In one way or another, life is always in flux. Transitions sometimes bring opportunity and sometimes pain and sadness. The more thoughtfully we experience them, find the good in them and prepare for the next life phase, the more satisfying life can be. Transitions happen throughout our lives — graduation, a new career, getting married, having children, a sudden increase in wealth, the death of a parent, serious illness or accident, your retirement and the sale of your business, to name a few.
Each transition requires you to adapt to new circumstance, as it can change the way you think, the way you approach taxes and investments, your lifestyle, your advisers, your circle of friends or your lifestyle choices.
“Some people have a real hard time with that,” says Norman M. Boone, founder and president of Mosaic Financial Partners Inc. “When a significant change occurs, some stick close to what they’re used to, while others refuse to acknowledge the change and others simply embrace it.
“Points of transition happen to everybody,” he says. “How you think about, plan and prepare for them and how you adapt your behavior is best done by being intentional, by considering the implications of your decisions, by thinking about your new circumstances and by determining what you need to do to optimize your new situation. Getting good advice can be critical.”
Smart Business spoke with Boone about how to deal with life’s major transitions without compromising your financial future.
Is transition a bad thing? Why or why not?
Transitions themselves aren’t good or bad. The issue, from a financial planning perspective, is how you approach them. Regardless of the type of change, allow yourself time before you make any major decisions.
Having the right professional assist you can help you avoid mistakes and take advantage of opportunities. The best adviser is one who has helped many people with situations similar to yours. People don’t often go through the same major life transitions twice. If you only have one time to experience something, it’s likely you’re going to make mistakes, sometimes minor and other times with important consequences. An experienced adviser can help you avoid those mistakes.
As a caution, be sure to ask yourself, ‘What is this person’s incentive?’ For example, the wrong insurance agent might think more about how much he or she will be paid, rather than what is best for you. You need to ask questions when you’re working with an adviser and understand if he or she has something to gain from the advice being offered.
When you’re going through a transition, you’re typically more vulnerable than at other times in your life. It’s critical to choose your advisers carefully.
Is there reason to be cautious when talking with advisers?
Be open and freely share information with your advisers, once you’ve chosen them. They need the whole picture. However, initially, when you are interviewing advisers or looking for the right one, you can and should be discreet about how much information you share. It’s important to find someone who has the experience, knowledge, capabilities and good chemistry with you, if he or she is going to serve you well.
What is a good way to research potential advisers before meeting them?
Go to your smartest and most objective friend and ask him or her to help you create qualifying questions. Almost every wealth manager, attorney, accountant or insurance agent wants you to pick them, and most are skilled at convincing you that they’re likeable and knowledgeable. You need to be able to get beyond that. It’s important to ask a similar set of questions of each so you can compare their answers — see how they treat your questions, how thoughtful their answers are and who appears to have your best interest in mind.
What are some important characteristics of a wealth management firm helping someone who is in transition?
At minimum, a wealth management firm should be able to clearly explain its investment philosophy and discipline. It also needs to offer proactive advice about taxes, insurance, charitable strategies, debt management and expertise in the full range of personal finance issues.
Perhaps even more critical are the firm’s values and characteristics. Are advisers fiduciaries — do they accept a legal obligation to put your best interests first — and if so, are they willing to put that in writing? Do they disclose all potential conflicts of interest? Do they treat all your questions with seriousness and respect? Are they rushing you to make decisions? Do they offer alternatives and allow you the time to understand, consider and make a choice? Transitions can be unsettling and take adjustment. A good adviser will help you get through that period rather than push you into something prematurely.
It can also be helpful to work with a firm large enough to have a team that offers the skills and resources needed to apply to today’s questions and the needs you’ll have tomorrow. You’ll eventually have more than one kind of transition, and a team is more likely to be able to offer a solution for each, thanks to a greater depth of resources.
What should you keep in mind when entering a life transition that could impact your financial future?
Don’t assume that you understand the situation you’re in, especially when it comes to a major transition, because your choices can have long-term implications. Mistakes can significantly cost you without first getting expert advice. Most times, it’s important to not make a decision until you’ve done research and gotten expert advice. Before acting, ask yourself, ‘How might this impact my life today and in the future?’
Norman M. Boone is founder and president of Mosaic Financial Partners Inc., which is celebrating, this year, its 25th anniversary. Reach him at (415) 788-1952 or [email protected]
Insights Wealth Management & Family Business Consulting is brought to you by Mosaic Financial Partners