Building a successful financial future takes a number of factors. A key element in establishing that future is building a solid relationship with a financial advisor. You'll need to communicate with them and work together to set parameters for risk tolerance, timelines, and potential life events. Think of them like your General Practitioner Doctor—they'll keep you healthy and deal with small issues, but if you need a specialist for a bigger problem, they'll steer you in the right direction. In this analogy, the specialists are the managers of mutual funds, separately managed accounts, or alternative investments.
Here's the deal: it's up to you to determine the direction you want to go in.
Your financial advisor is going to be there to help you steer the ship.
But they can't do it alone; you two are in this together! So get out there, and start building that relationship. Remember, your advisor is there to help you succeed—and who doesn't want to be successful?
Assess Your Money Goals and Risk Appetite
When you start working with a financial advisor, sit together and talk all about your financial objectives and how your advisor can help you reach them. Be open about your future plans like your housing situation, your family needs, your current income, and your overall financial status. Once you're both up to speed, discuss ways to manage risk.
Do market fluctuations give you the jitters? Are you one of those folks glued to the news, worried about a negative turn in stocks, even if you're working with professionals who are looking to the long term? Or do you sleep like a baby, understanding that your investments are for do-or-die?
If you're tossing and turning with the swings in the market, it might be time to rethink your risk tolerance.
Develop Your Investment Policy Statement
So, after setting up the parameters, you and your advisor should create an Investment Policy Statement (or whatever they fancy calling it). It's basically a clear understanding of your goals and how much risk you can bear.
Make sure you both sign a written document detailing these points, so there's no confusion or miscommunication about your investment goals.
Don't forget to review the IPS annually. This will help account for any life changes that might affect your plans and also remind you of your comfort level.
Keeping Ongoing Communication
Staying in touch with your financial advisor is essential for achieving your investment goals. Reviewing the Investment Policy Statement annually is a must, and you should also aim to chat with your advisor at least once every quarter, either in person or virtually.
Regular communication keeps you informed and empowers you to make well-informed decisions. After all, your advisor is your partner in this journey! Keeping them up-to-date on changes to your life and investment objectives enables them to steer the ship while you keep a firm hand on the wheel. Talking to your advisor often is a good thing, letting you tap into their expertise and experience!