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Do you have a Financial Plan or a bunch of accounts?

| May 24, 2022
  • Do you have a Financial Plan or a bunch of accounts? 

A portfolio of investments is NOT A PLAN.  Too many people have a bunch of accounts that don’t work well together and don’t complement one another.  What I mean is most people look at each of their accounts as something separate or segregated from each other.

In reality, investments should be integrated and coordinated.  Integration implies a fusion of components into something new:  the whole is great than the sum of the parts.  Coordination is the arrangement of investments into an organized whole.  Both are critical to investment (and financial plan) success. 

Industry constraints or multiple advisors means that integrated and coordinated management across all accounts is not typical.  By managing accounts separately, you are missing out on several key benefits. 

  • Avoid Overlap: You could own the same funds/investments/stocks in multiple accounts.  The result is a lack of diversification and greater systematic risk.
  • Lower Taxes: With asset location you can reduce your tax bill by holding the investments with the highest expected tax impact in your tax-deferred account.  This can only be achieved via investment integration.  In addition, harvesting losses in a taxable account can be used to offset capital gains that may be distributed by mutual funds or from sales. 
  • Lower Investment Costs: Due to restriction in a company sponsored plan, some types of investment vehicles may not be available given your target allocation.  By selecting the best available vehicles in your retirement plan and integrating them with your other accounts, you can lower your underlying cost while staying in line with your risk tolerance. 
  • Customized Risk Exposure: Managing accounts separately makes it difficult to align each allocation with your targeted risk exposure.  Integrating all accounts can make this more efficient and effective.   
  • Better Execution: Integration allows for timely execution across all assets, so that necessary adjustments are made, and opportunities are not missed. 
  • Monitoring and adjusting: It is important to constantly monitor your accounts to ensure they stay within your risk tolerance, and to take advantage of any opportunities the present themselves.
  • Uncorrelated Assets:  A rising tide lifts all ships, but in a solid plan, you want assets that move opposite of each other.  When the market goes down, which is will, you have some assets that will move the opposite direction.
  • Distribution Planning: How do you most efficiently distribute assets once you retire?  Which accounts do you pull from first or last without causing undue tax burden and preserving wealth? 

How do you integrate and coordinate your assets?  The first step:  have a FINANCIAL PLAN.  A plan helps prepare you against the factors that are out of your control.  In your control is integration and coordination which can help give you financial peace of mind. 

Let’s get you a plan and make sure your investments are integrated and coordinated.  

Joan Gilles & William Regenscheid                                                                                                                              612 436-3733  or  612 877-2532                                                                                                  or                              https:///