Asset Map
Last week, I met with a client: 72 years old, retired, receiving Social Security, a pension, and managing IRA, Roth IRA, and Trust accounts with us – pretty standard stuff. During our meeting, I presented the details I knew about his situation, and he said, “Oh, I forgot to tell you about this rental property I own but haven’t mentioned before because my sister lives in it, and I’m not charging her rent.”
In two years of working together, this was the first time I’d heard about the rental. Even though it doesn’t directly impact his current cash flow situation, it does factor into the broader picture, such as estate planning. We want to be sure it’s accounted for.
Overlooking a detail like this is incredibly common. After all, we spend our lives collecting assets, accounts, collectibles, etc., and it’s easy to forget something – maybe a small annuity or pension payment, an old 401(k), a bank account, a piece of jewelry, or an insurance policy. I’m sure it’s happened to you at some point. (Even as I was tuning up my own financial plan last week, I forgot about a Health Savings Account.)
With each client, we want to get the Big Picture as quickly as possible to pinpoint areas to focus on. However, the Big Picture is often, well, BIG (and complicated).
In light of this, we’ve introduced a new tool that provides exactly that: a picture of your financial life on one page… an Asset Map. Here’s a sample of how it looks:
Click to enlarge. Not an actual client. For illustrative purposes only.
Our Asset Maps don’t include complicated projections. They don’t include market forecasts or graphs about how wealthy you’re going to be in 10 years (those are just guesses anyway). They’re not 22-page-long financial plans. Instead, our Asset Maps offer a visually intuitive way to organize and display information. A snapshot like this can be incredibly effective when applied to financial matters.
Here are some things we think are beneficial:
Simplicity and Clarity: By utilizing a hierarchical structure, Asset Maps allow us to break down and categorize different aspects of your financial life. This simplicity helps in eliminating clutter and presenting information in a clear and concise manner, enabling you to grasp the bigger picture or notice areas of improvement at a glance.
Visual Organization: The human brain is wired to process visual information more effectively than text alone. By using colors, shapes, lines, and icons, we visually represent different categories of your financial life, such as income, expenses, investments, debts, and savings. This visual organization helps create a mental map that is easier to understand, remember, and navigate than a spreadsheet or Word document.
Interconnectedness and Relationships: Financial decisions rarely exist in isolation. Your income impacts your savings, which in turn affects your investments, debts, and expenses. We can use these maps to connect the pieces of our financial lives.
Proposals: A new client will often engage us while having accounts held across many institutions, several brokerage accounts and IRAs, old 401(k)s, bank accounts strewn around, etc. One of my favorite applications is to build an Asset Map highlighting the current complexity of their financial picture, then showcase what it will look like when we consolidate accounts while reducing unnecessary complexity.
Adding this to our processes brings a welcome visual element to our financial planning approach. Clients, I’ve already created yours, and I’m excited to present it to you at our annual review meeting this January/February (you can schedule that meeting here if you’re ready. I’ll send another link soon.)
If you’re not a client and would like to chat about this or any other financial, tax, or estate planning questions, let me know (click to send an email).
Until next time,
Adam Harding
Advisor | CFP® | Owner @ Harding Wealth
www.hardingwealth.com
Ps… Although this is totally unrelated to Asset Maps, I found this video comparing indexing to Dimensional funds to be pretty insightful. As you may know, we subscribe to a lot of the ideology around both low-cost indexing and Dimensional Fund Advisors’ approach to managing assets. This video succinctly highlights why I believe there could be potential in doing something more flexible than index investing alone. Let me know what you think.
For informational purposes only. Not to be considered investment, tax, or legal advice.
