May 2, 2025 • 32 mins
Annual reviews and why you need one – You have probably heard all the reasons why
you need a comprehensive financial plan. In this episode Jeff Perry and Russ Ball
discuss why it is critical to review your plan at least annually. Topics covered include
responding to life changes, investment objectives, time horizons, liquidity needs, risk
tolerance, cash-flows, life insurance needs, legacy planning, and more.
For more information or to reach TEAM AMR, click the following link:
https://www.wealthenhancement.com/s/advisor-teams/amr
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Hello, and welcome to another edition of Something
More with Chris Boyd.
My name is Jeff Perry, and I have
the privilege of co-hosting this episode with
my team member, Russ Ball.
(00:43):
How are you doing, Russ?
Pretty good, pretty good.
How are you this morning, Jeff?
Good.
We're in a new month.
It's May.
That's right.
That's right.
I did notice the calendar this morning.
May Day.
For those of you who are in the
Northeast or listening in other parts where you
have cold weather, I can see that your
hope is springing forward and saying, it's May.
(01:04):
It's going to get warm.
I know.
I know.
It's starting to feel like it out here,
but I did check that about the next
week, it's going to be raining every single
day.
It's a nice way to welcome in May.
April and early May showers, right?
Yeah, I guess so.
I guess so.
Well, for the listeners who listen in, they
know that I'm primarily in Florida, and that's
(01:26):
where I am today.
We're still in the dry season.
We start getting rain in June, and that's
our rainy season, June to September.
We all have seasons of rain.
Yeah, yeah.
At least everyone gets it.
It's not just us out here.
It's been an interesting couple of months.
(01:48):
It's just gloomy in Cape Cod.
Yeah.
I think spring comes.
I remember I lived on the Cape for
decades.
Spring comes, you get that date on the
calendar in March, and you get that little
glimmer of hope.
Then baseball season starts, and then April ends,
and it still hasn't shown up.
(02:09):
Exactly.
Don't despair.
I know.
I know.
It's right around the corner here.
You're almost there, right?
Well, for this episode, Russ, I think we
should talk about annual reviews.
Our listeners certainly hear us talk about the
(02:32):
need or recommendation for people to have a
comprehensive financial plan.
We talk about that a lot.
Whenever we bring on a new client, 99
% of the new clients go through this
onboarding process that revolves a few meetings and
the development of a financial plan.
(02:54):
We've talked about it on the show.
It's really at least a two-meeting process
where the first meeting, we describe it as
getting to know you.
We're not welcome to asset management resources, AMR
team, wealth enhancement group, and here's what we
recommend.
That's not how we run our business.
(03:17):
You listen to talk radio, you see some
shows on TV, and they give the financial
plan or 15 seconds of information and they
start making recommendations.
That's just not possible.
It's like meeting your doctor for the first
time and not having any tests or not
(03:38):
having any conversation, and it gives you a
prescription.
We go through this process of developing a
financial plan, two meetings, getting to know you,
getting to know not only your balance sheet,
not only your net worth, not only your
investments, but your goals, your fears, your concerns,
your unique challenges.
(03:59):
Maybe you have some in your family, cash
flows, debt.
We go through the whole thing and develop
the financial plan.
I know you, in the months that you've
been with us, you've dug right into that.
You've actually been working on a lot of
financial plans, right?
Yep, absolutely.
That's a big part of my role right
now is the financial planning process and getting
(04:22):
all the information that we gather in our
initial meeting into a financial plan and trying
to figure out the best ways to optimize
and create a plan that works for the
client.
I know you came from the financial services
sector before you joined our team, but were
(04:42):
you surprised at the amount of detail that
these plans go into, or is this something
you expected?
No, definitely.
I think, especially in the big wire house
world, they're just starting to catch on to
the financial planning side of things and the
importance of it and what clients are looking
for.
They don't want to have just a purely
(05:03):
transactional relationship with their investment managers.
For me, it was coming in and right
off the bat, we're right into planning mode.
I really think that's in the best interest
of clients because we get the whole picture.
We're not just trying to sort out what
you're going to do with this X amount
of dollars that you have sitting on the
side.
We're really trying to get a full picture
(05:24):
and then offer our guidance and suggestions and
advice.
That's right.
For our regular listeners, we're not convinced that
you need a comprehensive financial plan by now.
I don't think we're going to convince you.
It's almost in every episode.
At some point, it comes in.
If we're talking about a problem, we say,
(05:45):
how's it fit in the financial plan?
If we talk about, did you do something?
Should you do something?
We talk about the comprehensive financial plan.
For this segment, I thought what happens after
the plan would be a good discussion.
For us, it's an annual review.
That doesn't mean we don't talk to our
clients more than once a year.
(06:07):
If a client has a question or a
concern or they want to model something out,
they're thinking about buying a second house, downsizing,
taking a trip around the world, giving $50
,000 to their child for a down payment,
wedding coming up, whatever it is, we talk
(06:28):
to them all the time.
We like to hear from them, actually.
We're better planners the more we hear from
our clients because we understand what they're facing,
what they're thinking about.
Absolutely.
At least once a year, we are reaching
out to our clients and saying, time to
come in, time to jump on a call,
whatever you prefer, remote or in person, because
(06:49):
let's review that financial plan.
Let's go over it.
If you invest on your own, if you
have your own financial plan and it's working
for you, no judgment at all, but I
hope you're reviewing your plan.
(07:09):
I hope you're updating it.
It's not something like you don't make the
plan, put it on the shelf, and walk
away.
If you're our client, we're going to be
reviewing this with you.
If you're working with another financial advisor and
you don't have a plan and you don't
have regular reviews, I'm not saying that person's
not a good financial advisor, but it's not
(07:30):
how we do it.
If you'd like to get a second look
at your plan or create a plan, that's
why we're here.
We're here to help.
We do complimentary reviews of people's plans or
portfolios, whatever they want us to do initially.
