3 Things Your Financial Advisor Should Help With (That Aren't Investments)

August 17, 2023 | David Edmisten, CFP®

While most people think of investments when they look for a financial advisor, there are three very important topics a good financial advisor should be addressing for their clients. Great financial advice will help you cover potential risks to your plans, look for ways to legally minimize your tax bill, and make sure your estate is protected for the ones you love.

1. Risk management

An unexpected risk materializing in your life could be all it takes to throw your financial plans off course. You could have excellent savings habits, a solid investment plan, and a growing career and nest egg. But a sudden shock - a job loss, a long-term health issue or disability, or even a lawsuit – could have a large enough impact that it disrupts a well-crafted financial plan.

Helping to assess the risks that are present in your life, evaluating the material impact these risks could have on your plans, and exploring options to protect you (such as increasing emergency funds or insurance) are ways your financial advisor can help protect you from unnecessary risks.

2. Tax-efficiency

Taxes are a reality any time we earn or produce income. Within the confines of complying with the tax code, there are several things a good financial advisor can do to help you make smart tax decisions to keep your tax costs down.

Every investment decision has a tax result. A good financial advisor can help you choose the correct type of account to hold specific assets based on the tax implications; assess whether a buy or sell decision will result in a taxable gain or loss and help you plan to keep realized capital gains lower; help you determine which assets or accounts should be used for withdrawals based on the tax result; and even help make sure you’re executing required actions, such as a Required Minimum Distribution from an IRA account, to make sure you don’t incur penalties that could have been avoided.

Evaluating opportunities for Roth Conversions, use of HSA accounts, catch-up contributions and charitable giving strategies are additional ways a financial advisor can provide value for your tax planning.

3. Estate planning

While a financial advisor is not an attorney and cannot provide legal advice or draft legal documents for you, a good financial advisor should be reviewing your estate planning with you. Understanding your intentions for your finances in the case of your death or incapacity can be important for your advisor to help you make decisions on what assets to hold in which types of accounts, as an example.

Your financial advisor should be able to help you review your beneficiary designations to ensure they match your wishes and are in line with your estate plans. Simple items such as proper beneficiary designations and potentially a revocable living trust can help your estate to transfer without additional time and cost in the probate process. Effective estate planning can make sure your intentions for your wealth are carried out properly and can potentially reduce future taxes and preserve more of your wealth for your heirs.

Your financial advisor, in conjunction with your estate attorney, can help explain the financial implications of your estate plan, and can help with adjusting your financial accounts if needed for your ideal plan. Your advisor can also help you make sure important designations, like trusted contacts or powers of attorney, are in place before you need them.

Good estate planning and review can help you save on taxes and administrative fees, but more importantly can make a difficult time for your heirs a smoother and easier process. 

At Next Phase Financial Planning, our client success process ensures we are covering all these areas with each and every client.  For our clients to truly be confident and protected, we know it takes more than a good investment plan.  Our clients take confidence in knowing we are helping protect them by planning for all areas of their financial life.

Get your free guide on the Top 5 Retirement Mistakes (and How to Avoid Them) here!

For a free assessment of your retirement readiness, schedule a call with us.

About the Author:

David Edmisten, CFP®, is the Founder of Next Phase Financial Planning, LLC, a financial advisor in Prescott, AZ. Next Phase Financial planning provides retirement, investment and tax planning that helps corporate employees retire with both financial and lifestyle security.