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Financial Planning > Behavioral Finance

Organizing the Financial Junk Drawer

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Millions of Americans are enthralled by daily coupons they get online or via email offering everything from $99 cruises to vacuum cleaners to half-price pedicures. One of the more popular services offered through these coupon deals brings someone in to help you organize your home for a couple of hours. This got me thinking about our role as financial professionals in the lives of our clients, especially those we haven’t reached yet. Our role is that of financial home organizer.

What’s the most unorganized part of your home? For most of you — at least those of you not in denial — it’s that drawer in your kitchen packed full of utensils you never need. You know, the one with old notes and random screws you’ve kept in case you ever figure out what they fell out of. Yes, the junk drawer.

What does this have to do with financial services? Well, before most people make the decision to work with a financial professional, they tend to just shove their money into different financial products. Not that these products are junk, but consumers might not get the most out of these tools if they can no longer tell you why money was allocated in a certain way or what it will be used for in the future. 

One of the most successful advisors I know, Joe Sigman of Executive Wealth Advisors in Saint Louis, Mo. helps his clients organize their financial lives and gain efficiencies through calculated and coordinated allocation decisions and wealth-building strategies designed to maximize their financial protection. Joe’s strategy is simple: He focuses first on protecting wealth, then on growing and gaining efficiencies with financial growth products to increase that wealth.

“It’s my job to make sure my clients are strategically protecting and building their wealth,” Joe says. “If a client’s financial ‘drawers,’ are methodically and strategically organized, you’re going to find their assets begin to work together and with purpose. My strategy ensures a more coordinated and integrated asset allocation strategy to increase the efficiency and performance of assets.”

As an example, Joe says a retiree he advises might allocate his or her wealth in four strategic ways:

  1. Accessible money: This is the emergency money — the money where there should be maximum liquidity and zero risk. It could be placed in a very liquid financial product.
  2. Income source: This could be derived from a variety of different products, such as a single premium immediate annuity, guaranteed income annuity, dividends from whole life insurance for supplemental income and interest or dividend income from savings and growth vehicles.
  3. Short-term growth: This is money that will show growth over four to seven years. This can be used to replenish the first two, if needed.
  4. Long-term growth: Client risk tolerances will dictate the strategy used for long-term growth.

Now that you’ve read this article, go take a look at your junk drawer. You will likely be amazed by what you find and wonder why many things are in there and what they’re used for. 

Nobody has the same type of stuff in their junk drawers. The same is true for clients and their types of assets. If you approach your clients’ assets with the philosophy of helping them organize their financial lives and ensure their assets are working together efficiently, you’ll be able to help them bring their future into clearer financial focus. And you won’t even have to accept coupons.  

For more from Jeffrey Smith, see:

Peyton Manning and the Retirement Funding Team

Prospecting: Playing Your Cards Right

Acres of Diamonds


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