(Forbes) What's the point of accumulating wealth if you can't enjoy it now?
Like most wealth managers, Peter Mallouk helps clients establish and stick to a long-term personal and financial plan. Yet he also emphasizes living in the present by enjoying the things and experiences that money can buy.
Mallouk started his career as an estate planning attorney and urges everyone, no matter their age or wealth, to prepare a basic estate plan as soon as possible.
After all, the old adage "you can't take it with you" still applies to everyone.
Despite technological advances in nearly every aspect of our lives, we still haven't conquered our mortality. Spending your hard-earned money is one thing; how can you spend thousands of hours working for money only to squander it by dying without a will?
Mallouk is the President & Chief Investment Officer at Creative Planning, a Registered Investment Advisory firm based in Overland Park, Kansas.
The firm manages $37 billion in assets and was named by Barron’s as the #1 Independent Wealth Management Firm in America in four of the last six years. Mallouk is the only advisor to have ever been featured at #1 for three consecutive years (2013-2015), while Creative Planning was featured in Forbes in 2016 as the fastest growing RIA over the last 10 years.
Here, he shares three of the most important things you can do with your money: avoid making mistakes, ensure that your estate plans are in order and enjoy your wealth.
AVOID MAKING MISTAKES
Mallouk is the author of The Five Mistakes Every Investor Makes and How to Avoid Them and co-wrote Unshakable: Your Financial Freedom Playbook with Tony Robbins. The books are meant to help investors avoid mistakes and prepare for inevitable bear markets, both psychologically and by constructing an all-weather portfolio.
Mallouk stresses that corrections and bear markets are a natural part of a healthy economic cycle. It's important for investors to understand how their portfolio might behave during a downturn. Selling into a panic is one of the behavioral mistakes that investors or their advisors make that prevents them from achieving market returns.
"Over the long run, if you had invested the day before 9/11 or the tech bubble burst, you're doing fine if you were just invested in the market and didn't jump out. Even someone who invested the day before the markets began to collapse in 2007 has doubled their money now."
Creative Planning is an independent financial advisory firm that does not sell its own proprietary products. Mallouk says another common mistake is not realizing that some advisors can be dually registered as fiduciaries and brokers.
"When you're dealing with an independent advisor who's dually registered as a broker/dealer, you may think you're dealing with a fiduciary that has to act in your best interest all the time, but you're not," he said.
"You'll be in a meeting and they're wearing their fiduciary cap. In that same meeting, they might switch to a broker/dealer cap and recommend an investment product, except the cap is invisible so you don't know when they're changing it."
ESTATE PLANNING: HOW TO AVOID DISASTER
Benjamin Franklin famously wrote, "nothing can be said to be certain, except death and taxes." Though a well-constructed estate plan can't save you from your earthly fate, it can help you avoid paying unnecessary taxes — and disaster.
If you die without a written plan in place, your estate will be placed in the hands of a probate court, potentially costing your heirs thousands of dollars in fees while creating headaches and confusion. Your estate will be tied up in the courts for months or years and your personal information will become public record.
Mallouk is baffled by those who haven't ensured their estate plans are in order. "People are in denial," he said. "They don't want to think about it, but setting up a trust is not brain surgery. Just dedicate the one hour to be with an estate attorney and get something down on paper.
"Probate is a very, very big deal and settling an estate without a court knowing what you want is a disaster. Who's going to raise your kids, what age will your kids get your money, who will make health care decisions for you if you're incapacitated? If you think it's a pain for you to manage, just imagine a court having to deal with it all while your loved ones are fighting over your stuff."
Mallouk recommends immediately drafting an initial document based on your gut reactions to those essential questions and then, after deliberation, you can make changes to it over time. "Once you have something in place, that's ten times better than whatever the court was going to do," he said.
"Think about all the time you spent accumulating wealth, thousands of hours. You can't take one or two hours to document what happens to everything you've ever worked for? It's irresponsible. Get it on the calendar and get it over with."
ENJOY YOUR WEALTH
"Successful people tend to keep score with money," said Mallouk. "Some were diligent savers and now it's hard for them to spend it. It's really a tragedy when they have a health event or get too old and time's gotten away from them."
Mallouk is not in favor of the all-or-nothing approach: saving every penny or spending every dime. Instead, he suggests creating a long-term plan with your personal and financial goals in mind while finding a middle ground so you can still enjoy the present.
"What brings you pleasure? Some people value experiences, some value material things and for some, it's a combination of the two. That means using it to enjoy yourself, whether it's giving to charity, enjoying the little things or splurging a little more on vacation, as long as it's within the context of a plan.
"It's really not going to matter if your heirs get $300,000 instead of $500,000 or $3 million instead of $5 million," says Mallouk. "Someone who has a healthy relationship with money — saving what they need to and enjoying the rest — that's very, very rare."
