How can you reduce fraud risk & increase return potential without stressing about money? For every single financial transaction, write in your own words your expectations and understanding of the product, strategy or investment. This simple letter of understanding will assist you in communicating with your advisor helping you with the transaction; it will help you remember details later on; and it will help anyone who might need to help you with your financial matters if you weren’t able to. If you can have the advisor sign the document as well, even better, but understand this is not a legal document; it is for clarity of communication and understanding only.

Why take the time when a letter of understanding isn’t a legal document? First, by writing out your letter of understanding you, will ensure that you and your advisor are on the same page as far as communicating your needs and the product’s ability to fulfill that need. Second, for future reference, your reasons and details are not as clear after several years have passed as they are when you first purchase the financial product. The letter of understanding is a perfect summary of your expectations at the time of purchase. Third, if someone else is required to handle your financial affairs, they will understand what you have and why. For estate purposes, or for medical reasons, a letter of understanding can be an invaluable tool – to be kept with your record of affairs – that your executor, power of attorney or next of kin will use to process your estate.