One Question Every Financial Advisor Should Ask




At Coastwise, if we could ask a new client only one question, it would be: “What is your time horizon?” Put another way: “When do you need the money back?”

With this information, we can determine the risk, asset allocation over time, and portfolio management strategy that suits the client’s specific parameters. Need the money in 20 years?... you will have a higher allocation to equities than a client who intends to use the funds for a down payment in three months.

If there is one force in finance that competes with compounding, it’s room for error. And this brings up the second question that we would ask a new client – particularly one who is planning for retirement: what is your regular (monthly or annual) net cash flow? Do you save a few bucks on a regular basis that you can invest, or do you need to make regular withdraws to support your current needs? While it can be challenging to predict future cash flows, whether it be from a job or a rental property, this information is valuable to setting forth a plan to achieve important life financial goals.

Often times in retirement planning and investment management, we focus our efforts on building a portfolio that, over time, will create a margin of safety such that income gaps in later years can be avoided. The best way to build in for this room for error is to create a lifestyle today that is cash flow positive. Rather than waiting for events to happen for you in the future that will allow you to invest that bonus into your IRA or change your spending habits in the new year, creating a lifestyle today that is cash flow positive not only, by definition, creates good budgeting, it also allows for regular contributions to your investment accounts. This is the tail that should wag the proverbial dog. Everything you don’t buy today is 100% on sale and every dollar that is invested in your future self today (by consistently contributing to your investment accounts) will be worth multiples more down the road. We have a great deal of control over how much we spend, whereas we have no control over near-term stock price movements. Focus your time and energy accordingly.

Rather than waiting for the right things to happen to you, you can make them happen for you. It is never too late to create good habits that can compound over time and lead you to financial independence. There are times to be active and times to be passive. Each has its strengths and weaknesses depending on the scenario. Actively managing a budget and actively contributing to your investment accounts on a regular basis allows for the passive passage of time to let the magic of compounding work in your portfolio. A dedicated, focused, disciplined Financial Advisor can help you set forth a plan and keep you accountable to your near and long-term goals.

Scott Kyle,

CIO/Financial Advisor

Patrick Fischer,

Financial Advisor



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