Avoiding Financial Pitfalls: Five Essential Topics to Raise With Your Adviser - Adviser Investments

Avoiding Financial Pitfalls: Five Essential Topics to Raise With Your Adviser

August 19, 2020

Episode Description
FEATURING Josh Jones, Andrew Busa and Diana Linn

Costly financial mistakes can have ripple effects that resound for years and years. And most of them are caused by seemingly simple decisions with lasting consequences that are easily overlooked in the moment. We’re here to help.

Join our wealth management and financial planning experts for this illuminating look at some basic steps that can have profound impacts on your family’s financial life for generations. In this edition of The Adviser You Can Talk To Podcast, our team discusses key topics for your portfolio and your pocketbook, including:

  • Cash flow and savings
  • Identifying goals
  • Risk management and legacy planning
  • Managing debt and credit
  • Maximizing company benefits

Whether you’re just getting started in your financial planning or only need a little fine-tuning, there’s something in this engaging conversation for everyone. Click above to listen now!

Episode Transcript

Andrew Busa:
Hello, this is Andrew Busa and I’m a financial planner here at Adviser Investments. We’re here with another The Adviser You Can Talk To Podcast. And today I’m joined by my colleagues, Diana Linn. She’s a CERTIFIED FINANCIAL PLANNER™ at Adviser Investments and Josh Jones who’s a Portfolio Executive and Vice President at Adviser Investments. Thanks for joining us.

Diana Linn:
Well, thanks for having us.

Josh Jones:
Hi Andrew. Hi, Diana. Good to be here.

Andrew Busa:
It’s great to have you both. I’ve been looking forward to this one because today’s topic is five conversations to avoid financial mistakes. So the theme of today’s episode is going to be pretty big picture because we’re going to be focusing on these five different conversations as we go through the episode here. And we’re also just going to be discussing how these conversations had with your adviser will help you avoid some common mistakes that we see.

Diana Linn:
Okay. I like it.

Andrew Busa:
So Diana, why don’t you take us through some of the conversations that we’re going to be going through today?

Diana Linn:
Mm-hmm. I like this topic and really, of course there are many conversations that we should be having with our adviser, but I love thinking about it of making sure we’ve got these top five down to avoid any mistakes. So Andrew and Josh, I was thinking we should talk about goal identification, cash flow management, risk and legacy planning, debt management, and then company benefit maximization. What do you guys think about that?

Andrew Busa:
I love that.

Josh Jones:
That’s great.

Andrew Busa:
Yeah, those five topics that we’ll touch on today will allow us to get into some really good financial planning material that I think will help listeners quite a bit. And Josh, I know you’re going to have a lot of perspective here because you’ve been working directly with hundreds of clients for a long time and you’ve got experience on the front lines really having these conversations.

Josh Jones:
Well, this’ll be fun. And Diana, when I listened to your comments, I couldn’t help, but think of a Yogi Berra quote, “If you don’t know where you’re going, you might not get there.” And it is so true in these financial conversations.

Andrew Busa:
Yeah. There’s good, simple wisdom in that. And I think it’s a perfect segue to the first conversation that we think is really important for you to be having with your adviser. So goal identification. Diana, I’ll point this first question to you. Let’s say we come at this from a little bit of a different angle when considering goals. Let’s say you decide you’d never do really any goal identification with your adviser. You’d never have that discussion. What is the problem with that or is there one?

Diana Linn:
Yeah, well, I think Josh just led us right into the right direction with that quote, that if we don’t know where you’re going, how can we help you get there? And Andrew, I know that on the financial planning team, often we like to use that analogy of financial planning being a lot like the GPS of your car, right?

Diana Linn:
If we understand your goals, we’re inputting that destination, that the financial plan can really help you find the most efficient route to your goal, avoid roadblocks, make sure you’re hitting the right speed limit. So it’s really important to understand your goals to get us there.

Andrew Busa:
Right. And Josh, I mean, you make a point of having these conversations right up-front with your clients.

Josh Jones:
Well, I think it’s so important, especially Andrew, when it comes to the investment side of things, almost the last thing we do when determining how to invest someone’s money is pick the investments. Because before we can figure out how to invest anyone’s money, we have to understand what the goals are, what’s the purpose, and then come up with a plan. And by having that foundation, I think in particular can really help folks through difficult economic or market periods because you have that anchor and that foundation you can really rely on.

