Mark P. Bernier, CFA | Posted on Jan 06, 2020
A new job, marriage, the birth of a child, divorce, retirement, job loss, unexpected illness, and long-term care needs are all common examples of major life events that require a reassessment of an investor’s financial plan. Each of these events will conjure different emotions, and financial decisions clouded by emotion are not likely to generate the best results. What can investors do to navigate various life events successfully?
Investment professionals will discuss “time horizon” with their clients when helping to identify the appropriate exposure to various investment risks. Longer time horizons typically permit greater risk taking with investments in an effort to generate higher returns. Generally speaking, an investor’s time horizon is their lifetime. However, that lifetime is often marked by numerous life events that may materially impact investing decisions and risk tolerances along the way.
Regardless if events are planned or unexpected, investors will achieve the best results by engaging their team of experts – financial advisor, attorney, and tax professional. If you’ve not yet assembled your “team,” perhaps this is your first step. Life events may have tax and estate planning consequences, in addition to investment consequences, so it is critical to consult with your team as soon as you are confronted with the events. These professionals are committed to providing you with the best advice that is unbiased by the emotions of the event.
Communication amongst these team members is equally important. Too many times over the course of my career I have witnessed clients execute a well-intended action only to discover later that the action had unintended consequences that could have been avoided had they clearly communicated those actions to their team.
Assuming you already have your team in place, a good first step when faced with a planned or unplanned life event is to bring your team together for a joint meeting. Your financial advisor, attorney, and tax professional all have your best interests in mind, but they cannot speak openly about your circumstances without your explicit permission. A joint meeting creates an environment of open communication and can ensure that important details are not lost in translation if you were to meet with each of your team members individually.
The complexity of the life event may not permit the identification of appropriate next steps at the initial meeting. Consider providing your team with written permission to continue the discussion with each other, establish an email string with all parties included, or request that any written communication specific to those discussions be copied to the other parties.
At this point, you may be asking yourself this question: “How much is this going to cost me?” The answer is almost assuredly less than the potential cost of not engaging your team of experts, both financially and emotionally. You should find that the coordinated, professional advice you receive from your team provides solutions on both fronts for you and your loved ones.