The events of the past several weeks have highlighted the importance of having a sound, comprehensive wealth plan that supports your unique values and goals. That’s why the RKL Wealth Management team will be exploring benefits and best practices for wealth planning with a multi-part blog series. After all, as the Cheshire Cat explained in Alice in Wonderland, if you don’t know where you are going, any road will get you there. With a wealth plan, you know your destination and how to get there even if you are forced to take a detour.
To kick off our series, let’s examine a few of the reasons why a wealth plan is always important, but never more so than in times of duress. The coronavirus pandemic presents both financial and health challenges that are testing financial strategies and wealth plans on multiple levels. Almost everyone has now been impacted by the current crisis in some way, whether it is anxiety about their businesses or their jobs, concerns about their health and that of their loved ones, fears about the economy and more. Having a sound, comprehensive wealth plan can help alleviate anxiety and provide stability and reassurance in a number of ways.
- Peace of mind. Perhaps the biggest fear during a major crisis is the fear of the unknown. How far will markets fall? How bad will the economic impact be? How long will it take to recover? How will all of this impact my family’s future? The feeling of being in free fall can be dampened by knowing that there is a plan in place that achieves your goals even through “black swan” scenarios. Knowing that retirement timelines are still on track, estate plans are in order, sufficient emergency cash is available and other facets of a wealth plan can provide great comfort and allow you to focus on more important concerns, such as your family and your health.
- Long-term thinking. A wealth plan promotes long-term thinking by articulating a vision for the future, identifying goals to reach that vision and providing a road map to attain those goals. The success of a wealth plan is measured in terms of five, 10, 15 years or more. During turbulent times, it is very easy to become disoriented and get caught up in short-term events. Losing sight of long-term objectives can lead to short-term decision-making based on emotions that can actually knock you further off course.
- Decision-making framework. Challenging times can present us with challenging decisions. Should I get out of the market? Should I invest more in the market? Should I still make the big purchase? Should I still retire as planned? A wealth plan provides a framework for making those decisions in a rational manner. Since they are developed with your guiding principles and goals in mind, wealth plans can be a measuring stick for decisions to ensure consistency with values and long-term vision. These fundamental aspects are often overlooked during a crisis, but are critical to making sound and rational decisions in challenging times.
These are only three of the many benefits of a comprehensive, well-considered wealth plan. Without a wealth plan, we are very much like Alice in Wonderland wandering in the woods with no destination and no clear path. Regular reviews and consultations are a hallmark of the RKL Wealth Management approach to keep clients on track. Part two of this series will cover the fundamentals of reviewing and stress testing a wealth plan. As always, contact your RKL Wealth Management advisor with any questions.