Andrew Busa:
Absolutely. I mean, if you’re watching headlines day-to-day of how the market’s doing, that can be pretty stressful. And nowhere in those headlines does it say specifically your financial plan is in danger or your plan is in great shape, right? They’re just reporting what the S&P or the Dow is doing on a daily basis. I need to know whether you’re still on track that has to do with, are you on track to achieving your goals? So I think having this really substantive conversation with your adviser should come back to not only saying what your goals are, but also quantifying them and when you want to achieve them and how much money you need to achieve them. Yep.

Josh Jones:
I was just going to say, I couldn’t imagine a TV station or a newspaper, the headline, “Your financial plan is in danger.” I mean, they’d be out of business in six weeks.

Andrew Busa:
Exactly. Those kind of headlines don’t sell newspapers.

Josh Jones:
Right, right.

Andrew Busa:
That’s for sure. So again, these aren’t necessarily the most headline-grabbing things to talk about, but certainly important and a good place to start when considering financial planning. So segueing to the second conversation, Diana, that you mentioned at the beginning of the episode and that’s cash flow and savings. So you start with goal identification, right? That’s really the foundation for any financial plan, but the next step is really to have a good handle on your cash flow, how you’re saving money, how you go about doing that. So how does that play into things here?

Diana Linn:
Right. Well, again, I think this is another really important conversation that needs to be had with your adviser and to keep with the GPS analogy too, that financial plan is what’s guiding you to your destination. Really your investments and your cashflow is the car, the gas to the car that’s getting you there. So defining your savings and the process of how you do that. Andrew, as you know, I’m a big proponent of every time you get paid just immediately taking a certain amount and kind of putting it over into a savings account before you really have the opportunity to look at it and start to spend it on something else to create and form that healthy habit of saving money.

Diana Linn:
So if you aren’t cash-flow positive, so meaning that you don’t have that discretionary cash-flow at the end of the month to actually achieve any of your goals over time, it becomes more difficult. So your discretionary cash-flow, again, is that gas that makes the car go.

Andrew Busa:
Absolutely. And Josh, I’ve heard you be a proponent of that similar kind of method, right? Of saving first and spending the rest.

Josh Jones:
I think it’s so important to do that or to take that approach because it’s so much easier in many respects and it’s sustainable. There aren’t very many folks that can track expenses on a daily basis and do it for years. And so-

Andrew Busa:
Right. Just to plan for that.

Josh Jones:
Yeah. Yeah. We all lead very busy lives. And so if you can automate savings and put X amount into a reserve or X amount into a 401(k), you’re getting all of the hard work done and doing the savings right up-front, a huge advantage for most people.

Andrew Busa:
Yeah, for sure. I mean, I think here having this conversation helps you avoid I think the mindset that you necessarily don’t need a budget, right? I think that’s a lot of times the mindset that people have going into this conversation, or if you only need a budget. If you have a financial problem that you’re trying to solve, right? The word “budget” gets a bad rap.

Diana Linn:
It does. It can have that negative connotation. At Adviser Investments, we do have another wonderful aspect to our financial planning of a great method of budgeting and tracking your expenses. So if that is something that interests you, speak to your adviser, we can set up a financial plan.

Andrew Busa:
For sure. And we are releasing a future episode that goes into detail on different methods of budgeting. Because there’s no “one size fits all” here. And I think that’s really the point of this topic specifically, is that have the conversation with your adviser about what method suits you best because it’s going to depend on your situation specifically. So just don’t be afraid to have that conversation and really dig in with your adviser on that one.

Andrew Busa:
So moving onto the next one here. I preface this by saying it’s not everybody’s favorite, but it’s maybe the most important of all the conversations that we’re going to point out here today. And that’s risk management and legacy planning, right? So this is dealing with your mortality. Let’s face it. It’s not something people want to talk about, right?

Diana Linn:
Well, it’s uncomfortable thinking about that. But again, it’s another important element that really needs to be taken into consideration. It’s all about preparing for the worst and just like any insurance policy, we hope that we never have to use it, but it’s there if we do. So really mitigating our risk is an important aspect for your financial health.