So you're welcome to give us a call.
But back to the annual review.
I think everyone needs an annual review, if
(07:53):
you have an advisor or if you don't.
And Russ, have you participated in some annual
reviews with clients so far?
Yeah.
I'm involved in pretty much everyone with Chris,
sort of assisting and taking some notes, but
I definitely had a lot of exposure to
(08:13):
that since I started, which has been great.
I think from the start, we take a
look at how the portfolio is performing, what's
changed with performance, what's changed with the investments,
if they haven't watched the quarterly updates from
Brian and the team.
We kind of go over that.
(08:33):
And then, like you said, we dive into
the financial plan and say, all right, what's
changed since the last time we saw you?
Sometimes it's been more than a year since
we've seen clients.
And sometimes significant things have changed.
It's like, oh, yeah, actually, no, that mortgage
has been paid off.
Or no, we don't have that credit card
debt anymore.
And we're thinking about buying a house.
And it's interesting how right off the bat,
(08:55):
some clients are like, no, I'm not really
sure what I need to talk about.
And then when we start going into it,
it really starts going out like, oh, maybe
my plan is a little bit different.
Maybe my risk profile has changed a little
bit.
Maybe I'm less inclined to take more risk.
Let's dig into some of those, because there's
a lot there.
And I think you started at the exact
(09:17):
right spot.
It's like you haven't seen an old friend
in a year.
And you start out with what's new.
What's new?
Changes in health often come up.
People who had a plan to maybe work
till, say, age 65, and they have a
health issue.
And they're like, I had to retire this
(09:37):
year.
Or people who think they're going to retire
at age 65 and say, I don't know
what I'm going to do.
I love my job.
I'm going to keep working.
Or maybe they bought a house.
Maybe they bought a boat.
And if you have a boat, you definitely
need to change your financial plan.
(09:58):
Or maybe they have a child who is
heading off to college.
And who knows what the situation is?
It's like, what's new?
And by that question, we mean not just
what's new today, like, oh, the Celtics won.
They're going to round two.
No, we're talking about changes in your life,
life changes that will impact your finances, positively
(10:19):
and negatively.
Sometimes it can be kind of both.
Oh, well, my mother passed away this past
year.
Very sorry.
We talk about that.
And she left me $10 million.
So OK, well, both those things affect your
life.
And we talk about those things.
(10:39):
And then we go into, as you said,
after we get kind of the life changes,
anything significant that we need to be aware
of, we review their portfolio, the assets that
we have under management, review all the accounts
that we have.
And if they have other accounts they want
us to, we can take a look at
those as well.
But just to make sure they understand where
(10:59):
they're invested, make sure they understand their performance
over the past, in our discussion and annual
review here, over the past year or five
years and so forth.
We want them to have knowledge.
We want them to understand how they're doing.
And then the next thing that you mentioned,
which I think is right along the line
of where these usually go, is during the
(11:23):
conversation about life changes and reviewing their portfolio,
their investment accounts, their risk often comes up.
And it's a natural thing.
I say this a lot because it comes
up a lot.
It's a natural thing.
As people get older, they tend to get
more conservative.
(11:44):
And that's a broad statement.
Think about, especially in the category of risk,
think about the things that you would do
when you were 18 and not even consider
the risk you were taking.
Whether it be a sport, whether it be
an activity.
There's a reason our soldiers are young, because
(12:05):
they are willing to jump out of airplanes
or they're willing to go over the hill
with the M16, et cetera.
We all felt invincible when we're younger.
And we are willing to take more risks
just generally.
I'm not specifically talking about finances and investing,
but it applies there too.
(12:25):
And as you get older, you start to
think about your risk tolerance, how much risk
you're willing to take.
And it's even magnified, that kind of view
of risk is magnified when you stop working
and you don't have that ability to generate
income.
You may have income from a pension or
Social Security or from your investments, but you
(12:48):
don't have that kind of self-directed ability
to earn income.
So you start to think about, am I
taking too much risk?
Can I tolerate it if we have a
three-year bear market?
Yeah.
And it can be pretty unsettling when you're
thinking like, this is my nest egg.
This is what I need to live my
(13:09):
current lifestyle.
And when that comes into question where you
see some fluctuation, when there's some volatility, that
can be all that much more unsettling when
you're near retirement or in retirement.
And that's really what you've built up.
So during this annual review, if we get
an indication that a client is feeling like
(13:29):
they're not in the right risk profile, they're
just not comfortable, gee, I know we did
good last year, but I haven't slept in
the last three weeks because of volatility, which
our listeners know we've been talking about a
lot in this last month.
And so we have that discussion and we
use a questionnaire to help guide us.
(13:51):
And we look at the overall goal.
Maybe you don't need to take that risk
to stay in your plan.
You and I just did this for a
client, a woman who's retired, and she was
concerned about the risk because of all the
headline news.
And she had a very solid financial plan,
and she was taking a certain degree of
(14:12):
risk.
And throughout the annual review, it came to
the focus that she was not comfortable taking
the risk.
And so the plan that I asked you
to review, because you had access to the
original plan, was what happens, Russ, if this
client decides to reduce their risk from a
(14:36):
certain level?
I think she was a 60% exposure
to stocks.
What if we reduce it to 30%?
How does her outlook look for the rest
of her life?
Does she still have the cashflow she needs?
Will she still be stable in her goals
and be able to do what she wants
to do as lifestyle?
And the answer in this case was yes,
(14:57):
she was fine.
Yep.
So she doesn't need to take the risk.
You can have the same person, not the
same person, you can have two people with
the same circumstances, they have the same net
worth, same income, same everything.
It's like these two people have, they're twins
financially.
And one person can say, well, my plan's
(15:20):
100%.
I'm really solid.
Therefore, I don't need to take any more
risk.
I feel better that way.
And that's not a wrong position to have.
And their financial twin could say, my plan
is solid.
I'm good.
I can take a lot of risk, because
I can afford to have down years.
