After more than twenty years of marriage, I now realize that in our family my wife is more cautious than I am when it comes to the risk we take on investments. She has come to understand that I have an entrepreneur mindset and high risk for me is easy to accept. Stability and security in our investments combined with minimal or no debt is important to provide her a needed level of comfort.
So as a couple how do you come together in goals and risk tolerance? I believe it starts with you as a couple agreeing to be aligned with God’s word as you come to understand he alone can be their security within their finances.
“Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment” (I Timothy 6:17, NIV).
Bridging this gap continues by defining goals of when to retire and the amount of money needed to help provide for you during the retirement phase of life. A financial professional can be beneficial in helping you to agree on the goals and how much risk will be accepted to achieve the returns needed to attain your family’s desires.
Such a professional can also help you manage your expectations in the area of finance. Therefore, finding the right professional is important and even necessary for most families.
Choosing the right Financial Planner can be clarified by understanding the following:
1. Find out their expertise in the area of investments. How long they have been in business? Do they have any designations they have achieved such as CFP® (Certified Financial Planner). Also ask if they provide a comprehensive plan that will evaluate current income, expenses, risk tolerances, review of legal documents and tax planning.
2. Understand their investment philosophy. Since it is the core of your relationship, it will set the tone of your investment style. Are they an active manager where they are trading individual stocks, bonds and other securities? Maybe they have a passive style which will buy index funds or exchange traded funds which will allow the portfolio to own the total market. Do they believe in market timing or some trading philosophy that sets them apart from all other investment managers?
3. How much risk will their investment style bring? Remember that stocks normally have more risk than bonds. The way your portfolio is weighted between stocks and bonds will drive return and risk over periods of time.
4. Understanding how they get compensated for their knowledge is very important as it will affect the return you receive. A “fee based” planner will charge a flat fee to do planning or it can be a percentage of the amount invested. They get rewarded for growing your portfolio. Commission based planning is where every investment or product you choose they get paid commissions on the transaction. Total transparency is what you desire as God is entrusting these assets to your family.
Aligning with professionals who are living out their faith and application of God’s principles in the area of finance is important. God really is sovereign and will guide you to the right professionals who can help you make the decisions necessary to provide a bright future he desires for you.
Guy Hatcher – known as The Legacy Guy – has spent his lifetime helping families plan their legacy. A Certified Financial Planner, Guy has been a leader in the wealth management industry, which has allowed him to have over "10,000 Kitchen Table Conversations." This real-life experience merged with Guy's unique conversation style makes him financial advisor, family coach and family counselor. His new book, Your Future Reflection: How to Leave a Legacy Beyond Money, is now available at Amazon.com. Follow him on twitter @guyhatcher. www.guyhatcher.com
Publication date: January 24, 2014