Transitions in life aren’t just inevitable.
When life changes, money changes…and vice versa.
If you’re a global investor with increased complexity around your multi-jurisdictional life, you’ve probably been through more than one of them in the last few years.
These crucial moments of transition may shape your entire future.
Plus, if you have more than $1.2m to invest, the data tells us working with a financial planner (particularly during these transitions) may just change your life drastically.
Retirement is one of the biggest life transitions many people will ever make, yet most people are not prepared and need help in not only planning for, but also living in retirement.
The vast majority find out far too late they got retirement planning wrong. The key is to identify what you want early on and have a cashflow plan that helps you understand whether you’re on track. You can start your retirement planning at any point in time; the earlier the better. It should be approached holistically to not just cover you financially, but help you make better lifestyle choices to achieve your ideal future.
Unfortunately, not all life transitions are expected (but happen nevertheless). With an expat divorce, there are often legal implications and complexities, and the intersection of emotion and finance may require outside help.
Even changing otherwise simple documents can be difficult to focus on during a time like this.
Couples will likely need to consult with a planner on how to split assets to minimise cross-border tax consequences. These are just a few of the areas where financial planners can provide value and support.
3. Changing jobs
Now more than ever, massive numbers of workers are considering a new career path. Some may adopt a different focus in their current profession, while others may embrace a completely new career.
Every decision you make as part of your career change should be viewed from the lens of your personal financial needs not just for today, but also as part of your longer-term planning needs and goals before. These decisions are deeply important to your long-term financial stability. A financial planner will help navigate the key financial issues that are critical for you to integrate into your career change plans.
4. Losing your job
There will be some obvious turns in your life’s journey – job, marriage, children, retirement – that will trigger changes in your financial plans. A job loss is often seen as more of a speed bump that requires even more careful handling. Whether you’re asked to leave your job or make the decision yourself, the result is the same – a heavy strain on finances.
Creating a sound financial plan is important anytime. This will put your life into numbers and allow you to plan for such events.
5. Death of friends or family
As well as coping with grief and possibly planning a memorial service or funeral, there are often many financial decisions that soon follow the death of a loved one. You may have to deal with estate plans including trusts and wills, updating financial accounts (say, the beneficiaries on insurance policies) and planning how property and assets will be maintained and updated.
6. Moving country
Financial planning for the ‘average’ investor is challenging enough. But throw in those whose lives span international borders, and tax, retirement, and estate planning become even more complicated.
There are also different stages of this transition to consider, such as before the move, acclimation and retirement and independence, all of which come with unique issues regarding planning. Whether temporary or for the foreseeable future, expat status can present multiple stumbling blocks when it comes to financial planning.
7. Buying a house
Even wealthy, well-educated professionals need help here. For example, when considering the benefits of paying cash instead of securing a mortgage, or what assets to liquidate for a down payment or payment in full. Not to mention whether to buy or rent.
These are topics on which focused financial planners should easily be able to provide value and expertise. Take, for example, a first home purchase. One key question during this life event centres on whether parents should help children.
The answer often comes relates to the family’s principles, including how money is viewed from both parents and children. This can be a highly emotional decision. Parents may feel the urge to help but worry their children might develop a sense of entitlement. On the other hand, kids can feel like their parents aren’t being helpful enough during a major step in their lives. A planner can help.
8. Receiving an inheritance
An inheritance can be both a blessing and a burden. On the one hand, the money could be life changing for you and your family, but on the other a burden imposing responsibility on you to use it wisely. A financial planner can help you devise a long-term plan as well as look at more short-term decisions which need to be made.
A good choice here would be a fiduciary, fee-only financial planner, who receives no commissions for recommending investments, but charges you for their services, as a lawyer or accountant would. This is intended to eliminate any conflicts of interest on the planner’s part.
A planner can also help you make decision about any non-cash assets you’ve inherited. For securities, for example, you’ll need to decide whether they’re a good fit for your portfolio or whether you should sell them and buy something else.
9. Selling a business
There are many stages involved in selling a business and some may change/vary depending on the size of your business, where you operate, how you’re regulated and several other factors.
These stages involve pre-sale preparation which considers how your business works, the weak points and the improvements needed. You may need to consider if you need to engage in some form of restructuring to help with the sale. Then there is putting together a summary, teaser or information memorandum, with the assistance of a financial planner. This should be a short document that describes what your business is and the opportunity it represents. It should give enough information to create interest while being anonymous and confidential. Some financial planners also work with clients on identifying potential buyers, helping with the bid/auction process and all the necessary due diligence.
10. Ageing parents (and long-term care issues)
As the baby boomer generation continues to age, this is only going to become a more common transition. How should children handle the emotional and financial consequences of taking care of their parents?
Should they keep their parents in their current house or move them to a facility? What are the financial implications of each? Caring for an ageing parent is one of the hardest transitions that exist and it’s an area where you will need continued financial and emotional advice. The decisions made here are based on more than financial calculations. A financial planner steps in during this transition and makes sure everyone is treated with dignity and respect.
11. Illness or death of a spouse
These situations are highly emotional, but they also require good financial decision making. In the case of a serious or severe diagnosis, a financial planner will work with the client’s estate-planning lawyer to ensure documents and assets are titled correctly, so the family can be prepared when a tragic event occurs.
Of course, dealing with sickness and death involves much more than just estate planning. The whole financial and emotional picture needs to be considered. A human element is needed when such rational decisions are met with such emotion.
12. Legacy issues
Legacy planning isn’t just for the very wealthy. High-net-worth clients need to think about whether the legacy and planning should be built around other planning vehicles like charitable lead trusts or charitable remainder trusts, to name but a few.
Other legacy issues are just as important, regardless of net worth. If they have children, how do they talk to them about money? If charitable giving is important, how do they continue to use the resources they have to encourage this?
13. Wealth accumulation, deaccumulation and transfer
Accumulation is the period when you are gathering assets. You are working and trying to save and invest for life goals. Deaccumulation is when the time has come for you to spend the money you have saved and invested. This generally occurs in retirement.
With transfer, the time has come for you to transfer money to loved ones and charities, and to pass other legacy items to the next generation. If you review the other major transitions and other smaller transitions people will go through throughout their lives, they occur in each of these three categories.
One more, compelling reason
So, there you have it, 13 reasons you may need a financial planner.
As you think of your goals for the coming year, ask yourself why you want to achieve that goal. Now, ask yourself why that is important to you. You’ll find that no matter your goal, eventually these goals are important because you want either yourself or someone you love to be happy.
In a recent survey of 1,000 random consumers across the US (all of whom had self-reported assets of $250,000 or more) researchers found that those with a financial planner were statistically happier than those without one.
This survey identified four core factors that make people happier: fulfilment, intention, impact and gratefulness. The result?
All four predictors of happiness were heightened among consumers who work with financial planners — by a wide margin. This held true even when controlling for gender, age, income and asset levels.
But what’s most interesting, is that when individuals move past $1.2 million of assets, those who work with financial planners rapidly increase in happiness, while those without planners rapidly become less happy.