By Rita Cheng, CRPC®, CFP®
Co-Founder and CEO,
Blue Ocean Global Wealth
With Americans living longer than ever before, we have the opportunity to be successful in our original career, and then embark on a new venture. For some of us that means scaling back to part-time work or retiring from the professional scene completely. For others, it means starting up a new business, or exploring a new field.
Whatever Act 2 looks like for you, building financial stability now is a key ingredient in having flexibility later.
Two ingredients that foster financial stability are an essential part of the financial planning process: Clarity and simplicity.
- Clarity: To build your financial reserve, you should expect to work with a financial planner who can explain your options clearly and help you make smart financial decisions.
- Simplicity: This is a powerful concept when applied to personal finance and money management. When your financial planner demystifies complex issues such as investments, taxes, and retirement, you can make better decisions with confidence.
Integration trumps consolidation every time!
A Certified Financial Planner professional can help you integrate your investment holdings and coordinate your financial life. Having clarity about your financial situation yields confidence and peace of mind.
Some clients may incorrectly associate the number of accounts they have with diversification; the number of relationships they have with financial advisors does not mean they are diversified. Yes, it’s important to consolidate, but it’s more important to integrate your financial life.
You should consolidate so that you don’t have multiple relationships to manage. But the real reason to consolidate is to integrate the pieces of your financial life.
It’s not that consolidation is bad—of course we need to automate to save time and be efficient—but if you’re nervous about the mutual funds that you have selected or you’re uncertain about the investment allocation of your 401(k) plan, then you may need to revisit your strategy.
Start by partnering with a financial planner who will help you focus on your priorities and goals. It is not enough to identify goals and implement a plan; monitoring your progress underpins the foundation of ongoing financial advice and goal-tracking.
One way I help my clients organize their finances is by investing heavily in software and technology. My clients can access all of their financial information any time, anywhere, on any device. Not only can they view their investments that our firm helps them manage, but they can also see their 401(k) plans, savings accounts, and even liabilities on any phone, any tablet, any computer—Windows, Apple, Android.
That’s simplicity at work! The organization and clarity is appealing regardless of age, gender, or level of wealth. Whether they’re Millennials or Boomers, they want to see their holdings online, integrated, in one place.
Choose a financial planner who can help you see the big picture.
Sometimes I sit down with a client right by my side and re-balance their portfolio—real time, right in front of them. Due to compliance requirements, they log in and control the keyboard. Of course some prefer that I walk them through it over the phone. Clients appreciate that I work with them in the way that makes them feel most comfortable, and that they can finally cross this important task off their to-do list. They leave our meeting or end the phone call feeling positive about their financial future.
One simple way I help clients consolidate and integrate is by encouraging them to automate their credit card payments. So many clients travel, and they sometimes forget to pay their credit card bill. I tell them, “Automate that payment so that you pay the minimum amount due every month. And then you can pay off the credit card in full when you return or when you remember.”
They have the money; they’re just really busy. So automating helps them save the $30 late fee.
Scroll down for five reasons to integrate—by automating and consolidating—your finances. That way when you’re ready to move into Act 2 of your life, your finances will be ready for your next venture, too.
1. Consolidate financial accounts to reduce paperwork. The goal is for all of your banking and brokerage activity to be at the institution where your deposits and investments are. That way, you will receive just one statement detailing all of your holdings and the activity associated with each.
Remember: The number of accounts does not determine one’s level of diversification. You could have 10 accounts at different institutions and still not be properly diversified.
2. Automate to more easily manage your monthly cash flows.
- Direct deposit of paychecks, pensions, etc.
- Automatic sweeps to interest-bearing accounts mean less idle money.
- Checks and credit card activity are summarized in one monthly statement.
- Required Minimum Distributions (RMD) from retirement accounts at age 70.5 can be deposited directly into your checking account, with federal tax withholding. Federal tax withholding is not automatic, but can be arranged.
3. Automate to reduce the chance of errors.
- All assets can be viewed and analyzed in one view.
- Individual investment holdings are easier to monitor.
- Investment returns are easier to evaluate.
- Portfolio re-balancing is easier to implement.
4. Automate to simplify tax preparation and record-keeping.
- One source for 1099s, capital gains, dividends, and interest.
- Check-writing and debit card activity is categorized and summarized.
- Maintenance of cost-basis information and other historical information.
- Some tax software allows importing information directly from financial institutions (talk about saving time and reducing errors!).
5. Consolidate to centralize estate administration, in the event of disability of death.
- In the event of death, every institution that holds the decedent’s assets will require one set of documents:
- Death certificate dated 60 days or less from date of death
- Affidavit of domicile
- Last will and testament and any codicils
- Revocable Living Trust and any amendments
- Advance Medical Directive/Durable Power of Attorney for Health Care
- Durable Power of Attorney
- If the decedent owned a business, then copies or originals of the following documents will be required:
- Corporate, LLC, or partnership documents
- Contract, including leases, loans, and employment agreements
- Business licenses, such as state and local licenses
- Income tax records for the most recent three years
- Benefits of centralized estate administration include:
- One source for all requirements.
- One phone call and an experienced, dedicated specialist to help.
- Continuity of management and custody services.
As a financial planner, it’s extremely comforting knowing that I’m helping my clients prepare to send their children off to college, save money to cover wedding expenses, and even be able to have one less worry if they have to face an unexpected loss or illness.
Whatever shape your Act 2 takes, I hope it will be fun, fulfilling, and financially secure!
For more information, visit www.blueoceanglobalwealth.com.
Marguerita M. Cheng, CFP® is the CEO of Blue Ocean Global Wealth, which provides corporations and institutions with portfolio construction, investment due diligence, and risk-management consulting services. The firm works with families, entrepreneurs, and executives to help them identify and achieve their financial goals. As a CFP Board Ambassador, she helps educate the public, policy makers, and media about the benefits of competent, ethical financial planning.
A Financial Planning Association (FPA) national board member and member of the finance committee, Cheng served eight years on the board of directors of her alma matter, The Robert H. Smith School of Business at University of Maryland, where she collaborated to increase alumni engagement and developed asset management education programs. She is also the president of the Blue Ocean Economic Empowerment Fund.
Cheng says her greatest joy and passion is touching the lives of others so that they may achieve their personal financial success.
Securities offered through Private Client Services, LLC. Member FINRA | SIPC. Advisory products and services offered through Blue Ocean Global Wealth, a registered investment advisor. Private Client Services, LLC and Blue Ocean Global Wealth are not affiliated entities.
Blue Ocean Global Wealth intends that this article will be viewed for informational purposes only. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.