In light of today’s uncertain economy, it’s really important to have a wealth plan in place. First, take stock of your wealth and assets. Then, set your goals and quantify them in terms of dollars and the time you have to achieve them. Finally, determine what you have to do to achieve your goals.
Bottom line, no matter how bad the economy gets, there are ways to preserve your wealth and plan for the future.
“It is important to have an adaptable wealth plan in place coupled with proper investment disciplines to capitalize on these value changes and achieve your desired lifestyle,” says Andy Gangadharan, vice president and private wealth management advisor for Fifth Third Bank, Tampa Bay. “It doesn’t mean that you will be absolutely market proof or will not be impacted by a negative economy. However the discipline of diligence will help protect your portfolio from taking a major loss.”
Smart Business spoke with Gangadharan about protecting your assets and the steps that you can take toward wealth preservation in a volatile market.
What can happen if a business owner is not proactive about preserving his/her wealth?
Clearly, wealth will deteriorate. But the reduction in asset value has a much more immediate impact on lifestyle deterioration. Such deterioration can have another cost. For many, the cost means having to postpone retirement for many years. It is a soft cost in the sense that the leisure you had hoped for would have to be sacrificed for the grueling nine to five routine.
Business owners have one of the most concentrated positions of any investor, because a major portion of their investments is tied to their businesses. Such times call for proper prioritization efforts. Do not overspend or live beyond your means. Real wealth is not about amassing material goods, but in leading a fulfilled lifestyle knowing full well that you can easily live a good life with the money that you earn. The truly wealthy don’t just create wealth to last their lifetimes, but also create a legacy that will last for generations.
What steps can you take toward wealth preservation in this market?
Be honest with yourself. Things aren’t going to get better overnight. During such challenging times, things rarely improve immediately, but they will improve eventually.
A lot of factors go into recovering from a harsh wealth destroying economy. However, keep in mind that certain investment truisms still remain. Stocks still and will always remain one of the few readily available investment vehicles that can keep pace and outperform the rate of inflation. Ensure that you adhere to the investment philosophies that you have put into place, no matter how tough things may seem.
For example, if investors would have followed a more disciplined asset allocation strategy, the periodic rebalancing of their portfolios would have mitigated the risk of overexposure to a particular sector, as opposed to letting the favorable market conditions from a year ago overweigh the equity sector within individual portfolios, resulting in larger losses when the market underperformed.
Instead of seeking the next big investment, it may be appropriate to seek an investment that is more stable. In this environment, it is more important that you protect the assets that you already have, rather than rolling the dice on your investments, hoping to score the next big idea. A key component of wealth preservation also requires an examination of overall risk reduction. It is important to realize that insurance is a key instrument that people tend to overlook. One does not realize the role good insurance can play in protecting and preserving one’s assets and estate. Be proactive and talk to your tax advisers, estate planners and insurance advisers to develop a comprehensive financial plan specific to your individual situation.
How can you be proactive with your planning?
It is easier than you can imagine. Make sure that you are fully aware of the investments you are holding. Don’t blindly follow your investment adviser’s advice. It is your responsibility to know where your money is being invested. If you don’t understand a certain philosophy, it is OK to go back and revisit it until you do. It’s your hard earned money, your investment and your retirement. Therefore, it is imperative that you are involved and continue to be involved in the wealth management process. I am not saying that you shouldn’t trust your adviser, but the critical element in this equation is: trust, but inspect.
What steps can someone who has run into problems take to get back on track?
It is not easy to bounce back. Not only is your portfolio jarred, but your self-confidence and psyche may be shaken as well. Remember that such economic conditions occur in cycles and eventually these challenging times too shall pass. Adhere to your investment disciplines and time horizons. Do not overlook the importance of periodic portfolio rebalancing as a key to a proper asset allocation strategy.
Don’t let the bleak economic outlook or negative news impact your investment decisions. Don’t be easily swayed by what the pundits say. Remember that the Jim Crammers and the Suzie Ormons of the world are talking to a wider audience. Their recommendations may have a general application, but a professional and trusted adviser that you partner with is charged with the fiduciary responsibility of providing specific recommendations. During times like these, it is important that you secure professional advice from your trusted professionals, so that the recommendations and investment advice that is provided is customized and tailored specifically with you in mind. You are their only audience.
Andy Gangadharan is a vice president and private wealth management advisor for Fifth Third Bank, Tampa Bay. Reach him at
(813) 306-2548 or email@example.com.