With the world of finance evolving so quickly, it can be difficult to keep up with all your options for retirement planning. Enjoy this guide to help find what type of plans are best for you. Whether you are decades away from retiring, or it is quickly approaching - you'll learn what plans will work best for your goals.
What is Retirement Planning?
Retirement planning is the process of planning a person’s life for when they retire and will no longer receive an income. Retirement plans have a set of goals chosen by the retiree to achieve by the time retirement comes that will keep them comfortable for the remainder of their life. Retirement planning does not only determine one’s financial life after retirement, but also many other aspects of life such as where to live during retirement and how to spend their time.
There is a notable amount of crossover among the various sectors of finance, but it is critical to recognize the underlying differences between each. Wealth management, investment banking, and financial planning each have distinguishing characteristics that may help you understand which is best for you. The most important difference you’ll notice is WHO each sector serves best. Since these sectors have many of the same “Services” offered - it’s more important to understand who those services are for.
What Kind of Products can a Wealth Management Client Invest In?
Wealth management balances risk and reward and not all wealth management products are meant for every investor. Investors must choose between low or high-risk investments, low rewards vs. high rewards, and highly concentrated vs. highly diversified investments.
Wealth management is a clear-cut term with a definition that is unique from financial advising and private banking, but often confused with both. Even professionals that work in the field misinterpret the definitions or use them interchangeably, and that may be because they do have many similarities. Furthermore, wealth managers are different than both accountants and financial advisors and only provide services to 1-3% of the United States population.
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Most investors today limit their options to only traditional strategies. They buy into stocks, bonds, or pooled investments and just stop there. However, to the right type of investor, private equity investments are an appealing addition to a healthy and well-diversified portfolio.
In the current investing landscape individuals do not have many choices when it comes to saving for life goals and more importantly how their funds are invested. The big players in the industry may slice and dice the pie chart a little bit differently, but by and large they all follow the same rules and play a similar game. These mainstream investing practices can often be traced to Modern Portfolio Theory or MPT, which is a misnomer as it’s not very modern at all. The theory started to gather momentum in the late 1950’s as basic tenets of money diversification and statistical analysis started to take hold. Investors at that time discovered a way to reduce risk by diversifying their portfolios into multiple investments instead of making one big bet into a single stock. While it is true that diversification can reduce risk, it’s not as simple as just picking multiple investments and calling it good.