financial advisors, financial technology, gertsema wealth St. Joseph, Missouri

Using the Right Tools to Create Your Financial Plan

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By Mike Gertsema, CEO & Wealth Advisor

 

Have you ever attempted an improvement project with the wrong tools or less than optimal equipment?  About 15 years ago I decided I was going to play Tim Taylor from Home Improvement – a popular show at the time. The sitcom was based on Tim being a TV “how to” fix it, type guy. Tim Taylor (Tim Allen) would do these projects with tools the wrong way or try to “upgrade” the tools to make them bigger and better.

I must admit, I loved the show and it sometimes inspired me to do similar things that usually ended in disaster.

Mike the “Tool Man”

 

Inspired by Tim “the Tool Man” Taylor, I decided to put ceramic tile down in the basement laundry room. I talked to friends that had done it before and they all told me that I could do it and it was rather inexpensive if I did it myself.

So, we found some one-foot square ceramic tile on sale and bought the most inexpensive tools available to do the project. Since this was going to be a one-time project, I didn’t want to invest a lot of money into tools, so I bought a glass cutter for cutting the ceramic tile. I laid everything out and everything was going as planned.  It was a breeze until I had to start cutting tiles.

The walls weren’t straight, the angles were tough, the corners were off, and I started breaking a lot of tiles.  The project slowed down dramatically and my patience was tested because everything started taking much longer, the more I had to cut tiles.

Finally, I finished the project and my wife was impressed. She had no idea how frustrated I was with the job because all I could see was my mistakes, not the beauty she was seeing. The more she praised my work, the more I started overlooking the mistakes, to the point where she talked me into another project.

The Second Job

 

This time it was our main floor bathroom, and I figured it would be a breeze because the bathroom was small. I also decided I had to upgrade the cutter to a plastic wet saw and use smaller tile. I bought a plastic-type wet saw because it is my last project and I wanted it to go better than the laundry room.

The project went well until I broke the plastic guard on the saw and then things started getting ugly. The cuts were off, I had to redo a lot of tiles and I was frustrated with my work because it felt subpar and it took longer than expected. I finished the project and swore to myself, never again. I also discovered after everything was completed that I should have used a concrete backer board under the ceramic tile.

I guess I should have talked to a professional instead of my friends, or just hired it done. But guess what? My wife was impressed, she absolutely loved it. She could not believe I could do such a great job. Yes, she talked me into another ceramic job in the basement bathroom, which was a much bigger room and many more corners.

The Right Tools

 

If I would have known then what I know now, I would have bought all the right tools in the beginning. I looked for all the best tools and found the cost too high because this was going to be my last job. I found a tool rental that had everything I needed, so I rented a professional-grade wet saw and what a difference it made.  Everything went as planned and my workmanship was much improved. I actually felt proud of myself.

This story leads me to my professional life. In my career, I have witnessed a lot of change within the financial services industry and a lot of trends, but the biggest and most profound change is the tools available to financial professionals in the independent advisory firms.

I call them RIAs, which stands for Registered Investment Advisors. Over my career, I’ve been trying to help clients with financial planning, tax planning, investment risk management, and estate planning and thought I had the best financial planning tools available, only to find I was using a glass cutter to cut ceramic tile.

I’ve had to work longer and harder to complete projects with the tools provided by the various firms I worked for, but I could see the flaws in my work, even though it was much better than industry standards. Most of the people I talked to within the firm told me the financial planning tools that we had were the cutting edge.  It was cutting edge for the firm, but not cutting edge to the industry. Like my second tiling job, it was a plastic ceramic tile wet saw at best.

Financial Advisors Using Financial Tools

 

Risk management is a huge deal when managing investments, portfolios, and financial plans.  It’s almost like me doing the project in the main floor bathroom and not knowing about or having the right tools to protect the job I completed, like the concrete backer board. We have risk management tools available today that analyzes the projected risk and return on constructed portfolios to try to help avoid unwanted losses.

I also think of my friends I consulted over the years with my ceramic tile projects. They had great intentions, and the advice they gave me was the best they knew at the time.

A lot of people ask their friends financial questions about investments, pensions, social security, 401(k) investments, taxes, financing, or refinancing, major purchases, and estate planning. I’m sure all their friends have the very best intentions, but without knowing a lot of personal information how can your friends truly advise you?  Even if the friend is very wise, do they have the tools to really help guide you?

As I look back at our move to the independent advisory firm, I feel like I did when I finally went out and rented all the right tools to complete my ceramic project. I have the right tools for financial planning and I can show clients all the different options and scenarios when they’re considering investments, pensions, social security, 401(k) investments, taxes, estate planning, financing, or refinancing and making major purchases.

Using Technology to Help with Financial Decisions

 

You need the right financial planning tools to illustrate how one decision will impact another decision. Sometimes you may feel that you’re making a great decision to solve a problem, only to find that you’re creating another problem. We see that quite often regarding financial decisions and income taxes.

There are so many things to consider and some of them you’re not aware of, just like my main floor bathroom flooring. I should have put the concrete backer board down first, but I didn’t know at the time. Today we have tools to illustrate how different scenarios will impact your income taxes before making them and finding out next year when filing your income taxes.

How often do you say “I wish I would have known that last year” to your tax professional?  Another extremely powerful tool is illustrating our client’s estate settlement at age 90 for example, and how the estate will be distributed to each person and what taxes (if any) will have to be paid on the inheritance. Sometimes the information is shocking and very upsetting to clients, but knowledge is power, and they are empowered to make changes now to avoid a lot of taxes on their legacy.

So, at the end of the day, are you relying on a friend for financial advice or a financial professional? Is the financial professional a fiduciary? Does the financial professional have the right tools to illustrate the pros and cons within your financial plan, your taxes, and your estate? Are their tools a glass cutter, a plastic wet saw, or professional grade?

A few years ago I thought I was cutting edge, because that’s what I was told, only to find out that the world was passing me by, don’t let that person be you!

If you would like more information or an illustration using the right tools to help guide you or help you understand what I am talking about, let’s get in touch! Connect for an initial consult – not an obligation, just conversation.

 

For a comprehensive review of your personal situation, always consult with a tax or legal professional.

 

Let’s talk!

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