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Risk is an inevitable part of wealth-building, but it can be managed. This principle focuses on minimizing potential losses through diversification, insurance, and other financial tools. In the protection phase in particular, managing risk becomes essential to ensure the wealth you’ve built is not jeopardized by market volatility or unforeseen events.

Here is an example presented by Jacob Packer, First Federal Bank Wealth Management Advisor:

About a year ago, I met with a retired couple whose investments were spread across three different institutions, each following a separate aggressive investment strategy. When I asked about the reasoning behind this setup, they explained it was simply what their previous advisor had recommended. The husband was knowledgeable and comfortable with investments, but the wife felt uneasy and unsure about what they were doing.

Over the next two meetings, we explored their comfort with risk and assessed their current financial needs. Through this process, they realized they were taking on significantly more risk than necessary. We found that they could achieve their goals with a much more conservative approach. By simplifying their holdings and eliminating unnecessary complexities, we brought greater clarity to their portfolio—something that gave the wife much more peace of mind.

Given their stage in life, their priorities had shifted from aggressive growth to stability and predictability. These adjustments have allowed them to maintain their lifestyle without the stress of unnecessary market volatility.

?Risk should always serve a purpose in a client’s portfolio—if it doesn’t, it's something we should work to reduce.

This client later chose to bring over all their outside investments and closed their other banking relationships—not because we promised higher returns, but because our plan was thoughtfully customized to reflect their true needs and long-term goals.

Next Wealth Wisdom, we'll dive into principal number four: Tax Planning.

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Investing involves risk. There is always the potential of losing money when you invest in securities.

Neither IFP nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. IFP offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary.

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