How to Plan Your Financial Wellness for 2023: A Checklist for Business Owners

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07 Jan 2023
6 min read

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The new year has started, and while you might be concerned with holiday activities, travel, and shopping, doing a little forward planning will help you succeed in the new year. Making a strategy for your income, debts, and savings early on will help you achieve your short- and long-term financial objectives while ensuring that you keep moving forward. Both investors and financial advisors have had a tough past year.

Many people are reevaluating many parts of financial planning due to record inflation, declining asset values, increasing rents, and worries about an imminent recession. They are unsure if they will have the same desires in 2023 as they did in the past.

We have a fresh set of obstacles every year that we must overcome in order to grow. In light of our present financial condition and the market environment, it is sensible to analyze our financial decisions from the previous year. Making better financial decisions in the future can be aided by learning from our prior financial decisions.

For business owners who are unsure of where the new year will lead them, we are providing a deep overview of How to Plan Your Financial Wellness for 2023 in this blog post.

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A long-term financial plan is increasingly being understood by more people as financial planning has generally advanced in recent years. The generation of today is more comfortable managing their funds online or through apps. They need a one-stop shop that gives them the ability to plan, manage, grow, and take care of their financial needs. This trend is also influenced by the desire for greater financial freedom among millennials.

2023 has just started. And just like every year, it is likely to bring in a surge of economic changes that are both predictable and unexpected. Wealth advisors offer guidance to their clients on how to safeguard and increase their wealth as they assist them to get ready for these potential changes. Many financial advisors were contacted to discuss some of the most important tips they are offering clients for the new year.

Inflation and other economic headwinds are the main topics of discussion just as the world is recovering from the worst effects of the COVID-19 epidemic.

Along with other things, these advancements will have an impact on how wealth managers think, invest, and manage. Even while there will be challenges, opportunities exist for those who can adapt.

How to Plan Your Financial Wellness for 2023

1. Defensive Planning

The majority of forecasts state that many of the problems affecting the economy and stock market in 2022 should subside in 2023. Although the U.S. and other countries may just barely avoid a recession and inflation is predicted to decelerate, this does not mean that investors or advisors should take it easy.

You could feel especially worried about your money during a tumultuous market. It makes sense that way. And it's true that every investment entails some level of risk.

According to many experts, market volatility will continue in 2023. It is crucial to seek a financial advisor who is open and honest about risk due to this fact. According to a 2020 survey by BlackRock, 65% of advisors claimed they either always or frequently demonstrate how portfolio risks and returns match client goals and risk tolerances.

Additionally, 71% of advisors claimed that bringing up risk helped their customers maintain their investments during periods of turbulence. Work with a financial advisor who is open to discussing risk the following year.

2. Tax and Estate Planning Technology

Although holistic financial planning is nothing new, it will be more crucial for advisors to implement it in 2023, particularly when it comes to offering tax and estate planning services.

According to Brian Dudley, senior vice president and financial advisor at Wealth Enhancement Group, "We are no longer in the age of collecting fees to manage investment-only portfolios, and advisors who are not doing more for their clients will eventually lose clients, sell to advisors who are offering more, or retire to avoid having to add services to their suite of offerings."

In the coming year, it will be crucial to expand your services to include tax and estate planning. Rather than reserving these services for only the wealthiest clients, advisors should provide them to clients with smaller assets under management as well. Fortunately, this will also get simpler to perform as advisor technology progresses.

3. Planning For Inflation

It should not come as a surprise that inflation has reached an all-time high if you have just gone grocery shopping, filled up your car with gas, or purchased an airline ticket. According to Northern Trust, the Consumer Price Index (CPI), which tracks changes in the cost of goods for consumers, increased 8.2% from the previous year.

But going into 2023, we anticipate a slight improvement in inflation.  According to Kiplinger, this rate is expected to fall to 3.5% by the end of 2023. And if the economy begins to slow down, so will price growth.

How does this affect you? Your financial planning needs to take inflation into consideration because the cost of housing, travel, food, and auto repairs is still very high. However, the more expensive services we're seeing now ought to eventually start to level off.

4. Thinking About Risk Assessment

You could feel especially worried about your money during a tumultuous market. It makes sense that way. And it's true that every investment entails some level of risk.

