Beyond The ‘How Often?’ Question: Building A Dynamic Financial Plan

Regular Checkups And Holistic Risk Reviews Can Help Identify Client Problems Early To Avoid Draconian Measures Later
Mark Friedenthal, CEO, Tolerisk
Mark Friedenthal, CEO, Tolerisk

Financial advisors hear it all the time: “How often should I update my financial plan?”

While there’s no single answer etched in stone, the truth lies in a proactive approach that blends regular checkups with a deeper understanding of your risk tolerance. Let me explain.

Why Regular Checkups Matter

Most people identify their financial health as a pretty important factor, often ranking closely behind their physical and mental health. It’s generally recommended that we see our medical doctor annually.

If there are changes to our weight, body fat, cholesterol, blood pressure, blood sugar, white blood count, etc., the doctor might suggest a special diet, exercise, medication or perhaps a medical procedure.

Sometimes the advice might be simply to keep an eye on these measurements and repeat them in a shorter period of time.

The point is there may be a whole host of potential responses or treatments to improve the outcome.

By contrast, if someone never has their annual visit and waits until they have severe disease symptoms, they may no longer have many of these more tolerable treatments available.

Financial planning is similar. It’s important to regularly take measurements of financial longevity – the risk of running out of money. If this is ticking in the wrong direction, your client will have many options. If they’re still working, it might be simply to plan on working a bit longer, with no current change in spending and savings patterns, which equate to the client’s lifestyle.

By incorporating regular reviews, you can empower your clients to make informed decisions with regular financial checkups:

Proactively identify risks. By regularly measuring financial longevity, you can spot potential issues before they become major problems. This empowers clients to make informed decisions, reducing anxiety and strengthening your client relationships.

Craft personalized solutions. Instead of disruptive changes, regular reviews allow you to suggest smaller, tailored adjustments. This could be extending working years, optimizing savings strategies, exploring alternative income streams or simply trimming unnecessary expenses. You become the trusted guide, helping them navigate their financial journey with confidence.

Boost retirement nest eggs. Early intervention is key. By identifying the need to work a bit longer, you can help your clients significantly boost their retirement nest egg, reducing the risk of future financial stress. They’ll see your value in proactively securing their financial future.

Maximize growth potential. Regularly reviewing asset allocation and contribution amounts ensures your clients are on track to achieve their financial goals. You become the expert, optimizing their portfolio and maximizing their return on investment, solidifying your position as their trusted advisor.

We need a more holistic approach that considers both the risk appetite and risk capacity.

Why Risk Is A Consideration

The other important component is a risk tolerance assessment. But I’m not talking about the standard, seven to 12-question quiz with multiple choice responses and nebulous results at best, in which most people would be categorized as “moderate.” The results don’t help clients make better decisions and offer almost no direction or insight for you as their trusted advisor.

We need a more holistic approach that considers both the risk appetite (willingness to accept risk) and risk capacity (ability to handle risk).

Think of it like building a house. You wouldn’t use the same foundation for a one-story bungalow as a three-story mansion, right? Similarly, your risk tolerance shouldn’t be a one-size-fits-all answer. Modern risk assessment tools utilize a standardized scale based on total stock and bond equivalent benchmarks.

By combining regular reviews with a comprehensive risk assessment, we transform risk tolerance from a compliance box into a powerful tool for:

Building trust. Showing clients concrete calculations instead of just saying “trust me” fosters confidence and strengthens the advisor-client relationship.

Boosting retention. Demonstrating your diligence and personalized approach increases the likelihood of referrals and decreases client churn.

Attracting new clients. Showcasing your commitment to data-driven planning builds trust and attracts potential clients who value transparency and expertise.

When a problem is caught late, more draconian measures may be the only viable solution.

Proactive Planning For The Win

The bottom line is that when a problem is caught early, small changes allow for proper and complete course correction, with minimal impact. When it’s caught late, more draconian measures may be the only viable solution. In a financial framework, this could mean drastic downscaling of one’s lifestyle late in life when going back to work or manufacturing more savings just aren’t options. This can be very difficult for most people to tolerate.

Even when your clients don’t think their financial health has changed, it’s a good practice to simply update your financial plans and confirm.

Mark Friedenthal is CEO of wealthtech firm Tolerisk.

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