Andrew Busa:
Yeah. I mean, like you said, Diana, this section here is about downside protection. It’s about making sure what’s left over for your heirs and beneficiaries is what you’re expecting it to be and how you want it to be divided. So Josh, I’m curious, have clients ever said to you, “I don’t want to waste time on this stuff. It’s not important to me?” How do you come back to that?

Josh Jones:
Oh my gosh. Yeah. We’ve had that conversation many a times over the last several decades. Like you said, it’s a topic that isn’t exactly fun, but it’s so important when it comes to financial planning it’s basic blocking and tackling. Imagine for a minute, you’ve got the world’s greatest investment portfolio, but you’re barely saving or you have no life insurance. And God forbid, something happens to you when you leave behind a spouse and no kids with a small, perfect investment portfolio, but no insurance.

Josh Jones:
I mean, this is one of the things that has to be addressed right up-front to make sure that, again, that basic blocking and tackling is being done. Otherwise, a lot of the other good work is all for naught.

Diana Linn:
Mm-hmm. I mean, it’s almost like a hidden goal, right? Like when you think of your financial plan, normally you’re thinking about more fun goals of, “Okay, I’m planning for my retirement or purchasing that vacation home or planning for my kids and grandkids college education.” That we’re not really thinking about the risk management and estate as a goal, but it is a goal and an important one too, that can’t be forgotten or neglected.

Andrew Busa:
Yeah. I mean, I really like what you said there, Josh too, about you can have the perfect financial plan, but if you don’t protect against the risks that are out there, it could all be for naught. I mean, we spent the first half of this conversation so far talking about goals and saving for those goals. And if you don’t take the proper measures with either, we’re talking about either life insurance, disability, insurance, depending on the situation that you’re in, that could really be devastating for your financial plan.

Andrew Busa:
And then on the legacy planning side of things, again, you’re obviously dealing with mortality and not everybody’s favorite conversation. But making sure that your assets get divided the way that you want them to is just so important and it saves a headache for your heirs, right?

Diana Linn:
Mm-hmm.

Josh Jones:
I think that’s the biggest piece is that saving a lot of folks a massive headache. When someone passes on, it’s emotionally tough. And the last thing I think anyone wants to deal with is figuring out a lot of the finances. And so really by just thinking through even briefly some basic next steps, it’s a gift to your heirs and that you’re relieving them of lots of stress.

Josh Jones:
It’s a hard conversation. I think one thing that we’ve tried to do with a lot of families over the years is serve as that intermediary for lack of a better way of putting it, between different generations of a family just to make sure the tough conversation is actually being had.

Diana Linn:
Mm-hmm.

Josh Jones:
Yep. Diana, I know you like to refer to this part of the financial planning job as being the quarterback.

Diana Linn:
I do. I also wanted to just pop in and also mentioned that as a financial planner, we won’t necessarily draft up any of the documents for you, but we can certainly review any of the insurance policies that you might be considering with an insurance agent or take a look at the estate plans that the estate attorney has drafted up and kind of model what you want to see to be sure that these two do a line up and hopefully provide that peace of mind.

Andrew Busa:
Absolutely. So for this one, again, not an easy conversation to have, but ask your adviser, “Hey, can you take a look at my estate plan? Can you review my life insurance plan?” Don’t be afraid to ask that question and have them help you with that. And we’re certainly ready and able to provide that expertise to you.

Andrew Busa:
So next topic here as we move right along. This one, debt management, this is something that let’s face it, all of us have had to deal with at one time or another, whether it’s student loans purchasing a home, car loans, whatever the case may be. Diana, why is this an important conversation to make sure that you’re having with your adviser?

Diana Linn:
Well, we’re really hitting on all those cringeworthy words, aren’t we? Of budget and debt, and I think it’s really important that you maintain a healthy relationship with debt. And also to remember that there’s very different types of debt. So consumer debt of spending on your credit card and racking up a large credit card is very different than the debt of maybe a mortgage on your home. Or as you just mentioned, Andrew, of student loans.

Diana Linn:
So just making sure that there’s a purpose-driven approach to your debt, the type of a debt that you are accruing and then how you are going to pay it off and making sure you have that game plan almost so to speak in mind of how we’re going to get there.

