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Brad Newman

Tax Cuts and Jobs Act of 2017 Impact On Financial Health

With the ink still wet on the freshly signed tax bill (Tax Cuts and Jobs Act of 2017), there is no shortage of articles that narrowly focus on that aspect of your fiscal life. While the impact of the new tax regime is an important topic, let’s take a step back and explore matters that impact your financial health.

No matter how successful you’ve been in your chosen business or profession, the complexity of the financial industry, when combined with its never-ending supply of jargon, can leave the most accomplished professionals feeling overwhelmed. By asking the right questions, you can get back to the basics of what makes your money work to its fullest potential for you. Below are a few tips that you can use as a guide.

The recent tax reform makes it even more critical for your advisor to be current on the changes to tax law, charitable/family gifting techniques, retirement funding strategies, etc. You should feel confident about your advisor’s level of expertise in these areas. Never hesitate to have a dialogue with your advisor, here are some questions to start the conversation:

  • As you save for retirement or begin to distribute your assets, does your advisor holistically evaluate and recommend a customized plan for retirement contributions or disbursements that will be the most efficient for your situation?
  • What changes, if any, should you expect and how will this affect you?
  • Is your plan only reviewed initially?
  • Is it adjusted as circumstances change? This will help indicate if it is their financial health that is the main priority, or yours.
  • Is your advisor well versed in the numerous charitable gifting strategies (appreciated stock, RMDs, donor advised funds, family foundations, etc.) and is he/she able to recommend the best option for your situation?

Much like other trusted advisors, your advisor should be 100% transparent and have your best interests as their top priority. You can protect yourself by asking detailed questions about how they are paid for their investment recommendations. Specifically, ask if they are paid commissions, if they receive any incentives or if some of their suggestions would pay them more than others. It would be advisable to have them provide their fee-structure, as well as any costs that you may incur beyond their fees, in writing to avoid any confusion down the road.

You might naturally assume that all advisors strictly adhere to a code of ethics; however, there are several different variations based on how an advisor is licensed.  First, determine if your interests are put first by asking, “Will you be held to a Fiduciary Standard in every aspect of our relationship?” It is important to note that some advisors are held to a Fiduciary Standard, some never will be, and some will work on an intermittent basis.

Your advisor should have a detailed understanding of your situation, know your needs and be a proactive communicator. You should be sure to find out how many clients they have and what is the frequency of communications that you can expect and what that communication will be (emails, phone calls, or in-person meetings). It will also be essential to determine if they outsource any of the decisions impacting your portfolio or your planning – if so, find out who will be making these decisions and what are their qualifications. What you are trying to ascertain is to what extent the advisor will provide customization based on your specific situation. Likewise, you should find out what is their capacity of in-house experts in investment analysis, portfolio management, and financial planning. A firm that is serious about doing investment management in-house will have a dedicated Investment Committee that meets on a regular basis.

While it is human nature to become distracted by some of the nuance or minutia, take that step back to look at things from a broader perspective and focus your energies on the decisions that will have the most impact – working with the right advisor will be one of the most impactful decisions that you will make to ensure your financial health.

By: Bradley R. Newman, CFP®


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