Managing Your Investments with Your Financial Plan

New Year, new goals. What is your big, bold goal for retirement? And what legacy do you want to leave behind? These are some of the key questions one of our advisors might ask when they are getting to know you as a client. Some people just want to be sure they won’t run out of money in retirement. But if you know you’re going to have enough, the question becomes, what will you do with the excess? What are you dreaming about that your financial plan and investment portfolio can help you achieve?

By gaining a holistic picture of your financial life, including your goals and risk tolerance, a financial advisor can customize your investments to meet your unique needs and desires. They do it through a combination of inputs that include financial planning insights, capital market acumen, and tax perspective. Behind the scenes, the financial advisor is constantly trying to position each client’s portfolio so that it stands to benefit from a multitude of potential future events.

What difference does it make if your portfolio is 60 percent stock and 40 percent bonds versus 80 percent stock and 20 percent bonds?

Both portfolios might be equally likely to fund your retirement spending needs, but the difference may lie in what you leave behind. Or it could impact how much flexibility you will have to indulge in things like an 80th birthday cruise around the world, a large donation to charity, or the decision to fund a grandchild’s education.

“Imagine three buckets,” says Mark Feldman of CAPTRUST. “The first bucket is the one that’s going to take care of you for the rest of your life, so those assets are going to be invested more conservatively. We call this the capital preservation bucket.”

“The second bucket—the liquid risk bucket—contains more volatile investments to help grow the portfolio. And the third bucket—the illiquid risk bucket—contains assets that will grow the portfolio but are not able to be accessed immediately,” says Feldman. “If you know your needs are taken care of with the capital preservation bucket, you become more risk tolerant with the excess.” By separating your assets into buckets like these, we can craft an investment portfolio that’s personalized to meet your goals.

Planning for Investment Goals

Briana Smith, a CAPTRUST financial advisors states, “We do the planning first, then the plan informs how we will manage the portfolio.” First, we need to know your cash flow, your long- term legacy goals, your charitable intention—all those things. Then, we can align your portfolio appropriately to reach your goals. A robust financial plan will take account of your income, expenses, investments, estate planning, insurance, taxes, and more.

 

Proactive Tax Strategies

Perspectives from tax planning and advisory services are another big piece of the investment planning puzzle. To create a fully optimized investment plan, your financial advisor will pair your portfolio and investment opportunities with income tax strategies. The aha moment is when advisors can find synergies between tax planning, estate planning, and investment strategy that enrich your financial picture.

 

Reducing Risk

What are the risks of not integrating your investment management with your tax and financial plans? In Feldman’s words, “Suboptimization of the options.” Wertheim agrees: “From a tax perspective, it could undermine your goals. If you aren’t aware that you are going to have a huge tax bill at the end of the year because of whatever strategies you’ve engaged in, it can leave you feeling very frustrated.”

“If you have a gain, yes, you’ll also have a tax bill at the end of the year, but hopefully we can minimize or strategize how to use that gain,” says Wertheim. “If you have a loss, that can also be beneficial. In fact, you might strategically plan to have a loss so that you can use it against something else. The key is to avoid unbeneficial losses.”

By integrating investments, planning, and tax, your advisors create a benchmark and can give you a clear-eyed vision of the future. You can practice scenarios so that you feel prepared. In this way, investment planning creates better outcomes, and it grows your confidence.

 

Right on Target

Smith says, “Having a path to follow – that is, the recommendations determined from the plan – and your advisor as an accountability partner is the biggest value to having a holistic plan. The plan will provide peace of mind when the market dips and give you clarity on what impact short-term decision will have on your long-term projections.”

 

Wishing you a happy, healthy, and financially well new year. Happy 2025!