Andrew Busa:
Yeah. And Josh, I’ve been in the room with you with clients taking different approaches to paying debt down.

Josh Jones:
Well, it’s such an emotional topic, Andrew. It’s called personal finance for a reason. It’s personal. A lot of this is half art and half science. The spreadsheet could say one thing, but someone may not feel entirely comfortable with a spreadsheet. Perfect example, Diana and Andrew, is a mortgage. I can’t tell you how many conversations we’ve had over the years where the spreadsheet might’ve said, “Hey, don’t pay off the mortgage. Your interest rate is so low.”

Josh Jones:
But at the same time, the emotional if that’s the right word or the psychological part is saying, “I’m just a few years away from retirement, I’d like to be debt-free heading in.” And so these conversations that we have with all the folks around the country we help, they’re personal and we help them weigh the pros and the cons.

Diana Linn:
Mm-hmm. I feel like this conversation is coming up more and more often recently too. Interest rates being as low as they are, I feel like we’re having that conversation quite a lot where it’s well, somebody’s really wanting to pay off their mortgage just because it would feel good and relieve a lot of stress of not having that hanging over them anymore, but they’re reluctant to because, “Well, I could be earning more in the market.”

Diana Linn:
And so Josh, I think that point that you’re making is so important. And again, it’s personal. So if that is going to help you sleep at night knowing you’ve paid off the mortgage, or if maybe you want to take that approach. So again, sometimes even if it’s not the exact right answer on paper, but it’s the right answer for you and your family, don’t be afraid to go for it.

Andrew Busa:
I agree. And I think that’s what you said right there is why it is so important to have the conversation with your adviser because of the personal nature of it. I think we’ve heard clients say, “Well, my neighbors said I’m going to keep this money in the market and keep it invested and not to pay down my mortgage and what should I do?”

Andrew Busa:
I think that’s why it really comes down to your personal situation. It’s going to vary depending on your exact circumstances. So your adviser should be helping you figure out what’s the best decision for you. And like you said, Josh, it’s part art, part science for sure.

Josh Jones:
Right.

Diana Linn:
Yeah. Yeah. And also if you remember—before we change gears—that your credit just, again, to remember to kind of keep tabs on your credit. It’s your financial blood pressure. So make sure you are at least once a year checking your credit report. It’s just a quick test of your overall financial health.

Diana Linn:
So that credit score can always affect way more than we think that it can. So interest rates on your loans and insurance premiums, even sometimes renting an apartment, they want to know your credit score. So just throwing that in there to keep tabs on it.

Andrew Busa:
I love that. We have to remember the credit is the other side of the debt coin, right? Even like something as simple as an app like Credit Karma to just keep tabs on that, remember to file your free credit report every year to make sure that that’s accurate and correct any mistakes that you see. So thanks for calling that one out.

Andrew Busa:
So, all right. Last topic here and also a very important one, just like the rest of these, but this is company-benefit maximization. I think this one really gets overlooked a lot of the time, just because there’s so much going on in your life that a lot of times you might not be taking advantage of the benefits that are in front of you at your company, right?

Diana Linn:
Yeah. I think what’s most important here is sometimes we don’t are not even aware of what’s available to us. You take on that new job and you’re really excited and of course you know your salary. But how often are people really reading your employee handbook and knowing, “Okay, if I contribute 3% of my salary into my 401(k), my company’s going to match a 100%.” I mean, that’s free money right there.

Diana Linn:
Or is your company offering a flexible spending account or for dependent care, being able to take a portion of your paycheck and have it set aside tax-free. Those kinds of benefits really add up. So just being mindful of what you have and to start investing young. When we’re younger, I’m sure I was guilty of this too. My first job out of college, “Oh, I don’t need to maximize my 401(k).” But that power of compounding and starting to put it away as soon as you can really you’ll reap huge rewards when you retire.

Josh Jones:
Diana, you made a really good point about the importance of these benefits for many, many people. It can be the biggest part of their finances. That is the company benefit. How many folks over the years did we start helping with a 401(k) that they moved out into an IRA that represented nearly all of the bulk of their assets? And I think with other benefits that you mentioned earlier, a lot of it is fine tuning and optimizing what might be available and even knowing in the first place that it is available.