(15:41):
So I'm going to take a lot of
risk and think about my legacy.
Think about generation, building generational wealth.
And it's the same setup free the person,
but it's how they feel and what their
vision is with their investment objectives.
And we spend a lot of time during
these annual reviews, life changes, risk profile, but
(16:02):
also what their objectives are.
What are they trying to achieve in their
financial world?
Right.
Yeah.
What are their goals, near term, long term,
cash flow needs, all that.
One point related to that story you just
brought up is a lot of clients will
have some of their rollover IRAs with us,
(16:22):
some taxable assets, and then have a work
plan.
And they're not necessarily sure.
I think we've talked about this in the
past as well, but they're not exactly sure
how that's invested.
And sometimes it's not at all in line
with their risk profile.
Super common, right?
Yeah.
And so a situation like that, where it's
like, maybe their investments with us are in
a more conservative preservation type strategy, but their
(16:46):
work plan is a highly aggressive, all stock
portfolio.
And they just kind of set it and
forget it.
They never really checked it.
So that's what we've been doing a lot
lately is taking a look at those 401ks,
403bs and kind of giving our suggestions and
looking at it as a big picture and
trying to see if it fits with their
(17:07):
risk profile, because that could really throw a
whole portfolio a little bit out of that
risk alignment, I would say.
But yeah, just a thought on that.
No, it's very true.
People spend a lot of time, like if
they have their own investments or if they're
working with advisors, so they're getting information from
us frequently.
(17:27):
Not only do they get the statement from
Schwab and our case or Fidelity, but the
custodians that we use, we send our own
statements out with performance and we send out
newsletters and emails and do podcasts and webinars.
So if someone's watching, they get a lot
from us and other advisors certainly do these
(17:48):
things as well.
But your work plan, which for many people
is their largest investment.
I almost said largest investment with the exception
of their house, but we see people who
have 401ks and other deferred comp plans that
are larger than the value of most homes,
certainly.
Yeah.
And they just don't know what's in it
(18:09):
or they don't change what's in it or
they don't monitor what's in it.
So that's an excellent point of bringing in
those outside assets and seeing, here's your risk
profile.
You're very clear about it.
Here are your goals.
We know you.
How does this fit in?
And if it doesn't fit in, we can
make suggestions to make it consistent with your
(18:32):
overall financial plan.
You mentioned one thing that I want to
dig into because it's another thing that we
spend a lot of time focusing in during
the financial plan, but annual reviews, cashflow.
Yep.
Yeah, we do.
Through the financial plan, we can see a
breakdown of cashflow based on goals and all
(18:55):
the objectives and then your regular expenses, your
regular needs.
You can see each year broken down and
I think that's pretty useful to get a
big picture view.
Where's the money going?
Where's the money coming from?
One piece of that that's always a little
bit tricky is trying to figure out what
your expenses are, but not everyone has a
(19:16):
great handle of what those monthly expenses are.
In general, having that cashflow overview, I think
is very helpful.
When people see that, they really appreciate that.
Yeah.
The cashflow, getting that, how much do you
spend a month on your regular?
And we'll talk in a minute about non
-regular, like single expenses and how we handle
(19:37):
those.
But how much do you need to maintain
your house on a regular month?
If you're cashflow positive, meaning you're bringing in
more than you're spending, a lot of people
don't know.
They're just like, I have enough.
I don't know what it is.
We have a couple of different methods.
We can drill down independently with you and
really get a solid number.
For the people who don't want to do
(19:58):
that, we have a couple of other practices
to get really good estimates.
Most people left on their own, underestimate how
much they spend.
They might know, my electric bill is this.
My auto insurance is this.
I spend this much on groceries, but they
(20:19):
forget things that are regular, but not automated.
They forget about entertainment.
They forget about vacations.
They forget about car repairs.
They think about, I pay auto insurance every
month, but does your car need a repair
every year?
Probably.
If you think brakes, tires, even if you
(20:39):
have newer cars, you still need these maintenance
issues.
We help drill down on that.
Then we also go into, how do you
buy a car?
They'll say, I pay cash or I finance
or I lease.
We model that out in the financial plan
as well.
Plan so that you do have a new
car.
If someone just says, I spend $5,000
(21:03):
a month.
I look at my finances.
I can withdraw $5,000 a month.
I'm all set.
They're missing a lot of things.
We go through that with individual questions.
Some of the questions are common sense like
car, but some of them really make people
think, do you plan on helping your children
(21:25):
in the future?
I was going to mention that one.
That's usually a big one.
I'll talk about that some of the things
that come up in that category because it's
broader than just a gift sometimes.
Yeah.
Sometimes it's ongoing support for family members or
helping a grandkid or even college expenses for
kids, grandkids, that sort of thing.
(21:47):
Maybe those aren't really baked into the cash
flow or the cash flow needs.
It's just like, oh, well, it's family.
It's a separate category.
We like to include that, of course, to
get a real sense of how that's going
to play into the plan.
Some families are extremely generous, rightfully so, to
(22:10):
their children.
But it does play a role in the
plan.
We want to see how that models out.
Yeah.
In that family category, sometimes we have a
family or an individual with a special needs
situation where they want to make accommodations for
a child, say, who needs some support after
(22:31):
they're gone, after the parent's gone.
It can be sometimes unexpected where you may
think your children are all set and then
there's a divorce or a death of a
spouse.
Talking about these issues and putting a placeholder
for those families who think it's possible or
(22:51):
likely gives you peace of mind in the
plan because if one of those things come
up and you have a placeholder, a certain
amount that you might spend for family support,
it makes your financial plan more accurate and
it also serves as confidence that if it
comes up and you want to do that,
(23:13):
if it's helpful, you know you can without
disrupting the financial plan.
That's just not for those unknown things.
We put in vacations.
You're just retired.
Most people have some vacation goals, some travel
goals, and we put those in.
Other things, home repairs.
How old is your roof?
