How’s Your Navigation System?

Written by Dave Polstra, CPA, CFP®, CIMA® on January 1, 2016

Pick up any electronics store flyer and you’ll find several for sale. They were all the rage this past holiday season. In fact, I received one from my wife last month. What is it, you ask? Portable GPS. You know; the little handheld unit that helps you navigate the roads and highways. Instead of unfolding an old-fashioned paper map, all you do is enter the address of your destination, and the nifty 4.5” color screen guides you there with a moving map and voice directions. My unit even lets me choose from a variety of voices; from British accents to Mr. T to Burt Reynolds. The more I learn about my new toy, the more similarities I’ve discovered with the wealth management process.

First, a GPS system tells you where you are. At the push of a button, you can pinpoint your location anywhere in the world. Similarly, a wealth plan tells you exactly where you are from a financial perspective. It maps out your current financial location, i.e., your net worth, your cash flow, your tax situation, your estate plan and your current investment positions. Then, the GPS unit shows you how to get where you’re going. If you know where it is you want to go, all you have to do is enter the address of your destination, and the GPS unit does the rest. In fact, it can even forecast what time you should arrive. A well-constructed wealth plan helps you arrive at your financial destination, whether it is achieving financial independence, or buying that dream home in the mountains, or reaching a lifelong goal to benefit your favorite charity in a significant way.

A GPS system advises you to turn around when you get off course. If you accidentally take a wrong turn while driving, the little box starts talking to you. Some units even have a concerned voice; “Turn around,” it says. Simply stated, it puts you back on track so you can still reach your desired destination. Having a regular financial review also helps you stay on track financially. And if by chance you do get off course, your advisor can help steer you back so you are once again moving in the right direction.

There is, however, one pitfall in the GPS system you need to be aware of: it lacks the human element in decision-making and navigation. I tried to find a friend’s house the other day, only to discover that his address was not in my GPS database. Even after downloading the latest map update, his address would not come up on my system. Fortunately I had his phone number, and he could guide me to his new home with verbal directions. Without speaking to my friend, I never would have found his house … and of course, I wasn’t about to stop and ask for directions!

When it comes to finances, computers never have all the answers. That’s why an experienced, trusted advisor is essential to achieving your financial goals.