Financial analysis: In this step your Wealth Advisor would evaluate your current net worth and outline your personal financial goals and lifestyle needs. This should include a snapshot of your household balance sheet – your assets and liabilities and your income and expenses.
  • Risk management: This step assesses your need for life insurance, as well as coverage for disability, critical illness or long term care.
  • Tax and financial strategies pinpoint the opportunities to minimize the amount of tax you pay.
  • Wealth transfer deals with the efficient transfer of wealth during your lifetime and/or upon your death.

The wealth planning process involves the following key steps:

  • Setting expectations – In this step a Wealth Advisor would discuss and understand your financial goals and objectives.
  • Gathering data – The Wealth Advisor would then compile all the necessary information to provide an accurate picture of your current financial situation, as well as your lifestyle objectives and plans for your estate.
  • In-depth analysis and Integrated Wealth Planning Report – Your financial information, lifestyle goals and estate distribution objectives are reviewed and analyzed to provide you with a report that assesses the ability of your financial resources to support you throughout your life as well as your insurance needs, and provides tax minimization and estate planning strategies.
  • Recommendations – Based on this analysis, the Wealth Advisor would identify appropriate financial, tax and estate planning strategies, discuss the implications of each course of action and assist you in implementing the agreed upon courses of action.
  • Monitoring and periodic review – On a regular basis, the Wealth Advisor would revisit the recommendations from your Integrated Wealth Plan.

Wealth planning is an ongoing process. Your Wealth Advisor should meet with you regularly to review various aspects of your Integrated Wealth Plan to help implement recommendations and to suggest changes as your circumstances change. With an Integrated Wealth Plan in place your advisor can advise on specific tax and estate planning issues and participate in meetings with your lawyer, accountant and other professional advisors as needed or at your request.

If your advisor is not providing you with full integrated wealth planning services in addition to investment advice, you may be paying your advisor too much in fees for just investment advice. At minimum you should have a discussion with your advisor about the services available to you and the fee you are being charged for the services currently being offered.

Of course, this type of integrated wealth planning service isn’t right for everyone…but it may be right for yo

– By Adrian C. Spitters, FCSI®, CFP®, FMA


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About the Author:

Adrian Spitters is an avid writer and blogger who recognizes the need to publish on issues relating to the retiring business owner and farmer, by offering information and insight to help them transition into retirement and create sustainable multi-generational family wealth.

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