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Are You Fiscally Fit? A Financial Check List to Share with Your Advisers

October 1, 2013
by Jack Reynolds

The summer is over, the kids are back in school, and just when you think you might have some time to relax, you ask yourself, “How on earth am I going accomplish all of my goals before year-end?”  Well, you are not alone.  I find that creating a checklist of ‘to do’ items is enormously helpful in accomplishing my goals, and emotionally satisfying as I knock items off my list.  With this in mind, I have created a simple, yet pretty comprehensive, financial check list for you to share with your advisers and put your mind at ease as you enter the fourth quarter.

PrintEach of our financial check lists will vary somewhat, but you may be surprised at how many items apply to you.  Further, setting your financial priorities and tackling your most relevant items now, will allow you to enjoy a more relaxing and satisfying holiday season come November and December.

If you are unable to meet with each of your advisers, I would be happy to review this financial check list at our earliest convenience without charge. Simply give me a ring at 617.945.5157, or shoot me an email. If you would like to share a few items from your own check list, please be sure to leave a comment at the end of this article.  Let’s get started!

A Financial Check List for You and Your Advisers

1)      Tax Related Considerations

  • Review your long-term capital gains.  Are they meaningful? Do you have long-term capital losses available to offset the gains? Are there long-term losses that you should realize before year-end to offset your taxable long-term gains?
  • Review your short-term capital gains.  Are they meaningful? Do you have short-term capital losses available to offset the gains? Are there short-term losses that you should realize before year-end to offset your taxable short-term gains?
  • Explore whether you (and your spouse) have used up your lifetime gift tax exemption of $5+ million each. If not, consider making tax-free intra-family gifts. For even greater tax-efficiency consider making generation-skipping transfers to a trust for the benefit of your grandchildren. See my earlier article, What High Impact Tax Planning Can you do in September?
  • Counterintuitive as it may seem, review with your team of advisers the appropriateness of making taxable intra-family gifts. This is not a crazy idea, and you can learn more about this from my earlier article The Advantages of Making Taxable Lifetime Gifts.
  • Begin estimating your 2013 tax liabilities (both state and federal) to avoid being surprised later on by how much you owe. Work with your advisers to think about sourcing the required cash, potentially even through a line of credit, where your private banker can be of assistance. See my article Read This If You Still Think You Don’t Need Credit and see my brief video Innovative Investment Solutions, A New Perspective on Credit.
  • If you have an offshore bank account, ask your CPA what you can do to minimize draconian forfeitures and fines that could be applicable, depending upon your situation. Offshore accounts are more common than is generally appreciated and are a red flag for tax authorities in the U.S.


2)      Insurance Considerations

  • Consider spending some quality time with both your life insurance adviser and your estate planning counsel in the same room. While the prospect of having this meeting may not fill you with excitement, it could turn out to be an important conversation both in terms of tax/liquidity management and estate conservation for your intended beneficiaries.
  • Review your property and casualty insurance portfolio.  There are a myriad of small factors that taken together, can dramatically impact the cost and efficacy of your coverage. You may be spending more than you think, or more than you need to. On the other hand, there may be inappropriate gaps in your coverage.


3)      Investment Strategy Opportunities

  • Have an offsite meeting of your investment committee and key advisers to evaluate your long-term asset allocation targets.  Are the targets still suitable? How does your portfolio conform to your targets? Are you comfortable with the divergences between your targets and your actual exposures?  Some investors have a large asset allocation target to bonds, based on a 30-year bull market in bonds. This may be a good time to review those choices.
  • Similarly, review your liquidity preference. As a result of the Great Recession, a lot of investors developed an ultra-high liquidity preference. Can you tolerate more illiquidity in your portfolio than you currently employ? If so, how would you and your advisers like to deploy an increased illiquidity budget?
  • If you want to rebalance your asset class exposures there may be a need to give some managers advance notice of your intentions. It is not uncommon for hedge funds to allow only annual exits with 60 or 90 day notices, so now is the time to review required notice provisions.
  • Assess your cash flow needs (e.g., taxes, living expenses, both family and charitable gifts and capital calls) and whether you can use your cash flow requirements to reallocate assets back toward your long-term asset allocation targets.



4)      Investment Tactics

  • Review each of your investment managers with your investment committee to see if any managers should be put on a watch list, or are candidates for replacement.
  • Has your view of passive asset management (e.g., index-related mutual funds and ETFs) vs. active asset management (e.g., mutual funds and managers who emphasize security selection expertise) changed? Do you want to shift more of your exposures in favor of active or passive management?
  • What opportunistic investments may be worth embracing before year-end? Are there asset types that have languished and whose time has come? Your advisers may have perspectives to share with you on this topic.
  • Take a close look at your balance sheet, asset allocation and performance reports. Are you getting all of the information that you need? If not, what are you and your team going to do about it and when?


5)      Take a Poll

  • Ask each of your advisers what their key issues are in your situation, and prioritize their ideas.  Odd as it may sound, some advisers are bashful or reticent about pushing their agendas. So get your top advisers to go on record about what they see as priorities in managing your investment/financial affairs, and what they want you to do about those priorities.

I hope that you find my financial check list inspiring, rather than discouraging. If you have a Private Investment Counselor, he/she is in your life specifically to help you examine all of these things. If you don’t have such a person in your life, consider whether you need one. If that isn’t the right answer for you, then divide-and-conquer by carving up the list and getting your existing advisers to help you.

What have I overlooked? Please leave a comment, including items that you would like to add to my financial checklist, just below this article. If you prefer, please give me a ring at 617.945.5157, or shoot me an email.