Updating Your Financial Plan

12/1/2021

As the year draws to a close, many investors take this time to conduct various housekeeping tasks within their investments, such as required minimum distributions, tax loss harvesting, IRA contributions, and many others.  Another task that investors may want to consider doing is a review of their financial plan.

Financial plans have become a very common offering in the financial industry, with 75 percent of wealthy investors indicating that their primary advisor has created a financial plan. That plan is consistently updated and discussed, according to a recent report, Wealth Management Redefined, from Spectrem Group. That percentage decreases to only two-thirds among Millennials, who may have not had the opportunity to create a financial plan yet. How often the financial plan is updated however varies.

Thirty-eight percent of investors are updating their financial plan at least twice a year. A similar percentage, 37 percent, update their financial plan once a year with their financial advisor. That means a quarter of investors are not updating their financial plan on an annual basis, which reveals the opportunity for those investors to conduct a review of their financial plan as we are heading into the end of the year. The percentage of investors who are not updating their financial plan at least on an annual basis jumps up to 35 percent among those investors with a net worth between $100K-$999K.

It is extremely important for financial providers to regularly update financial plans, as 55 percent of wealthy investors would leave their financial provider if their financial plan was not regularly updated. Interestingly enough however, is that investors at lower levels of wealth are more likely to leave their current firm if their plan was not updated regularly. The same holds true for younger investors, who are more likely to leave their current firm if their financial plan was not updated on a regular basis.

While these younger investors are more likely to leave their financial advisor if there are not regular updates to their financial plan, they are also more likely to be very satisfied with the actual ongoing reviews of the financial plan than other age segments, with half of Millennials being very satisfied with their ongoing financial plan reviews. Higher levels of wealth are more likely to be very satisfied with the ongoing reviews of their financial plan with their financial advisor than those investors at lower wealth levels.

While it is clear that most wealthy investors have a financial plan created for them, there is room for improvement, in the areas of ongoing management and review of the plan. A plan is only good if it is followed and updated, so investors would be wise to take this time at the end of the year to review their financial plan with their advisor and ensure that the plan review meets their expectations. If there is room for improvement that is an opportunity for a discussion with the financial advisor to elevate the review to what is needed.