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Financial Documents to Prepare Before Meeting Your Financial Advisor

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Money matters can be intimidating. But, if you have made the proactive decision of engaging with a professional financial advisor, you are likely headed in the right direction. A financial advisor can make a comprehensive financial plan for you, manage your accounts, and wisely invest your funds, allowing you peace of mind and security. Hiring a financial advisor is not difficult given the prevalence of the internet today. However, it is important to engage with the right person and also prepare well-in-advance for your meeting with the professional. Sharing the necessary financial documentation can help you ensure that your first meeting with the advisor is productive. Moreover, without the most pertinent and comprehensive financial information, you will not be able to equip your advisor to efficiently assess your monetary condition and work effectually to improve it.

Why is it important to prepare your financial documents before meeting your financial advisor?

Each person’s financial condition is unique and can be affected by several factors. From investment portfolio, retirement accounts to education savings plans, mortgages, life insurance, and more, it is critical to take a holistic view of all aspects of your financial plan.

Hence, your advisor cannot adopt a one-size-fits-all approach. They must tailor their strategies and create customized plans as per your preference, lifestyle, risk tolerance, life stage, monetary goals, and income. This is why is it essential to provide the details of every financial aspect because your advisor cannot make informed, strategic recommendations if you only give out a fraction of the information about your financial realities.

You can think of this as engaging with an architect to build a home of your dreams. You would have to give the architect every detail of your personal preferences, budget, land considerations, material preferences, etc., to enable him/her to create a detailed blueprint of your home. If you do not give these details or offer incomplete information, you will not get the right value of the engagement and might end up wasting your resources and time.

The same argument justifies the need to disclose all information to your financial advisor. If you do not give this person all of the documentation necessary to understand your financial standing and develop a dynamic plan to achieve your future targets, you could waste your money and effort, and eventually, receive a poor return on your investments. By giving your financial advisor a complete view of your financial information, you can equip them with a stronger framework to deliver value and achieve success.

What financial documents should you prepare before meeting your financial advisor?

Before you understand the financial documents that you need to carry for your meeting, you should know your goals. It is important to determine what your five-year and ten-year goals are concerning your finances, assess how you plan to achieve them, and what your financial future looks like. This will help you gather all documents that you might need to turn your goals into a real actionable plan.

Here are some important documents that you should carry when meeting your financial advisor:

  • Tax return statements: Your financial advisor can use your tax return statements to understand your complete financial picture. Your tax returns will explicitly reveal all your income sources like salary, real estate earnings, Social Security benefits, pensions, investments, retirement account withdrawals, and more. These statements will also help the financial advisor understand the various tax deductions you have claimed in the previous years. This could include charitable donations, medical insurances, mortgage interest, etc. This detailed information will help the professional develop a sound investment strategy and identify ways to reduce your tax liabilities and save more of your hard-earned money.

  • Net worth statements: It is useful to provide your financial advisor with a net worth statement and an estimate of your future income aspirations. You can easily calculate your net worth by evaluating how much you own versus how much you owe - assets vs liabilities. In this context, the scope of assets includes your bank balance, real estate, cash deposits, investment and retirement account balances, house, car, insurance policies, etc. Alternatively, liabilities in this regard include your current outstanding debts, mortgage, credit card dues, rent, etc. Deducting the total value of your liabilities from the total worth of your assets will give a figure that will be a true depiction of your financial situation. Comparing your present net worth against your desired income can enable you to estimate how far you are towards reaching your financial goals and what needs to be done to reduce the gap. Your financial advisor can study this data and find out ways to minimize the income gap.

  • Monthly expenses: One of the most important pieces of information to have when sitting with your financial advisor is your detailed monthly expense outlook. Financial planning primarily consists of cash flows. So, if your advisor does not evaluate your expenses with your income sources, tax returns, savings, and investments, they could be operating in a vacuum that can prove to be detrimental to your financial objectives.

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  • Comprehensive budget: A sound budget sets the foundation of your goals. But people often struggle with creating a budget, and more so, living within a budget. Hence, it may be advisable to take cognizance of your cash inflow and outflow and create a budget before you meet your financial advisor. The advisor will assess your budget and help you ascertain how much you need in retirement along with strategies you can use to achieve this figure. The advisor will also help you know how long it can take to accumulate the required corpus according to your preferred level of risk in your portfolio. A trimmed budget, as advised by your financial advisor, can enable you to cut down on unnecessary expenses and focus more on achieving your savings target.

  • All account statements: Your financial advisor can best understand your monetary position through your account statements. Hence, when meeting with your financial advisor for the first time, it is beneficial to carry recent statements of all your bank accounts as well as cash deposits, money market accounts, mortgage accounts, mutual funds, tax-deferred annuities, etc. You should also bring all relevant details and financial statements of your retirement savings account like an IRA (Individual Retirement Account), a 401(k), etc. Further, insurance documents (health, disability, long-term care, home, renters, auto, etc.), details of pension and Social Security statements are also essential. This will help the financial advisor have an informative conversation with you regarding your goals, availability of funds, and future aspirations, and create a strategic plan. Moreover, your debt statements are also crucial. This includes statements of any personal loan, student loan, auto loan, credit loan, etc. Through your debt statements, your financial professional will be able to chalk out the right plan for you. This will also allow the professional to assess your investment risk level, and accordingly, choose a goal strategy and define a level of portfolio risk.

  • Estate-planning documents: Your financial advisor can also perform important estate planning functions for you. If you wish to leave behind a legacy for your children, your advisor can enable you to do so in the most feasible and tax-effective manner. Your advisor can help you adequately divide assets, guide you through the will drafting process, and a lot more. Besides, if you would like to set up a living will, trust, or a 529 college savings plan for your children, you can seek help from your financial advisor. Hence, you should carry your up-to-date estate-planning documents with you when you meet your financial advisor.

In addition to these financial documents, it is good to bring along the following papers when meeting with your financial advisor:

  • Driver license, passport, or a government ID that can help the advisor verify your identity.
  • List of valuable personal assets like jewelry, car, furniture, collectables, etc.

Once you have compiled all the above documents, it is best to prepare a few important questions that you should ask yourself and discuss with the professional before the engagement begins. Here are some questions that you can ask yourself:

  • When do you foresee your retirement?
  • What kind of retirement life do you envisage for yourself?
  • Do you want to save money for your child or grandchild’s education, marriage, etc.?
  • Do you own a house or wish to own a house shortly?
  • Do you have mounting debt?
  • Do you have an emergency corpus?
  • Do you have adequate insurance?
  • How is your health? Is your health insured? Do you have long-term care arrangements?
  • What are your investment goals?
  • What is your savings target?
  • Do you know your risk tolerance?
  • Is your investment portfolio aptly diversified?
  • What is your investment philosophy?
  • Are you on track to meet your financial goals?
  • Do you have a retirement saving withdrawal plan in place?
  • Are you open to charitable donations?
  • Are you tax-efficient?
  • Are you filing your taxes wisely?
  • Are you making the most use of all deductions and tax-deferred retirement accounts?
  • How will your success be measured?
  • How will you define the value-add of the financial advisor?
  • What tools can be used for financial planning and monitoring?
  • Do you wish to have a will and distribute your assets or form a trust?

To sum it up

After you do a thorough analysis of all the above-mentioned questions and compile your financial documents, the financial advisor will be in a much better position to offer you valuable advice. Moreover, when you work in sync with your advisor and align your decisions with your ultimate objective, you are more likely to experience financial security and contentment.

You can use our free tool to compare up to 3 financial advisors and find the best professional to lay a strong foundation for your financial future.

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.