Investor column: Plot your financial path wisely

May 13, 2014 

To enhance your financial condition, focus first and foremost on what you can control. Start by getting fiscally organized. A certified financial planner can help you with this.

Too often people think the primary value of a financial adviser is picking the right stocks and bonds. But investment giants Morningstar and Vanguard both came out recently with research quantifying the value of planning. They confirm that planning can add significant value to your finances by helping you get your financial house in order, coordinating investments with planning, and maintaining the discipline necessary to avoid unnecessary loss in a volatile market.

Whether you work with an adviser or go it alone, here are four key areas to address annually that will help keep you focused on what is important:

Goals, objectives

Where are you going? As the Cheshire cat said to Alice, "If you don't know where you're going then any road will do." Without direction, without a destination, without a goal, how do you plot a course to get "there"? I once heard that if you can't measure something, it doesn't exist. Defining your goals and measuring progress allows you to focus your efforts and avoid impulsive distractions.

Personal financial statement

A personal financial statement should list your assets, liabilities and insurance to better understand resources you have available to meet your goals. With an updated statement you can more

effectively manage assets for generating short-term income versus long-term growth needs. A good statement will also detail titling of assets and ensure that you are best positioned for additional objectives such as asset protection, tax management and legacy goals.

Investment philosophy

While the investment industry has undergone dramatic changes in my 20-year career as a financial adviser, there are still only a handful of investment philosophies. Most philosophies suggest you will find success with sufficient diversification and patience. The trick is to find one that agrees with you and then stick with it.

The big mistake comes when you try and change horses in midstream. I worked for a large cap value manager in the 1990s and it was one of the most difficult periods to maintain a value discipline. We had several clients leave us for our paltry low double-digit returns. In 1999, management decided to appease clients by adding some tech names to the portfolio. It was a bad move. Had they stuck to their discipline, they would have eventually rebounded as their original strategy regained favor in the early 2000s.

Estate planning

Estate planning is not just for the rich, nor is it only about death. The risk of incapacity increases substantially with age.

The U.S. Bureau of the Census estimates that as many as 47 percent of individuals older than 85 will develop Alzheimer's disease. Without basic estate planning documents, your loved ones will have a difficult time making medical and financial decisions on your behalf without a court order and guardianship appointment. Court action can require time and money and can lead to additional frustration for your family should you become incapacitated.

Estate taxes have changed dramatically in the past two years, so you would be wise to review your older documents. Additionally, Powers of Attorney are often a source of conflict with financial institutions and should be updated regularly to ensure there are no issues with acceptance.

Gardner Sherrill, CFP, MBA, is an independent financial adviser with Sherrill Wealth Management. To learn more visit The opinions expressed in this material do not necessarily reflect the views of LPL Financial. Securities and advisory services offered through LPL Financial. Member FINRA/SIPC.

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