As financial markets around the world face challenging times, investors are experiencing unprecedented levels of stress and anxiety.
But it’s not all bad news: Current conditions have created an ideal time to review and re-engage in the execution of your wealth plan, says Joe Delaney, a director with Vista Wealth Management, an affiliate of Burr Pilger Mayer.
The situation is analogous to leaving on a trip to an unfamiliar area without first checking for directions. Soon you find that you are lost, the kids are hungry and asking, “Are we there yet?” and your spouse is trying to help you navigate and saying, “I told you so,” in the same breath. But had you taken the time to plan the trip, it would have been much less stressful because you had a plan in place, and Delaney says the same is true with managing your wealth.
Smart Business spoke with Delaney and Henry Pilger, CEO of Vista Wealth Management, about how reviewing your wealth plan now can help you adjust your expectations, how to make changes to benefit your family over the long term and how to transfer wealth under favorable conditions created by the current market.
How important is it to revisit your wealth plan?
Pilger: In these rough economic times, it should be a top priority for everyone to revisit their wealth plan with their adviser to determine if it is comprehensive enough. Your plan cannot be based on wishful thinking or on unrealistic assumptions.
A comprehensive plan should consider three essential areas: cash flow projections, both for now and for the future, using accurate modeling; protection of yourself and your assets as you move through different phases of life; and legacy planning to create the legacy you want to leave at the time of your death.
What are the goals of a wealth plan, and how often should the plan be addressed?
Delaney: Your comprehensive wealth plan should enable you to identify and document important goals and objectives, which will then serve as a guide to help meet and exceed them. It is a good idea to review your plan and make adjustments for changes in your personal circumstances on a regular basis, as an outdated plan based on assumptions that are no longer valid can be worse than having no plan at all.
It is during times like these, when the value of your assets has changed, that you may be able to use assets that have lost value as part of a gifting strategy. As an example, the plan might make adjustments for the transition of a closely held business to the next generation and a corresponding change in cash flows. Or it might require more complex advanced planning strategies to ensure that legacy goals are ultimately achieved.
You should talk to your advisers about your wealth plan and make the necessary adjustments in light of what has happened in the financial markets. In these turbulent times, switching to cash may feel safe, but risks remain. By running for the comfort of safe and insured, investors with a time horizon beyond a few years may be doing real damage to their long-term finances. History has shown that in the last 10 market downturns, when the recovery begins, it often yields a 30 to 40 percent upside in the next three or four months.
How do you involve your heirs in the process?
Pilger: Make sure your heirs are equipped to handle the type of market turmoil we are experiencing today. Including your heirs in discussions around money potentially sets the stage for a more successful intergenerational transfer of wealth.
One of the biggest concerns many people have is what money will do to their family. At the same time, it is a subject that is very hard for most people to talk about, often because discussions around the topic of money tend to be uncomfortable. But the fact remains that families that are the most successful in passing on wealth through multiple generations are those that have regular meetings about wealth and the responsibilities that go with it.
Tough economic times remind all of us of the importance of involving and educating future generations so that they are better equipped to handle financial decisions going forward. Educating others in your family could be as simple as a joint meeting with parents, children and a financial adviser to discuss investing and preparing a budget.
Or it might be as involved as coordinating a multigenerational family meeting to establish and work on family values and a vision statement, which can often include philanthropic planning.
Now is the time to take action and seize control of your finances. Step back and access where you are and where you want to go, which requires taking a thorough look at the wealth plan you have in place.
If you don’t have an updated comprehensive plan, it is important to create one. Market circumstances have not only created new realities but also some compelling opportunities that you can use to your advantage.
Henry Pilger is CEO and Joe Delaney is a director with Vista Wealth Management. Based in the Bay Area, Vista has six offices including Santa Rosa, Novato, San Francisco, Walnut Creek, Palo Alto and San Jose. Reach them at (415) 842-3112, or [email protected] or [email protected]. Vista Wealth Management is an affiliate of Burr Pilger Mayer.