According to many analysts, market volatility will persist in 2023. It is crucial to seek a financial advisor who is open and honest about risk because of this. According to a 2020 survey by BlackRock, 65% of advisors claimed they either always or frequently demonstrate how portfolio risks and returns match client goals and risk tolerances.

Additionally, 71% of experts claimed that bringing up risk helped their customers maintain their investments during periods of turbulence. Work with a financial advisor who is open to discussing risk the following year.

5. Consolidation of Banking and Wealth Management

In 2023, advisers can anticipate that clients will increasingly seek consolidations that include banking and wealth management under one roof. According to McKinsey research, the proportion of investors who choose to combine these two under one roof increased from 13% in 2018 to 22% in 2021. More than half of investors under 45 and almost one-third of those with $5 million to $10 million prefer consolidated partnerships, which is especially true for younger and wealthier investors.

According to Rajini Kodialam, chief operating officer and co-founder of Focus Financial Partners, "it will be more crucial than ever for advisers to give their customers access to tailored, open-architecture solutions where they can select whatever offers are most beneficial to them."

According to her, "advisors who have access to large organizations are given access to complete solutions in fields like alternative and private investments, financing and credit, valuation and investment banking, and family office solutions. This helps advisers be more successful in meeting the complicated wealth structuring requirements of their clients."

6. Solutions for External Investment

It takes a lot of effort for advisors to provide a wider range of services. Perhaps this explains why there has been an increase in the use of external investing strategies. According to a recent FlexShares poll of 500 advisors, nearly one-third of Registered Investment Advisors (RIAs) increased their use of third-party providers in 2022, compared to 27% of RIAs who increased usage in 2020. This pattern is most expected to persist through 2023, according to Laura Hanichak Gregg, director of practice management and advisor research at FlexShares ETFs.

7. Think about alternative investments

Speaking of greater diversification, the year 2023 offers hope for alternative investments to eventually find a home in the portfolios of regular investors.

No of your net worth, risk tolerance, or time horizon, the portfolio for 2023 should have a larger proportion to alternatives. Alternatives may dampen inflation- and recession-induced volatility and boost return more than dividend stocks alone because of their low connection to traditional asset classes like stocks and bonds.

Through a good variety of inexpensive Exchange-Traded Funds (ETFs) and mutual funds, regular investors now have easy access to alternative asset strategies like commodities and managed futures that were previously only available to authorized investors and experienced traders.

The performance of alternative assets may make up for the higher costs even if expense ratios tend to be greater than the average fund.

8. Growing Interest in Renewable Energy

While supply chain problems over the past two years have slowed the development of clean energy technologies like solar panels and electric vehicles (EVs), 2023 may be a very strong year for renewables.

The adoption of renewable energy storage systems will have a banner year, according to BDO Global, as battery storage and EV adoption are intimately linked. Rivian, Lucid, Ford, and Chevy, newcomers to the EV industry, might push established players like Toyota and Tesla to the back of the pack.

Additionally, natural gas constraints brought on by disputes inside the European Union have boosted support for clean and renewable energy sources.

9. Investing in Real Assets

The importance of real assets in any financial portfolio has increased, according to Northern Trust1. The main real estate holdings are:

World-Wide natural resources

Real Estate

Infrastructure 

When compared to the five-year outlook provided by Northern Trust, all real estate should perform well. Real estate and listed infrastructure provide greater dividends than conventional equities while assisting in portfolio diversification2.

Natural resources might be a smart complement to your portfolio, depending on your risk tolerance and time horizon. In the event of unforeseen inflation, natural resources might provide a safety net3. Your choice to invest in natural resources might be guided by a financial representative from Bankers Life Securities.

10. Digital assets are increasing

ETFs that are concentrated in ancillary industries are a clearly visible trend that has completely taken over the investment industry. According to Temenos, the demand for digital alternatives to traditional assets like cryptocurrencies has grown significantly in recent years.

Direct cryptocurrency investments, domain name purchases, non-fungible token purchases, virtual asset purchases in virtual worlds, and security token purchases have all become commonplace for the younger generation.

However, the wealth management sector's delayed acceptance of digital assets has prevented a full breakthrough. This can be attributed to advisers' continued skepticism of the asset class and businesses' ongoing struggles with volatility and regulatory uncertainty. But when the regulatory path is clear, businesses will need to decide whether to expand their current capabilities.

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