Josh Jones:
We’ve seen unbelievable benefits over the years with a lot of the families we help at big companies, small companies, and medium-sized companies that without looking in the handbook, you never would have even known they existed. And it’s just a big part of someone’s overall financial picture.

Diana Linn:
Mm-hmm (affirmative).

Andrew Busa:
Right. It can really help with other conversations that we’ve had here today. Take a risk management and insurance for example. It’s very common for group life insurance or group disability insurance to be available. And we’ve seen a handful of cases where the client wasn’t even aware that that was available to them.

Andrew Busa:
So that’s just something to, again, to reiterate the points that you both have made to make sure that you know what’s available to you. I know that we’ve also seen stock options being another one in this category.

Diana Linn:
Oh yeah, that’s true.

Andrew Busa:
I mean, that’s a huge part of people’s financial plans, right?

Diana Linn:
And some of those can be tricky too if you’ve got the different types of stock options that may be offered to you. So again, that’s a great question to bring up to your adviser like, “Hey, my company is mentioning this. It’s something that might be available to me” and let them help you figure out when to get in.

Andrew Busa:
Yep. So I would say here ask your adviser about this, even bring them the employee handbook, or the benefits suite from HR and we’ll help you look through that and kind of make heads or tails of it. Because it’s not always straightforward. So we just want to make sure that you’re taking full advantage of what’s available to you. So that takes us through the five conversations that we wanted to hit on today.

Diana Linn:
Man, that went fast, didn’t it?

Andrew Busa:
It did.

Diana Linn:
Did we do all five?

Josh Jones:
Time flies when you’re having fun.

Andrew Busa:
Let’s take a walk down memory lane here already. Let’s say what were your biggest takeaways from this conversation that you want to leave the listeners with?

Diana Linn:
Josh, what was your biggest takeaway?

Josh Jones:
I’d say and some of these are simple, Diana. It’s make sure you’re having the conversation. Write things down. We’ve always been big believers and by just writing something down, it helps you organize and simplify your thoughts and recognize too, that these are big conversations.

Josh Jones:
Rome wasn’t built in a day, but having the conversations, having goals and then gradually making progress is a huge step and getting you in the right direction.

Diana Linn:
I like that. I think that’s my biggest takeaway too. Not being afraid to have the conversation and to ask the question just to be sure that you fully understand this is your investments, your financial plan and to get to your goals where you want to go.

Josh Jones:
Yep.

Andrew Busa:
Yeah. I think kind of on a similar theme, Josh, what you said, Rome not being built in a day. We went through a lot of information here today and we did go through it quickly, but these five conversations aren’t all meant to be had at once. It’ll depend on your circumstances, right? So for example, if you change jobs, that’s a perfect time to bring up company benefit maximization. You take out a mortgage, obviously you should be focused on some debt management conversations and kind of so on and so forth. Things always changing, always evolving.

Andrew Busa:
So these conversations are really here to take off the shelf whenever you need the most. And, and just always remember that you should be probably coming back especially to that goal identification, to make sure that you’re on track to where you want to go with your money. So thanks for joining us, Diana and Josh. It was a pleasure having you.

Andrew Busa:
This has been Andrew Busa, Josh Jones, and Diana Linn from Adviser Investments, thanking you for listening to The Adviser You Can Talk To Podcast. If you enjoyed this conversation, please subscribe and review our show and you can always check us out at www.adviserinvestments.com/podcasts. Your feedback is always welcome. And if you have any questions or topics that you’d like us to explore, please email us at info@adviserinvestments.com. Thanks again.

 

Podcast released on August 19, 2020. This podcast is for informational purposes only. It is not intended as financial, legal, tax or insurance advice even though these topics may be discussed. Information and events addressed in this podcast, as well as the job titles, job functions and employment of the podcast’s participants with respect to Adviser Investments, LLC may have changed since this podcast was released. For more information on each individual featured in this podcast, see the Our People section of our website.

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Almost the last thing we do when determining how to invest someone’s money is pick the investments. We have to understand what the goals are, what’s the purpose? And then come up with a plan.


Josh Jones

Vice President

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