(23:34):
Oh, it's 30 years old.
Well, I guess we should plan for a
new roof sometime in the next five years.
This is a long process, but we put
them all in and it helps create a
plan that when those things come up, it's
almost, I call it, I haven't come up
with a better word.
I call it permission.
A client will say, hey, I'm thinking about
(23:56):
going on this month cruise this year.
Do you think I can afford it?
Well, yeah, you've planned $15,000 a year
for vacations.
How much is the cruise?
Oh, $50,000.
Well, maybe not.
Let's model the plan.
Let's test the plan.
We spend a lot of time on cash
flows.
(24:17):
That's a good point.
It's not static.
You already mentioned that.
If you say, oh, there is a $20
,000 vacation I'd really like to take.
I wonder if I can afford that.
We have a way to answer that to
a pretty reasonable conclusion of if it's going
(24:37):
to work or not.
Just something to reach out to us about
and we can put it into the plan
and see how it plays out and model
different kinds of scenarios.
Another topic I want to touch on about
what we do in our annual reviews, we've
talked about a lot, but another big thing
that we do with our clients in the
annual reviews is talking to them about their
(24:58):
liquidity needs.
Liquidity just means available money that's not exposed
to a market that may be volatile.
You could have funds in your liquidity bucket,
as we call them.
We call buckets, in other words, places to
hold certain types of money.
We want our clients to have liquidity, not
only to meet their cash flow, but in
(25:20):
the event that we have a down market.
If you think if someone is spending $100
,000 a year, for example, and they're taking
it all from their investments, just to keep
this simple, we'd offset it with social security
or pensions or annuity or whatever they may
have that's guaranteed, but we don't want that
client to be having to time the market
(25:42):
and saying, all right, I'm going to take
out whatever that is, $8,000 something each
month out of their investments.
We want to have a liquidity bucket.
We monitor the liquidity bucket, that's money that's
not exposed to the market.
They can withdraw that from non-invested assets
(26:03):
without having to worry about, the market was
down 20% a couple of weeks ago.
You don't want to be taking money out
when you're in the middle of a correction.
It's too much for this episode to go
into how we do this and the breadth
of liquidity buckets that we use, but just
know that this is something else that comes
(26:24):
up in the annual review.
How much do you have set aside?
Is it enough?
How long should it be?
Depends on where your income comes from and
all that, but it's something else that we
do during these annual reviews.
Where should that money that you need for
retirement come from?
In a tax-efficient manner, and where are
(26:46):
we taking it from first?
Yeah, the sequence, right?
The sequence, exactly, yeah.
Yep.
We're scratching the surface here, but what we
want to get across today is you have
a financial plan.
If you've done it with us, you know
the process and you have confidence in your
plan.
We actually give you a number.
We give you a grade.
(27:06):
I love giving good grades.
I think I know how teachers feel.
People from students are really trying, but they
don't get a good grade.
You can have confidence that if you have
a good grade, you can stick to your
plan.
You can live that life that you've earned
from your saving and investing.
If you don't have a great score, there's
(27:27):
things that we can do to help you
get that score up.
These annual reviews, we certainly review the score,
like what's changed, all these things that we
talked about.
Market performance plays into it.
Your health plays into it, what you do
with your family, all these things we talked
about today on the episode.
We update your score.
The score doesn't change very much.
(27:48):
People think when you get your first score,
it's there, but people think in this market
turmoil where I said, oh, my score must
have went 95 to 50 because we had
a bad year or a bad few months.
That's why so many people, when we do
the stress testing and they see, even from
here, if we drop the market 20%
(28:09):
tomorrow, that it still has a 90 plus
percent chance of success, that's not too bad.
They're usually very pleasantly surprised.
Yeah.
They're so impacted by the recent things that
have happened.
We use the Monte Carlo simulation.
It projects a thousand different scenarios based upon
(28:30):
market history, long periods of good markets, long
periods of bad markets.
We get a range of where we think
you'll be at, and then we get a
prediction and that's what that score is, which
is zero to a hundred.
Like any student, you're shooting for the hundred,
but you walk out with a 95 and
you say, I'll take it.
Right.
Exactly.
(28:50):
We're about out of time.
I think we did a good job at
covering things that we go over in annual
review.
There's other things, like we'll ask you, do
you have your estate plan?
And if you do have your estate plan,
when's the last time you reviewed it?
So it might be more of an accountability.
We're not going to do your estate plan
with you, but we're more of an accountability
(29:10):
partner.
Like, well, you have an estate plan is
20 years old.
Let's put that on your to-do list
to review it.
First of all, read it.
If it's not accurate, go back to your
estate planning attorney to get it.
We'll review things like life insurance.
Now people think, well, I have life insurance.
Why do I need to review it?
Well, maybe it's not enough because of life's
(29:31):
changes, or maybe you don't need it anymore
because of life changes.
So review things like that.
We help you with making your decisions on
when to take social security, what your risk
is to long-term care, potential needs, all
these things we do in the financial plan.
And we do them every year.
Some of them superficially because you're all set,
(29:54):
or we've decided that this is irrelevant to
you.
But this is how we serve you.
And this is the way to keep you
on track so that you can stay on
your plan and reach your goals, live your
goals, and live your dreams happily without having
to worry about, am I going to run
out of money?
Am I not going to be able to
do something I wanted to do?
(30:15):
And a financial plan and any reviews really
give clients a peace of mind.
So if you don't have one, you should
have one.
And if we can help you with that,
please feel free to reach out to us
and make an appointment where you offer a
complimentary consultation.
We'll help you create a financial plan if
you have one, or if you have investment
(30:36):
somewhere else, we'll certainly be willing to be
a fresh set of eyes and give you
our thoughts on those.
To do so, you can call our office
at 508-771-8900 and ask for an
initial consultation.
Russ, thank you for joining me today.
I think we did a decent job at
explaining a lot of information that happens after
(30:57):
the financial plan during an annual review.
