Many financial planners focus primarily on money management, trying to help their clients beat the returns of a benchmark, often the Standard & Poor’s 500 stock index.
But that is not the most important consideration in the actual lives of most clients seeking investment help, according to certified financial planner Roy T. Diliberto.
Diliberto says his primary aim is to help people set priorities — and then achieve their goals, whether that involves spending more time with family, taking expensive vacations or retiring early.
How his method can help you realize your dreams…
Often, when the financial-planning process begins, clients feel that they don’t have enough money to do what they would like to do. But after setting priorities, many people discover that they can afford more than they thought. Some financial advisers refer to the process of setting goals as life planning, but I prefer to think of it simply as financial planning done well.
The first step in setting goals is to recognize that money is an emotionally charged subject. Some people hoard their savings, fearing that they will become impoverished. Others spend too freely, trying to prove that they are successful. My mission is to help clients look at money objectively. It is nothing more than a tool for accomplishing goals. The goals are what’s important.
When I start working with a client, I begin by asking a series of questions…
If you had all the money that you needed to achieve your dreams, how would you lead your life?
People often have what they think are unachievable goals, such as owning a second home or taking a long trip to Europe. They imagine — often erroneously — that there are insurmountable obstacles preventing them from achieving their dreams. By answering this question, they begin thinking about how to overcome the obstacles.
When I posed this question to one client, he got very emotional and said that he would like to provide college scholarships for needy students — if only he could spare the necessary amount of money. We examined his assets and discovered that he could afford the expense without taking money away from various other financial needs and desires. He gave $100,000 as an endowment to his alma mater. If I had not asked the question, he would never have considered the possibility of the scholarship fund.
Often I see retirees who are so concerned about losing a big chunk of their money that they don’t take the necessary steps to increase their assets so that they can afford a richer lifestyle.
I ask clients to discuss their feelings of anxiety about money. One client in his mid-60s kept all his money in bonds, fearing stocks and other investments that might produce higher returns but also might lose more value, at least in the short term. It was clear that the bond portfolio would not provide enough income to support his retirement. He was on the road to exhausting his assets.
After talking a while, he explained the source of his fear. When he was nine years old, his mother gave him $1 and said that he could spend 20 cents at a carnival. The youngster spent 40 cents. As a punishment, he was grounded for a week. Whatever his mother intended, she taught him to always be very cautious with money — or face punishment. After we discussed this childhood experience, he was open to taking an objective look at his investment portfolio. Now 50% of his money is invested in stocks, and he has enough to cover retirement costs.
If you learned that you had only five years to live, how would you spend the time?
This question encourages people to think about what is truly important to them. After struggling with the question, many people resolve to spend more time with their families. Others slow their pursuit of money because they decide that they already have enough.
Suppose a doctor says that you have only 24 hours to live. Look back on your life. What are your biggest regrets?
This question encourages people to reach for goals that they had long ignored. When faced with the question, an architect realized that he regretted never having designed a home for his own family — so he designed and built that house.
In another situation, a couple had a disabled child who was in his mid-30s. They had been meticulous about setting up a will and providing trusts that could support the child, but after thinking about the “24 hours to live” question, they decided to actually implement the provisions of the will while they were alive. They bought an appropriate condominium for the child and arranged for caretakers to pay the bills.
Of course, to achieve goals and dreams, clients must have sound investment portfolios.
To reduce the anxiety clients feel when the stock market drops sharply, I help them to diversify their portfolios, making sure that they hold a broad range of stocks and bonds. For example, because I did not place big stakes in technology stocks, my portfolios trailed the market in the 1990s, when tech stocks boomed. But when stocks — especially tech stocks — began falling in 2000, my portfolios proved resilient, losing less than the overall market. These stable results enable clients to feel more comfortable and worry less about their money.
For an investor with a moderate tolerance for risk, I suggest putting 60% in stock funds and 40% in bonds and/or bond funds. Best ways to divide those investments…
STOCK FUNDS
BONDS/BOND FUNDS
