THE FIRST STEP
college education? Or is buying a vacation home in Florida your main priority? By telling your advisor what you hope to gain, that person will be able to guide you along the best path to help you reach your goals. An advisor’s job, however, is not to make the decisions for you. He or she merely suggests what should be done. You are the decision maker. It’s important to have realistic goals. Perhaps you can’t afford to have your vacation home in Florida just yet. That doesn’t mean you should give up the idea, you just have to work with what you have. Your advisor will be able to put you into investments that will have the potential to make enough money to get your vaca- tion home.
For example, a married couple comes in for an initial consulta- tion. They are in their 40s and say that they want to have $3 million in performing assets in five years. A look through their assets reveals that they currently have $1 million total. But, that figure includes their house, the surrounding land, and some other land they own. Their investable assets total $400,000. In this case, it’s great that they had this goal, but while their net worth was very good for a couple their age, $3 million in performing assets in five years was just not realistic. In order for this to happen, they would need nearly a 50-per- cent return every year for the next five years.
It wasn’t that the $3 million in performing assets was the unreal- istic part; it was the time frame in which they wanted to work. Your advisor will help you decide what goals should be short term and which ones should be long term. Most importantly, though, he or she will continue to provide client service. This means that as your needs change, your advisor will change with you to make sure you are still on track to achieving whatever your goal may be. Anyone can sell you an investment product; it takes a committed financial advisor to provide ongoing client service to ensure that you are heading in the right direction.
ESTABLISHING A FINANCIAL PLAN
Smart investors know that they must know where they are currently, what they want to accomplish, and they know that they need to have a game plan. A financial plan is just that: a financial road map. A