5 Reasons Why Neglecting to Conduct an Annual Financial Review can be Devastating
I believe very strongly in conducting an annual financial review. Many of the problems that people faced in the last year & many of the horror stories of losing 40% - 70% on the stock market, might have been prevented by having a professional review of your entire portfolio on an annual basis.
Here are those 5 reasons:
1. Your financial picture is dynamic, not static.
Your income, goals, and needs have all likely changed in the last year. You may have a child going to school, you may be expecting a big move, you may be getting married or divorced, you may be saving for a new car, you might be getting a raise, you might be getting a bigger tax refund. These are all instances of a dynamically changing financial situation.
2. Small changes in macroeconomic fundamentals daily, affect performance expectations annually.
Do you think that if you knew that unemployment numbers have been escalating since the middle of 2007, you may have assumed a slightly different stock market allocation in 2008? You bet your pants you would of. Regular adjustments to your asset allocation can help prevent sudden or unexpected drops in your portfolio
3. Your basic information may be out of date.
Were there changes to your phone number, mailing address, email? How about beneficiaries? Was a child born or was a loved one lost? The organizations that hold and maintain your accounts need to know your precise information so that when money is required, it can be accesed conveniently and quickly.
4. A fantastic advisor can present new opportunities.
You aren't in the financial / investment industry and even if you were, it would be impossible for you to stay on top of the many investment opportunities that are out there -- however large or small they may be.
A fantastic advisor will be able to asess your annual situation and present opportunities that may have recently become available due to changing market conditions that you would otherwise have no clue about.
Did you know that US Treasury Funds provided a staggering 22% return in 2008? 11% the year before? Your advisor might have known, and this could have made you money.
5. It's just common sense.
No matter what you think about money and no matter how much of it you actually have, financial pressures account for most of the stress in your life.
If you can learn how to regularly analyze your money, employ your resources in the most efficient way possible, and spark confidence in yourself that you are doing the right thing -- you can improve both your mental and physical well being.
Its just common sense.