The financial world is pretty exciting right now – the rapidly shifting investment landscape tends to draw and hold most people’s attention, but what is frequently forgotten is some basic – yet essential – big picture planning.

Imagine that you are three years away from retirement and contemplating a future move to a warmer climate for at least part of the year. Would a reasonable person hire a builder to construct their dream home without a basic blueprint? Would a prudent person look through a bunch of brochures of attractive show homes, agree to similar concepts scribbled on the back of a napkin, then sign over a small fortune to a salesperson? Unfortunately, this parallels the norm in today’s financial services industry.

When I first meet with clients, few have ever had a truly comprehensive Wealth Management Plan (WMP) prepared. Even fewer have a WMP that is updated regularly, and almost no one has an Investment Policy Statement. Investment accounts are often scattered around in different places with no sense of what the objectives are, and there is rarely a unifying strategy about how to get “there,” wherever that might be. In the vast majority of cases, even high net worth investors have entrusted their nest egg to one or more institutions without a comprehensive financial blueprint. This is a recipe for disaster.

Just a few of the MANY important reasons to have a holistic WMP created and maintained include:

• A greater sense of context for your family. How do world events really affect my financial life? How much capital do we really need to achieve or maintain financial independence?
• Lower anxiety levels regarding your long term security. Do you need to make 10 to 15% per year to retire when you had hoped, or will a steady 4 to 7% return from current levels keep your family “in the black?”
• A very clear understanding of your investment priorities. This should result in more appropriate initial investment recommendations, which should lay the groundwork for a mutually beneficial long-term professional relationship. It also makes you a more patient investor

A great WMP is essentially the synthesis of the technical and the human. The technical stuff is left-brained and the human is more right-brained. At the center of this should be your own unique, deeply personal Life Goals. Your Life Goals flow from your values, beliefs and priorities, and should become the unifying principles behind all of your major decisions. The process should be dynamic, candid, collaborative and flexible. It does NOT need to feel like “work” but it does require some effort.

A comprehensive WMP addresses all of the following areas that are relevant to your family situation:

• Financial Security – cash reserves, and group and personal life, disability, critical illness and long-term care insurance coverage
• Retirement Planning – location, lifestyle, volunteering, part-time paid work, etc
• Investment Management – protecting and growing your nest egg
• Tax Minimization  – so you are paying only what is required under law
• Estate Planning – current Wills, Enduring Powers of Attorney and Personal Health Directives
• Planning for Aging and Health – aging beats the alternative, but planning in advance is essential
• Optimizing Business Values – growth, succession, disposition
• Debt Elimination – especially before interest rates escalate again
• Post-Secondary Education Funding – for children or grandchildren

In the introduction I also referred to an Investment Policy Statement (IPS). I’ll cover this in more detail in future, but an IPS is essentially a contract for how your capital will be invested. Most external IPS’s I’ve reviewed do NOT have a clearly articulated framework for managing risk, choosing to focus mostly on capturing upside opportunities. This is another recipe for disaster.

How important is your family’s financial security? Do you have a current and comprehensive Wealth Management Plan AND an Investment Policy Statement for your nest egg?

Cheers,

Andrew H. Ruhland, CFP, CPCA

President of Integrated Wealth Management Inc. and

Portfolio Strategist with ETF Capital Management