Before I attempt to summarise just how to build a good wealth plan in a single post, it may be helpful to first answer the question: What is a good wealth plan?
At Providend, we like to say that it is one that is comprehensive, designed to support you in achieving your purpose and life goals, and one that can help you do so with high degree of certainty, no matter what happens along the way and in a comfortable manner.
And we mean it. The yardstick for a good wealth plan is one that can do all the above.
So, how do we go about putting such a plan together?
Start with Why
To borrow the words of Simon Sinek, we start with why.
Before we ever get to speaking about how to grow wealth and what to do to grow it, we first have our clients share with us why money is important to them and exactly why they want it to grow. These may seem like silly things to ask because it is easy to imagine that everyone wants more money.
But the key to this conversation is really that in a well-facilitated examination of what wealth means to them and precisely what it is they want their money to do, we achieve two things. We uncover their most important goals, both of the sort already at the top of their mind and those that may be a little less obvious without prompting, and we create motivation by reminding them of what will drive them to take positive steps toward making those things happen.
Assess Your Needs
Once we have identified their objectives and concerns, we need to work out what their actual needs are. This often involves quantifying how much money they need at various points in the future and determining how much risk they may need to take in order to reach those targets with the resources that they have available to them.
We then work collaboratively to model their desired scenarios and show them the possibilities given their current and expected future position.
We also make sure to analyse which part of their resources, or income, is most important to protect to reduce unnecessary disruptions to their plan or the lives of their family.
It is also at this stage that we ensure that any key concerns or preferences they may have are reflected in the plan that we are developing together.
Chart a Reasonable, Reliable Path
Then, we begin charting an actionable investment plan that is based on academic evidence, using low-cost, broadly diversified portfolios of index and evidence-based funds.
This is important not for maximising investment return but in order to allow them to achieve the return that they need for their goals with a high degree of certainty.
Investing in a way that does not require a heavy reliance on forecasting or guesswork also allows them to take good advantage of compounding in that the outcomes are more repeatable across time.
Other than the investments, we discuss contingency plans to address relevant risks. We then select and recommend the most appropriate insurance for their needs and support them in thinking through any relevant estate considerations, as well as add buffers to the plan.
Execute It Well
The next step is to then execute the plan well and support clients in taking effective action.
Without resorting to market timing (which the evidence says does not work reliably), we discuss the best way for them to enter the market and ensure that we are doing so in a way that is comfortable for them.
We monitor their investment portfolios, ensuring that they are performing as they should be and rebalance them periodically to keep them in line with their agreed risk allocation.
And throughout the process, we remind them of the plan that we have in place and what the academic evidence says so that they can invest with conviction, stay invested and reap the returns due to them.
Where we help them implement insurance, we assist them in buying what they need at the lowest cost we can.
Review as Needed
Of course, the work does not stop there. Life changes, and so plans change.
We review the plans we have made with each client on at least an annual basis, making sure we are on track towards where they want to be.
When significant events happen to our clients, or when they are faced with important life decisions, we help them make sense of what that means for their financial future. If there is ever a need for them to adjust their plan, we support them in doing so where appropriate.
Each of these steps is a crucial piece of the process that allows us to create wealth plans that express our clients’ values, and that gives them the assurance that they are headed to where they want to be.
This is an original article written by Bryan Chan, Client Adviser at Providend, the first fee-only wealth advisory firm in Southeast Asia and a leading wealth advisory firm in Asia.
For more related resources, check out:
1. RetireWell™ Part 2: A Tale of Two Retirees and Their Fortunes
2. How Should Property Fit Into Your Overall Investment Portfolio?
3. Client Case Study: At 40, Are You on Track to Retirement?
*Providend is very excited to share that we are now ready to extend our service offerings to the younger accumulators who are looking for holistic, independent, conflict-free wealth advice!
For this group of younger accumulators, we know that it is not easy to make retirement planning a priority when other financial goals – buying a first home, for example, or saving for a child’s education – appear more pressing. Learn how we can help here.
We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current investment portfolio, financial and/or retirement plan, make an appointment with us today.