Yeah.
We like to cover all the bases, but
yes.
We certainly try.
Thank you for listening.
I hope you'll join us next week.
Until then, keep striving for something more.
(32:02):
Transcribed by https://otter.ai Revised by https://otter.ai
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Hello, and welcome to another edition of Something
More with Chris Boyd.
My name is Jeff Perry, and I have
the privilege of co-hosting this episode with
my team member, Russ Ball.
(00:43):
How are you doing, Russ?
Pretty good, pretty good.
How are you this morning, Jeff?
Good.
We're in a new month.
It's May.
That's right.
That's right.
I did notice the calendar this morning.
May Day.
For those of you who are in the
Northeast or listening in other parts where you
have cold weather, I can see that your
hope is springing forward and saying, it's May.
(01:04):
It's going to get warm.
I know.
I know.
It's starting to feel like it out here,
but I did check that about the next
week, it's going to be raining every single
day.
It's a nice way to welcome in May.
April and early May showers, right?
Yeah, I guess so.
I guess so.
Well, for the listeners who listen in, they
know that I'm primarily in Florida, and that's
(01:26):
where I am today.
We're still in the dry season.
We start getting rain in June, and that's
our rainy season, June to September.
We all have seasons of rain.
Yeah, yeah.
At least everyone gets it.
It's not just us out here.
It's been an interesting couple of months.
(01:48):
It's just gloomy in Cape Cod.
Yeah.
I think spring comes.
I remember I lived on the Cape for
decades.
Spring comes, you get that date on the
calendar in March, and you get that little
glimmer of hope.
Then baseball season starts, and then April ends,
and it still hasn't shown up.
(02:09):
Exactly.
Don't despair.
I know.
I know.
It's right around the corner here.
You're almost there, right?
Well, for this episode, Russ, I think we
should talk about annual reviews.
Our listeners certainly hear us talk about the
(02:32):
need or recommendation for people to have a
comprehensive financial plan.
We talk about that a lot.
Whenever we bring on a new client, 99
% of the new clients go through this
onboarding process that revolves a few meetings and
the development of a financial plan.
(02:54):
We've talked about it on the show.
It's really at least a two-meeting process
where the first meeting, we describe it as
getting to know you.
We're not welcome to asset management resources, AMR
team, wealth enhancement group, and here's what we
recommend.
That's not how we run our business.
(03:17):
You listen to talk radio, you see some
shows on TV, and they give the financial
plan or 15 seconds of information and they
start making recommendations.
That's just not possible.
It's like meeting your doctor for the first
time and not having any tests or not
(03:38):
having any conversation, and it gives you a
prescription.
We go through this process of developing a
financial plan, two meetings, getting to know you,
getting to know not only your balance sheet,
not only your net worth, not only your
investments, but your goals, your fears, your concerns,
your unique challenges.
(03:59):
Maybe you have some in your family, cash
flows, debt.
We go through the whole thing and develop
the financial plan.
I know you, in the months that you've
been with us, you've dug right into that.
You've actually been working on a lot of
financial plans, right?
Yep, absolutely.
That's a big part of my role right
now is the financial planning process and getting
(04:22):
all the information that we gather in our
initial meeting into a financial plan and trying
to figure out the best ways to optimize
and create a plan that works for the
client.
I know you came from the financial services
sector before you joined our team, but were
(04:42):
you surprised at the amount of detail that
these plans go into, or is this something
you expected?
No, definitely.
I think, especially in the big wire house
world, they're just starting to catch on to
the financial planning side of things and the
importance of it and what clients are looking
for.
They don't want to have just a purely
(05:03):
transactional relationship with their investment managers.
For me, it was coming in and right
off the bat, we're right into planning mode.
I really think that's in the best interest
of clients because we get the whole picture.
We're not just trying to sort out what
you're going to do with this X amount
of dollars that you have sitting on the
side.
We're really trying to get a full picture
(05:24):
and then offer our guidance and suggestions and
advice.
That's right.
For our regular listeners, we're not convinced that
you need a comprehensive financial plan by now.
I don't think we're going to convince you.
It's almost in every episode.
At some point, it comes in.
If we're talking about a problem, we say,
(05:45):
how's it fit in the financial plan?
If we talk about, did you do something?
Should you do something?
We talk about the comprehensive financial plan.
For this segment, I thought what happens after
the plan would be a good discussion.
For us, it's an annual review.
That doesn't mean we don't talk to our
clients more than once a year.
(06:07):
If a client has a question or a
concern or they want to model something out,
they're thinking about buying a second house, downsizing,
taking a trip around the world, giving $50
,000 to their child for a down payment,
wedding coming up, whatever it is, we talk
(06:28):
to them all the time.
We like to hear from them, actually.
We're better planners the more we hear from
our clients because we understand what they're facing,
what they're thinking about.
Absolutely.
At least once a year, we are reaching
out to our clients and saying, time to
come in, time to jump on a call,
whatever you prefer, remote or in person, because
(06:49):
let's review that financial plan.
Let's go over it.
If you invest on your own, if you
have your own financial plan and it's working
for you, no judgment at all, but I
hope you're reviewing your plan.
(07:09):
I hope you're updating it.
It's not something like you don't make the
plan, put it on the shelf, and walk
away.
If you're our client, we're going to be
reviewing this with you.
If you're working with another financial advisor and
you don't have a plan and you don't
have regular reviews, I'm not saying that person's
not a good financial advisor, but it's not
(07:30):
how we do it.
If you'd like to get a second look
at your plan or create a plan, that's
why we're here.
We're here to help.
We do complimentary reviews of people's plans or
portfolios, whatever they want us to do initially.
So you're welcome to give us a call.
But back to the annual review.
I think everyone needs an annual review, if
(07:53):
you have an advisor or if you don't.
And Russ, have you participated in some annual
reviews with clients so far?
Yeah.
