Uncertainty is a part of life, whether it has to do with international politics, the business climate, or your personal health. It's unavoidable — but that doesn't mean you can't plan for it.
According to Zach Zigmond, Vice President – Wealth Planner at Wells Fargo Private Bank, one of the first steps in dealing with future uncertainty is working with your financial team to build flexibility into your plan. Read on for tips on how to make that happen.
Gather all your information
When working with clients, Zigmond and his team begin by reviewing financial records: tax returns, investment portfolios, insurance policies, trusts and other estate-related documents, and more. He notes that this comprehensive review nearly always turns up something that could be done to strengthen clients' strategic plans, even among those who are diligent planners.
The issue for clients: Pulling all that information together isn't necessarily hard, but it takes time. You also need to be sure that you're sharing everything. At one recent discovery meeting, Zigmond thought he had everything covered and was walking out the door when the client mentioned in passing that he also owned 5 percent of a company worth hundreds of millions of dollars. Don't omit details that help to provide your complete financial picture.
Focus on insurance coverage and health care costs
People often have gaps in their planning in insurance and health care, so Zigmond recommends checking to see that clients have sufficient property and casualty insurance. Affluent and high-net-worth clients may need umbrella policies that provide them extra liability protection beyond what's available in their home or auto insurance policies.
Be sure that you're sharing everything: Don't omit details that help to provide your complete financial picture.
One in four of today's 20-year-olds will become disabled at some point before they retire, according to the Council for Disability Awareness. People who are working, especially those with net assets under $5 million, may want to consider disability insurance to help protect their income in case illness, injury, or something else prevents them from working.
Continually update your plan
Wealth planning isn't a once-and-done activity, Zigmond says. He suggests people review their financial strategy with a professional advisor on a regular basis, even if it is just to check in and make sure there haven't been major changes that need to be incorporated. After all, changes in market conditions, tax laws, and your life stage can all trigger changes to your wealth plan.
"In one case a few years ago," Zigmond recalls, "one of my clients hadn't reviewed a key estate planning document in more than 20 years. When the client shared a copy of his estate plan with me, I realized that it didn't match up to the goals we had discussed together. That realization triggered a meeting with his estate planning attorney to update the plan."
Involve your family in your conversations
A key part of the planning process involves communicating the plan to others who may be affected by it. By providing more financial clarity early on, everybody involved knows both your wishes and their responsibilities. This candor can pave the way for less family uncertainty and discord in the future. Not everyone may be comfortable with sharing every detail of the estate plan, but communicating information can be done effectively without disclosing exactly how much you plan to leave to your children and other beneficiaries.
"Recently, I had a family meeting with a husband, wife, and their two grown children," Zigmond says. "The children were in their 30s and 40s, and they didn't know what Mom and Dad were worth."
During the meeting, the children got a candid look at their parents' finances, heard about their hopes for the family legacy, and got copies of their parents' health care directives and estate planning documents. They left with a much clearer idea of what their parents wanted.
"When the family walked out," Zigmond says, "they all hugged each other."