understand why before deciding howI recently sat down with a new client who needed help understanding her financial accounts. It takes two-way communication and objectivity to determine what investment strategy best serves a client’s needs. Essentially, you must understand why before deciding how. Unfortunately, this woman’s previous advisor did not take such actions.

Several years ago this person recommended (as a sales agent) she move her IRA and brokerage accounts into equity-indexed annuities. That locked up most of her investable assets for 10 years into an insurance product that levies a fee to access her money.

As we chatted, I learned she wanted to travel and take classes in her retirement. Annuities hindered her ability to do that right away. Once I took the time to understand her goals, we knew this product was not the best choice.

Situations like this are all too common and have created a stigma for annuities. Yet, some annuity products may be appropriate investments in certain circumstances. One example is a client who had not had a fixed paycheck during his career as a realtor. When he retired, we purchased an annuity for him to complement his Social Security benefits. The steady annuity income was a welcome change from the unpredictable income stream he’d had while working and gave him peace of mind in retirement.

These examples highlight the importance of knowing what you need and want before making any decisions about your portfolio. It’s critical to explore all the reasons why you are investing before deciding how to invest and what products will be most effective in meeting your goals.

To learn more about our financial planning process and investing strategies, click here.