I'm involved in pretty much everyone with Chris,
sort of assisting and taking some notes, but
I definitely had a lot of exposure to
(08:13):
that since I started, which has been great.
I think from the start, we take a
look at how the portfolio is performing, what's
changed with performance, what's changed with the investments,
if they haven't watched the quarterly updates from
Brian and the team.
We kind of go over that.
(08:33):
And then, like you said, we dive into
the financial plan and say, all right, what's
changed since the last time we saw you?
Sometimes it's been more than a year since
we've seen clients.
And sometimes significant things have changed.
It's like, oh, yeah, actually, no, that mortgage
has been paid off.
Or no, we don't have that credit card
debt anymore.
And we're thinking about buying a house.
And it's interesting how right off the bat,
(08:55):
some clients are like, no, I'm not really
sure what I need to talk about.
And then when we start going into it,
it really starts going out like, oh, maybe
my plan is a little bit different.
Maybe my risk profile has changed a little
bit.
Maybe I'm less inclined to take more risk.
Let's dig into some of those, because there's
a lot there.
And I think you started at the exact
(09:17):
right spot.
It's like you haven't seen an old friend
in a year.
And you start out with what's new.
What's new?
Changes in health often come up.
People who had a plan to maybe work
till, say, age 65, and they have a
health issue.
And they're like, I had to retire this
(09:37):
year.
Or people who think they're going to retire
at age 65 and say, I don't know
what I'm going to do.
I love my job.
I'm going to keep working.
Or maybe they bought a house.
Maybe they bought a boat.
And if you have a boat, you definitely
need to change your financial plan.
(09:58):
Or maybe they have a child who is
heading off to college.
And who knows what the situation is?
It's like, what's new?
And by that question, we mean not just
what's new today, like, oh, the Celtics won.
They're going to round two.
No, we're talking about changes in your life,
life changes that will impact your finances, positively
(10:19):
and negatively.
Sometimes it can be kind of both.
Oh, well, my mother passed away this past
year.
Very sorry.
We talk about that.
And she left me $10 million.
So OK, well, both those things affect your
life.
And we talk about those things.
(10:39):
And then we go into, as you said,
after we get kind of the life changes,
anything significant that we need to be aware
of, we review their portfolio, the assets that
we have under management, review all the accounts
that we have.
And if they have other accounts they want
us to, we can take a look at
those as well.
But just to make sure they understand where
(10:59):
they're invested, make sure they understand their performance
over the past, in our discussion and annual
review here, over the past year or five
years and so forth.
We want them to have knowledge.
We want them to understand how they're doing.
And then the next thing that you mentioned,
which I think is right along the line
of where these usually go, is during the
(11:23):
conversation about life changes and reviewing their portfolio,
their investment accounts, their risk often comes up.
And it's a natural thing.
I say this a lot because it comes
up a lot.
It's a natural thing.
As people get older, they tend to get
more conservative.
(11:44):
And that's a broad statement.
Think about, especially in the category of risk,
think about the things that you would do
when you were 18 and not even consider
the risk you were taking.
Whether it be a sport, whether it be
an activity.
There's a reason our soldiers are young, because
(12:05):
they are willing to jump out of airplanes
or they're willing to go over the hill
with the M16, et cetera.
We all felt invincible when we're younger.
And we are willing to take more risks
just generally.
I'm not specifically talking about finances and investing,
but it applies there too.
(12:25):
And as you get older, you start to
think about your risk tolerance, how much risk
you're willing to take.
And it's even magnified, that kind of view
of risk is magnified when you stop working
and you don't have that ability to generate
income.
You may have income from a pension or
Social Security or from your investments, but you
(12:48):
don't have that kind of self-directed ability
to earn income.
So you start to think about, am I
taking too much risk?
Can I tolerate it if we have a
three-year bear market?
Yeah.
And it can be pretty unsettling when you're
thinking like, this is my nest egg.
This is what I need to live my
(13:09):
current lifestyle.
And when that comes into question where you
see some fluctuation, when there's some volatility, that
can be all that much more unsettling when
you're near retirement or in retirement.
And that's really what you've built up.
So during this annual review, if we get
an indication that a client is feeling like
(13:29):
they're not in the right risk profile, they're
just not comfortable, gee, I know we did
good last year, but I haven't slept in
the last three weeks because of volatility, which
our listeners know we've been talking about a
lot in this last month.
And so we have that discussion and we
use a questionnaire to help guide us.
(13:51):
And we look at the overall goal.
Maybe you don't need to take that risk
to stay in your plan.
You and I just did this for a
client, a woman who's retired, and she was
concerned about the risk because of all the
headline news.
And she had a very solid financial plan,
and she was taking a certain degree of
(14:12):
risk.
And throughout the annual review, it came to
the focus that she was not comfortable taking
the risk.
And so the plan that I asked you
to review, because you had access to the
original plan, was what happens, Russ, if this
client decides to reduce their risk from a
(14:36):
certain level?
I think she was a 60% exposure
to stocks.
What if we reduce it to 30%?
How does her outlook look for the rest
of her life?
Does she still have the cashflow she needs?
Will she still be stable in her goals
and be able to do what she wants
to do as lifestyle?
And the answer in this case was yes,
(14:57):
she was fine.
Yep.
So she doesn't need to take the risk.
You can have the same person, not the
same person, you can have two people with
the same circumstances, they have the same net
worth, same income, same everything.
It's like these two people have, they're twins
financially.
And one person can say, well, my plan's
(15:20):
100%.
I'm really solid.
Therefore, I don't need to take any more
risk.
I feel better that way.
And that's not a wrong position to have.
And their financial twin could say, my plan
is solid.
I'm good.
I can take a lot of risk, because
I can afford to have down years.
(15:41):
So I'm going to take a lot of
risk and think about my legacy.
Think about generation, building generational wealth.
And it's the same setup free the person,
but it's how they feel and what their
vision is with their investment objectives.
