How to Avoid Sinking Your Financial Ship

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By Scott Keegan, Associate Wealth Advisor

I recently watched a short video called “Why Ships Don’t Sink as Often These Days.” As a male, the potential of seeing large boats slam into large waves had me hooked.

I initially thought the video’s narrator would be some brainy engineer speaking about innovations made through the years to help ships withstand large waves and storms. Indeed, the first minute of the video played out much like I thought it would, with explanations of how ships are designed to hold up against these storms compared to the wooden ships people used to sail great distances prior to the 20th century.

But the biggest reason ships don’t sink at the rate they used to shocked me, because it seemed so simple: They avoid storms.

The narrator described how the evolution of tracking weather patterns and predicting future weather events was the biggest reason ships can avoid sinking.

In the Christopher Columbus days of sailing, passengers hopped on a ship with a paper map and hoped for the best. While they had sails to help control the direction of the ship, they were still very much at the mercy of the winds and Mother Nature. There were no GPS systems or ability to see where storms gathered in the oceans ahead; they simply knew their starting point and destination, and whatever happened in between was left to luck.

Financial Navigation is Key

As I watched the video, I couldn’t help but think of the parallels between the evolution of sailing and financial planning. Too often, individuals planning for retirement are like the passengers on old ships – they know where they are and where they want to end up, but the ocean in between is a frightening variable.

To make the situation worse, many financial advisors are like the captains of the old ships – they hand the passengers a paper map (a “financial plan” when they initially become a client) and wish them luck. The problem with this situation is that, like the ocean, our lives are ever-changing, and priorities are shifting when you’re navigating your financial plan.

Too many financial advisors are not willing to put in the effort of maintaining a client’s financial plan as life and priorities change. Your financial plan should be more like the newer ships equipped with GPS and storm tracking equipment to tell you exactly where you are at any given moment, what storms could lie ahead (tax changes, health care expenses, updating estate plans, market changes, etc.), and what course of action they can take to avoid these storms or weather them to protect their assets.

Ongoing Guidance: Not a One-time Thing

Your financial advisor should be like a good captain. They should know what your individual end goal is financially and then look ahead to steer you in a direction that helps you work towards your destination with the least amount of turbulence possible. Similar to a captain, an advisor can’t change the weather or all external conditions, but will take into account the external forces and guide you while navigating your financial plan.

This guidance is not a one-time, “point you in the right direction” kind of navigation, but rather a continual coming alongside a client and monitoring of the situation to help ensure the path is the best route and that the advisor understands exactly where the client wants to go.

Many advisors often will tout their low fees to make up for the lack of financial planning they provide to their clients. Unfortunately, many clients are willing to sacrifice receiving a personalized financial plan to save a few percentage points. What clients may not understand, until it’s too late, is that the lack of the planning aspect could cost them much more than increased percentage fees if they come across a “storm” they were ill-prepared for.

While I’m sure it would cost far less to make a cruise ship like one Christopher Columbus used to sail, I highly doubt anyone would give up the safety and security of modern-day cruise liners to cut costs on their vacation. It is easy to make the decision to pay incrementally more for safety and security when the outcomes are life and death.

Are You Sailing or Bailing?

The outcome of a poor retirement plan may not be life or death, but the stakes are still high. For many, the money they have put away for retirement represents a lifetime of hard work and commitment to their career. If your advisor is not actively updating your financial plan and taking proactive steps to plan to weather or avoid storms, your financial vessel may be taking on water before you realize it’s too late.

Is your current financial plan seaworthy? Set an appointment with one of our advisors today!

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