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Written by: Rose Palazzo, Group Head of Envestnet | MoneyGuide
This was a year of heavy volatility, persistent inflation and rising interest rates with no end in sight. Now is the best time to connect with clients who are likely worried about the chances of a recession in 2023 and what it could mean for their financial lives. A few key planning conversations can help ease their concerns and remind them that their financial plan is still on track. Or, if the plan has veered off this year, together you can work to get it back on track toward meeting their end goals.
Review the financial plan
This conversation should take into account and reassess a client’s entire financial plan. Did your clients save what they anticipated being able to save this year? In the years leading up to retirement, this is a critical piece of the puzzle.
Clients may have had more expenses this year than expected. If so, adjustments can be made to the plan for going forward into 2023 to help ensure they get back on track toward their long-term savings goal. (In fact, compared to 2021, nearly 1 million more plans were updated across our platform in 2022 – which is not surprising given the year that it was.)
Even if a plan is on track, but a client’s actual needs or savings were not aligned to what they planned, they should reassess whether or not their plan can sustain whatever changes they might not have anticipated.
Investment checkup
When you're revisiting the plan, it’s always a good time to simultaneously look at their investment strategy and make sure the two are still aligned. Of course, rebalancing is a regular occurrence, but year end is a good time to carefully evaluate whether your client’s investment strategy needs any adjustments. Each year a client gets closer to retirement is a good time to consider more conservative investing opportunities, taking on less risk.
Tax loss harvesting and tax advantaged accounts
At the end of the year, clients of course have a better sense of their tax situation. That being the case, this is an opportune time for tax loss harvesting, to offset any gains that they may have accumulated over the year. Not to mention, the volatility of 2022 is likely to create opportunities for tax loss harvesting.
Review tax advantaged accounts with clients and make sure they've maximized contributions. It is also a good time to consider a Roth conversion and whether it offers your clients any advantages. The deadline is December 31 of the current year. A conversion of after-tax amounts is not included in gross income.
Estate planning
Estate plans should also be reviewed and updated as needed at year end. Things to go over include a client’s gifting strategy and charitable contributions, it may be an opportune time to gift money to a relative or impact the lives of others through a charitable donation. Remind clients that, in 2022, any individual can transfer up to $16,000 as a gift and the recipient won’t owe any federal taxes to the IRS on the gifted cash or assets. Also go over designations on trusts as well as run through beneficiaries to see if anything has changed.
Insurance coverages
Clients should check over all insurance policies that are renewing at year end. It is also a good time to review any life insurance policies and make any changes necessary.
The bottom line
Whether your clients end up making changes or not, the conversations you have with them at year end can give them much needed peace of mind. Remember keeping clients invested during times of volatility is so important, because you don’t want them to miss out on opportunity when the market eventually springs back.
Rose Palazzo is Group Head at Envestnet | MoneyGuide, which is fully vested in its financial wellness ecosystem for enabling people to live an intelligently connected financial life.
The information, analysis, and opinions expressed herein are for informational purposes only and represent the views of the author, not necessarily the views of Envestnet. Nothing contained herein is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Investors should consult with an investment advisor to determine the appropriate investment vehicle. Investment decisions should always be made based on the investor’s specific financial needs and objectiv
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