And we spend a lot of time during
these annual reviews, life changes, risk profile, but
(16:02):
also what their objectives are.
What are they trying to achieve in their
financial world?
Right.
Yeah.
What are their goals, near term, long term,
cash flow needs, all that.
One point related to that story you just
brought up is a lot of clients will
have some of their rollover IRAs with us,
(16:22):
some taxable assets, and then have a work
plan.
And they're not necessarily sure.
I think we've talked about this in the
past as well, but they're not exactly sure
how that's invested.
And sometimes it's not at all in line
with their risk profile.
Super common, right?
Yeah.
And so a situation like that, where it's
like, maybe their investments with us are in
a more conservative preservation type strategy, but their
(16:46):
work plan is a highly aggressive, all stock
portfolio.
And they just kind of set it and
forget it.
They never really checked it.
So that's what we've been doing a lot
lately is taking a look at those 401ks,
403bs and kind of giving our suggestions and
looking at it as a big picture and
trying to see if it fits with their
(17:07):
risk profile, because that could really throw a
whole portfolio a little bit out of that
risk alignment, I would say.
But yeah, just a thought on that.
No, it's very true.
People spend a lot of time, like if
they have their own investments or if they're
working with advisors, so they're getting information from
us frequently.
(17:27):
Not only do they get the statement from
Schwab and our case or Fidelity, but the
custodians that we use, we send our own
statements out with performance and we send out
newsletters and emails and do podcasts and webinars.
So if someone's watching, they get a lot
from us and other advisors certainly do these
(17:48):
things as well.
But your work plan, which for many people
is their largest investment.
I almost said largest investment with the exception
of their house, but we see people who
have 401ks and other deferred comp plans that
are larger than the value of most homes,
certainly.
Yeah.
And they just don't know what's in it
(18:09):
or they don't change what's in it or
they don't monitor what's in it.
So that's an excellent point of bringing in
those outside assets and seeing, here's your risk
profile.
You're very clear about it.
Here are your goals.
We know you.
How does this fit in?
And if it doesn't fit in, we can
make suggestions to make it consistent with your
(18:32):
overall financial plan.
You mentioned one thing that I want to
dig into because it's another thing that we
spend a lot of time focusing in during
the financial plan, but annual reviews, cashflow.
Yep.
Yeah, we do.
Through the financial plan, we can see a
breakdown of cashflow based on goals and all
(18:55):
the objectives and then your regular expenses, your
regular needs.
You can see each year broken down and
I think that's pretty useful to get a
big picture view.
Where's the money going?
Where's the money coming from?
One piece of that that's always a little
bit tricky is trying to figure out what
your expenses are, but not everyone has a
(19:16):
great handle of what those monthly expenses are.
In general, having that cashflow overview, I think
is very helpful.
When people see that, they really appreciate that.
Yeah.
The cashflow, getting that, how much do you
spend a month on your regular?
And we'll talk in a minute about non
-regular, like single expenses and how we handle
(19:37):
those.
But how much do you need to maintain
your house on a regular month?
If you're cashflow positive, meaning you're bringing in
more than you're spending, a lot of people
don't know.
They're just like, I have enough.
I don't know what it is.
We have a couple of different methods.
We can drill down independently with you and
really get a solid number.
For the people who don't want to do
(19:58):
that, we have a couple of other practices
to get really good estimates.
Most people left on their own, underestimate how
much they spend.
They might know, my electric bill is this.
My auto insurance is this.
I spend this much on groceries, but they
(20:19):
forget things that are regular, but not automated.
They forget about entertainment.
They forget about vacations.
They forget about car repairs.
They think about, I pay auto insurance every
month, but does your car need a repair
every year?
Probably.
If you think brakes, tires, even if you
(20:39):
have newer cars, you still need these maintenance
issues.
We help drill down on that.
Then we also go into, how do you
buy a car?
They'll say, I pay cash or I finance
or I lease.
We model that out in the financial plan
as well.
Plan so that you do have a new
car.
If someone just says, I spend $5,000
(21:03):
a month.
I look at my finances.
I can withdraw $5,000 a month.
I'm all set.
They're missing a lot of things.
We go through that with individual questions.
Some of the questions are common sense like
car, but some of them really make people
think, do you plan on helping your children
(21:25):
in the future?
I was going to mention that one.
That's usually a big one.
I'll talk about that some of the things
that come up in that category because it's
broader than just a gift sometimes.
Yeah.
Sometimes it's ongoing support for family members or
helping a grandkid or even college expenses for
kids, grandkids, that sort of thing.
(21:47):
Maybe those aren't really baked into the cash
flow or the cash flow needs.
It's just like, oh, well, it's family.
It's a separate category.
We like to include that, of course, to
get a real sense of how that's going
to play into the plan.
Some families are extremely generous, rightfully so, to
(22:10):
their children.
But it does play a role in the
plan.
We want to see how that models out.
Yeah.
In that family category, sometimes we have a
family or an individual with a special needs
situation where they want to make accommodations for
a child, say, who needs some support after
(22:31):
they're gone, after the parent's gone.
It can be sometimes unexpected where you may
think your children are all set and then
there's a divorce or a death of a
spouse.
Talking about these issues and putting a placeholder
for those families who think it's possible or
(22:51):
likely gives you peace of mind in the
plan because if one of those things come
up and you have a placeholder, a certain
amount that you might spend for family support,
it makes your financial plan more accurate and
it also serves as confidence that if it
comes up and you want to do that,
(23:13):
if it's helpful, you know you can without
disrupting the financial plan.
That's just not for those unknown things.
We put in vacations.
You're just retired.
Most people have some vacation goals, some travel
goals, and we put those in.
Other things, home repairs.
How old is your roof?
(23:34):
Oh, it's 30 years old.
Well, I guess we should plan for a
new roof sometime in the next five years.
This is a long process, but we put
them all in and it helps create a
plan that when those things come up, it's
almost, I call it, I haven't come up
with a better word.
