Timing Matters: When to Review Your Financial Plan

A financial plan is a road map for your future. It helps define goals that are important to you and your loved ones and assists you in achieving them. Having a detailed (and recorded) plan may put you ahead of those who have a general idea or are simply winging it.* If you have a plan, you may think you're set. You are, but not forever. Your current plan likely won't fit you indefinitely, so it's critical to review it periodically.

How often should you review your financial plan—and why? Financial consultants Amy Alley, Rowland Pepito and Jennifer Simmons discuss when to have one, why to have one and what really happens during a financial plan review.

When to Review Your Financial Plan

A solid plan should help you chart a course for your financial future. But that's not the end of the story. Our consultants say reviewing your plan addresses any adjustments needed and can help you know if you're on track.

How Often Should My Financial Plan Be Reviewed?

This is a good conversation to have with your advisor. "It may be as simple as asking how often the client wants me to call," says Rowland, who likes to set expectations upfront. He says another telling question is, "What keeps you up at night?" But he also adds that his goal is to develop a plan that helps lessen sleepless nights over finances.

How often you review your plan largely depends on your unique needs. Our consultants recommend at least an annual review, but you can review more often if needed. The frequency may also depend on where you are in the investor life cycle and your confidence in your plan.

What Would Trigger a Change to My Plan (or Not)?

Some investors think a review is necessary when headline news affects markets and the economy or when policy changes could impact their investments. Not necessarily. With the right plan, very few market events will prompt a significant change. Even policy changes—such as taxes or retirement plan rules—don't happen overnight, so often, those can be addressed in an annual review.

When markets are incredibly volatile, you may be surprised by a "stay the course" message from your financial professional. But there's a reason. "We don't just plan for the best years; we plan for the worst years, too," says Jennifer. "A good plan will already account for market ebbs and flows. At that point, it's about keeping your long-term view."

Still, there may be circumstances that warrant a call. Let's say the markets drops 20% before you were planning a big purchase—such as a home down payment or your child is planning a wedding. Situations like these may be reasons to pick up the phone and make sure you're where you need to be.

"You need to be OK with the downside of the portfolio you pick," says Amy. "When markets perform well, it's easy to think you have a larger capacity for risk than you really do. Down markets will give you a better idea of how much risk you can tolerate."

"After you invest for a while, you may also begin to see down markets as less scary and a potential opportunity to invest at a bargain—and possibly take advantage of a rebound," says Rowland. "When markets struggle, I often get calls from seasoned investors looking for opportunities."

Why a Financial Plan Review Matters

You just read what may not trigger a plan change. Now let's explore why you should review your plan from time to time. The primary reason? Life is full of changes, and your plan should change with it.

Remember, a "review" differs greatly from the time and effort you and your financial professional spent creating your plan. "We've already done the hard work developing your plan together," says Rowland. "Now it's time to make sure it still works, discuss what's happening in your life and see how your financial plan could address it."

You might even think about a plan review like life coaching. It can help to have a different perspective and hear options from a professional, and you can discuss those financial issues you may not want to talk about with friends.

Do I Need a Review if My Portfolio Is Already Diversified?

"There's so much more to a financial planning review than just your investments," says Jennifer. "It's about your life." When you work with a professional, your review time can help uncover ideas and considerations you may not have thought about on your own.

Even a diversified portfolio may need rebalancing occasionally, especially if market activity has caused it to drift from the original risk level you chose. However, if you're in a managed account, our investment professionals are already adjusting regularly. The work is being done, but a review still matters to ensure your needs haven't changed.

How Important Is the Financial Plan Review, Really?

If you're wondering if you really need a financial plan review, our consultants say yes! Avoiding regular reviews may make it more time-consuming or challenging when you eventually decide to look at your plan. "Like regular checkups with a doctor or dentist are important for your health, the plan review is the same for your financial health. Though I'd like to think the plan review is a lot less painful than a visit to the dentist may be!" says Jennifer.

What can help make it less painful? Take a little time to prep before your session to help gather your thoughts and make sure what’s important to you is covered.

What Exactly Happens During a Financial Plan Review?

Clients have different views about a financial plan review, ranging from being excited to pick a financial professional's brain to concerns about not being on track. But you may be surprised about what really goes on and how you might benefit.

"The review should be quick and not intimidating," says Amy. "You already have your plan in place. All the time spent building your plan makes the review completely different."

What Will We Talk About in a Plan Review?

While there are so many things you could talk about in a review, our consultants like to pinpoint the most important one or two things for you. Your portfolio mix (and making sure it still fits) is always a point of discussion. Where it goes from there depends on your needs. See our list of possible topics to get ideas for what you may want to talk about at your next review.