Financial planning - What's a plan without considering real estate?
Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
Retirement / financial planning are extremely important tasks. My biggest beef and frustration though is that the vast majority of planners fail to consider real estate and other investments when building a plan.
As real estate investors real estate has become an essential element in an financial plan. It is surprising though the lack of advisers that understand how appropriately consider real estate any other alternative investments in a retirement plan.
Bottom line is there is so much more to investing and planning than stocks, bonds and mutual funds.
Perhaps some of you have found financial advisers that appropriately include other investments when helping clients in their financial plans. If so I very much what like to hear about them. If you also are frustrated by the lack of advisers feel free to share your thoughts. Perhaps you feel that financial advisers do not need to include alternative investments, I would love to hear your thoughts on this as well.
This seems to an appropriate place to share the following:
A Comprehensive Wealth Management plan:
1. Creates and Grows Wealth
a. Assures that their investments are appropriate to achieve desired goals.
b. Reviews their income tax situation to make sure they are not paying unnecessary taxes on investment income and excessive capital gains tax.
c. Assures their life insurance is adequate in case of premature death.
2. Protects and Preserves Wealth
a. Reviews current plans for paying for the consequences of life’s unknowns. This includes a discussion of their overall risk management program -- Life, Disability, Long Term Care and Liability -- to make sure the plans are adequate and cost effective.
b. Considers the overall investment portfolio to make sure investment selection and diversification are managed appropriately.
c. Reviews the overall tax sensitivity of these investments.
3. Plans the Distribution of Wealth during Life in the Most Advantageous Way
a. Considers the IRA and qualified retirement plan distribution plan; not as an accountant, but using a tax expert as appropriate.
b. Assesses who serves as their durable power of attorney or successor trustee of a revocable living trust in case of an incapacity - again using the appropriate advice from a CPA and legal counselors.
c. Considers ways to distribute wealth to children and descendants for well-being, education and other purposes and doing so in the most tax-efficient method.
d. Reviews charitable giving for both tax savings and control issues.
4. Plans for the Distribution of Wealth at Death in the Most Tax-Advantaged way.
a. Reviews the titling of all the assets and whether Joint Tenants with Rights of Survivorship makes sense - using the appropriate advice from a CPA and legal counselors.
b. Considers who will serve as the executor or trustee and whether a lack of continuity in the financial arrangements is an issue.
c. Analyzes the plan to distribute wealth at death to their spouse and descendants for both tax efficiency and control - not as a CPA or Attorney, but bringing in those advisers as appropriate.
d. Reviews the charitable inclinations at death for both tax savings and control issues.
To create this Comprehensive Wealth Management plan one must consult with an accountant and an attorney to assure accuracy and legitimacy.
THIS DOES NOT CONSTITUTE FINANCIAL ADVICE.
I STRONGLY urge everyone who reads this to consult with qualified advisers in each area (investments, insurance, accounting and legal matters).
Brandon Shaw as a CPA I have been looking for advisers that I would feel comfortable referring clients to. I have yet to find one that I would recommend.
There are many considerations and each individual has a unique situation. It is a shame that you can't find planners that can't be more of a guide, trainer and/or coach. Instead it seems most are pitching products and building plans that are skewed towards equity or insurance investments.
@Charles Perkins It seems to me you need more than an individual planner, you need a coach for each market, be it REI, Market, Insurance etc. As you said everyones situation/goals are different. Each person has to decide what mix they want, because each FP in whatever field you approach believes or pushes their's is the best and pitch the product that will put the most $ in thier pockets. I dont blame them, but there doesnt seem to be a place to go to find independant advisors who just want to help outside of forums like these. If anyone knows of one, please forward thier link haha.
But back to your original question, why FP's dont push REI for portfolios, I think a previous post hit it on the head, theres no gain for the FP if you buy your own property. Seems like that could be a niche though, open a hybrid firm with RE Agent/stock broker/financial planner haha. One stop shop for a truely diverse portfolio.
Having had researched the financial planning profession pretty thoroughly a couple of years ago with the intention of going into it I can tell you not all planners are the same. There are also fee based planners who will charge you a flat fee or a fee based on the value of the assets that they manage for you. In such a case it would be plausible for you to find a planner that will gladly consider RE for your portofolio.
Having said that, the reality is that these guys get trained to sell products that makes them a commission hence the emphasis on stock market and insurance products.
The reality of the matter is that we (real estate investors) are a rare breed and we compose a very small amount of all investors out there if you consider the amount of people that are in the stock market. Therefore real estate investing is just not profitable for the "typical" financial planner.
Also, one of the things that drove me away from being a financial planner is the inherent conflict of interest ingrained in the profession in the sense that you HAVE to sell your client something in order for you to make a living otherwise you don't earn anything. The catch 22 is that few people (except for the mega wealthy ) are willing to pay for financial advice.