I call it permission.
A client will say, hey, I'm thinking about
(23:56):
going on this month cruise this year.
Do you think I can afford it?
Well, yeah, you've planned $15,000 a year
for vacations.
How much is the cruise?
Oh, $50,000.
Well, maybe not.
Let's model the plan.
Let's test the plan.
We spend a lot of time on cash
flows.
(24:17):
That's a good point.
It's not static.
You already mentioned that.
If you say, oh, there is a $20
,000 vacation I'd really like to take.
I wonder if I can afford that.
We have a way to answer that to
a pretty reasonable conclusion of if it's going
(24:37):
to work or not.
Just something to reach out to us about
and we can put it into the plan
and see how it plays out and model
different kinds of scenarios.
Another topic I want to touch on about
what we do in our annual reviews, we've
talked about a lot, but another big thing
that we do with our clients in the
annual reviews is talking to them about their
(24:58):
liquidity needs.
Liquidity just means available money that's not exposed
to a market that may be volatile.
You could have funds in your liquidity bucket,
as we call them.
We call buckets, in other words, places to
hold certain types of money.
We want our clients to have liquidity, not
only to meet their cash flow, but in
(25:20):
the event that we have a down market.
If you think if someone is spending $100
,000 a year, for example, and they're taking
it all from their investments, just to keep
this simple, we'd offset it with social security
or pensions or annuity or whatever they may
have that's guaranteed, but we don't want that
client to be having to time the market
(25:42):
and saying, all right, I'm going to take
out whatever that is, $8,000 something each
month out of their investments.
We want to have a liquidity bucket.
We monitor the liquidity bucket, that's money that's
not exposed to the market.
They can withdraw that from non-invested assets
(26:03):
without having to worry about, the market was
down 20% a couple of weeks ago.
You don't want to be taking money out
when you're in the middle of a correction.
It's too much for this episode to go
into how we do this and the breadth
of liquidity buckets that we use, but just
know that this is something else that comes
(26:24):
up in the annual review.
How much do you have set aside?
Is it enough?
How long should it be?
Depends on where your income comes from and
all that, but it's something else that we
do during these annual reviews.
Where should that money that you need for
retirement come from?
In a tax-efficient manner, and where are
(26:46):
we taking it from first?
Yeah, the sequence, right?
The sequence, exactly, yeah.
Yep.
We're scratching the surface here, but what we
want to get across today is you have
a financial plan.
If you've done it with us, you know
the process and you have confidence in your
plan.
We actually give you a number.
We give you a grade.
(27:06):
I love giving good grades.
I think I know how teachers feel.
People from students are really trying, but they
don't get a good grade.
You can have confidence that if you have
a good grade, you can stick to your
plan.
You can live that life that you've earned
from your saving and investing.
If you don't have a great score, there's
(27:27):
things that we can do to help you
get that score up.
These annual reviews, we certainly review the score,
like what's changed, all these things that we
talked about.
Market performance plays into it.
Your health plays into it, what you do
with your family, all these things we talked
about today on the episode.
We update your score.
The score doesn't change very much.
(27:48):
People think when you get your first score,
it's there, but people think in this market
turmoil where I said, oh, my score must
have went 95 to 50 because we had
a bad year or a bad few months.
That's why so many people, when we do
the stress testing and they see, even from
here, if we drop the market 20%
(28:09):
tomorrow, that it still has a 90 plus
percent chance of success, that's not too bad.
They're usually very pleasantly surprised.
Yeah.
They're so impacted by the recent things that
have happened.
We use the Monte Carlo simulation.
It projects a thousand different scenarios based upon
(28:30):
market history, long periods of good markets, long
periods of bad markets.
We get a range of where we think
you'll be at, and then we get a
prediction and that's what that score is, which
is zero to a hundred.
Like any student, you're shooting for the hundred,
but you walk out with a 95 and
you say, I'll take it.
Right.
Exactly.
(28:50):
We're about out of time.
I think we did a good job at
covering things that we go over in annual
review.
There's other things, like we'll ask you, do
you have your estate plan?
And if you do have your estate plan,
when's the last time you reviewed it?
So it might be more of an accountability.
We're not going to do your estate plan
with you, but we're more of an accountability
(29:10):
partner.
Like, well, you have an estate plan is
20 years old.
Let's put that on your to-do list
to review it.
First of all, read it.
If it's not accurate, go back to your
estate planning attorney to get it.
We'll review things like life insurance.
Now people think, well, I have life insurance.
Why do I need to review it?
Well, maybe it's not enough because of life's
(29:31):
changes, or maybe you don't need it anymore
because of life changes.
So review things like that.
We help you with making your decisions on
when to take social security, what your risk
is to long-term care, potential needs, all
these things we do in the financial plan.
And we do them every year.
Some of them superficially because you're all set,
(29:54):
or we've decided that this is irrelevant to
you.
But this is how we serve you.
And this is the way to keep you
on track so that you can stay on
your plan and reach your goals, live your
goals, and live your dreams happily without having
to worry about, am I going to run
out of money?
Am I not going to be able to
do something I wanted to do?
(30:15):
And a financial plan and any reviews really
give clients a peace of mind.
So if you don't have one, you should
have one.
And if we can help you with that,
please feel free to reach out to us
and make an appointment where you offer a
complimentary consultation.
We'll help you create a financial plan if
you have one, or if you have investment
(30:36):
somewhere else, we'll certainly be willing to be
a fresh set of eyes and give you
our thoughts on those.
To do so, you can call our office
at 508-771-8900 and ask for an
initial consultation.
Russ, thank you for joining me today.
I think we did a decent job at
explaining a lot of information that happens after
(30:57):
the financial plan during an annual review.
Yeah.
We like to cover all the bases, but
yes.
We certainly try.
Thank you for listening.
I hope you'll join us next week.
Until then, keep striving for something more.
(32:02):
Transcribed by https://otter.ai Revised by https://otter.ai
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