Asset consolidation is something that many people would like to do, but oftentimes don’t do it because of time and complications. However, asset consolidation can greatly help your financial life!
The most simple way of thinking about asset consolidation is instead of having a handful of investment accounts at different places, you bring them under one main umbrella at one investment company.
In today’s blog post, we will be sharing three ways that asset consolidation can help you transform your financial vision into a reality:
1. You can have a clearer vision of where you are at currently in your financial life.
Usually, when your investment accounts are scattered across many different companies, it can be difficult to fully understand your financial picture. One account could have more of a positive return, another account could have more of a negative return. One account could have a more conservative risk tolerance, and another could be more aggressive.
Accounts that have varying levels of performance and risk characterization can cause unnecessary complications in your financial picture.
Assembling your account together under one investment company and with one advisor has the potential to help your accounts work hand in hand, aligning with your goals and levels of comfort.
2. When your accounts are together, they can work under the same plan to work toward your goals. All your accounts can support your financial mission.
The last point discussed more of the numbers, also known as the quantitative side. However, we need to address the more qualitative, goal-oriented side. If your accounts are sprinkled throughout different companies, the actual goals of your money may not be supported in the best way.
For example, suppose you are saving for a down payment on a new home and want to get a mortgage in two years. Let’s say you have money in a savings account at a bank, money in an online investment account that you’re managing yourself, and money in another account that was gifted to you years ago.
Having two investment accounts that are separate from one another and cannot be easily accessed in one dashboard can be an obstacle for you if you want to monitor these investments on a regular basis.
When it comes to the down payment goal, you may know that your goal is to save for a new home, and you may know that you want to execute this goal in two years. However, it can be difficult to view the progress of your goal if your investment accounts each have their own lens and process.
When your accounts are on one dashboard, or when they are all held at one firm, it can make your life much easier and more simplified.
3. You can have a diversified portfolio and more easily create tax strategies when the accounts are working together instead of separately.
Diversification and strategic tax planning are common words used in the financial planning industry. While they may sound confusing or boring, these terms are more simple than you may think.
Investopedia defines diversification as “a risk management strategy that mixes a wide variety of investments within a portfolio. A diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt at limiting exposure to any single asset or risk” (2021).
It’s commonly explained that diversification means that you are not putting all your eggs in one basket. You are spreading out your money over a variety of investments to limit your dependability of one investment.
Investopedia also defines tax planning as “the analysis of a financial situation or plan to ensure that all elements work together to allow you to pay the lowest taxes possible” (2021).
Tax planning involves timing investment purchases to create a strategic gain or loss, organizing income and expenses in an efficient way, and utilizing the advantages of retirement accounts.
When investment accounts are organized together, effective diversification and tax planning can greatly help your accounts grow, stick to your goals, and make your money work for you. It is much simpler to see diversification and tax strategies when your assets are held at one company.
If you would like to start gathering your investments together and have them work with one another, here is a tip that can help you: Write down a list of where all of your investment accounts are to get a clear view of how much money you have and where. Bring this list to your financial advisor and ask them to help you consolidate this list. By doing this, your investments can work together along one main plan to help transform your financial vision into a reality.
If you would like our team at Desert Wealth Management to take a look at your financial picture and start the process of asset consolidation, please reach out to us. We would be more than happy to help you.
Of course, there are some accounts with age and timing restrictions that can’t always be transferred whenever you want. If this is the position you are in, we can utilize our financial planning software for you to help give you an online dashboard of where to view your accounts all in one place. This can help you stay organized as your wait until you are allowed to transfer your accounts.
We hope that this article was helpful as you work toward transforming your financial vision into reality.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.