In last week’s blog “Retirement Warning: Don’t Go it Alone!” I discussed the importance of building a Retirement Team to help with retirement and retirement planning. The article was getting a little too long so I decided to break this topic up into several different parts. Over the next few posts I will go over the core credentials and expertise to look for in each member of your team and give you a few questions you need to ask when choosing the right team member.
Today we’ll discuss The Financial Advisor.
- Fiduciary Duty: This is paramount. Look for an advisor who operates as a fiduciary. This means they are legally obligated to act in your best interest, putting your needs above their own or their firm’s. You don’t want someone that may not be totally committed to doing what’s best for you. Ask directly if they are a fiduciary and if they will commit to this in writing.
- Relevant Credentials and Education: While certifications aren’t everything, certain credentials demonstrate a level of expertise and commitment to professional standards. Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA) are two of the most common credentials you will probably see. These credentials alone aren’t a guarantee of quality, but they show a baseline level of knowledge and commitment.
- Experience in Retirement Planning: Inquire about the advisor’s experience in retirement planning. Have they worked with clients in similar situations to yours? Do they understand the nuances of retirement and retirement planning such as: retirement income, healthcare cost, Social Security optimization and estate planning?
- Understanding your Specific Needs: The advisor should take the time to thoroughly understand your unique financial situation, goals, risk tolerance, time horizon and concerns about retirement. Watch out for cookie-cutter solutions but rather look for someone who tailors their advice to your individual circumstances.
- Clarity of Fees and Compensation: Know exactly how the advisor is compensated. Are they fee-only (charging a percentage of assets under management, hourly or flat fee), fee-based (charging a combination of fees and commissions) or commission based? Fee-only is generally considered the most transparent and least prone to conflicts of interest.
- Communication Style and Accessibility: Choose an advisor you can communicate with. Are they clear, patient and responsive? How often will they communicate with you and can you easily reach them when you have questions or concerns?
- References and Reviews: Ask for references from current clients and check online reviews. This can provide insights into the advisor’s reputation and client experience.
- Transparency and Honesty: The advisor should be transparent about their qualifications, fees, potential conflicts of interest and risks associated with any recommendations.
- No Guarantee of Higher Returns: While a good advisor can help you make sound investment decisions, they cannot guarantee higher returns or protect you entirely from market downturns. If someone is guaranteeing or promising higher returns or no-risk investments be very cautious. This is probably not the right advisor for you!
- “Gut Feeling” or Comfort Level: Ultimately you need to feel comfortable and trust your financial advisor. This is a long-term relationship, so choose someone you feel understands you, listens to your concerns and acts in your best interest. Don’t underestimate the importance of personal rapport.
Questions to Ask Potential Advisors
“Are you a fiduciary and will you commit to acting in my best interest in writing?”
“What are your relevant certifications and experience specifically in financial planning?”
“How are you compensated? Please explain all the fees clearly.”
“What is your investment philosophy and how will you tailor it to my risk tolerance and goals?”
“How often will we meet and what kind of communication can I expect?”
“Can you provide references from current clients?”
“What is your process for developing and reviewing a retirement plan?”
Choosing the right Financial Advisor for retirement planning is significant. Not all financial advisors are created equal. Your financial advisor will probably be the quarterback of your team. Finding a competent, trustworthy, and communicative advisor who understands your specific needs and with whom you feel comfortable can take time and effort. Poor communication or lack of understanding can lead to frustration and potentially poor outcomes.
I have drawn from my own experience when planning our own retirement and Gemini AI to help with this article. I was fortunate early on to realize I needed a team to help me in the retirement planning process and have continued with my team in retirement. Hopefully, the information I’m providing is giving you a good start to retirement planning and a wonderful retirement.
In the next post I will discuss the core credentials and expertise needed in a Tax Advisor. I will also include some questions to ask when choosing this retirement team member
Thank you for taking the time to read this article
If you would like, please leave a comment below or you can email me at www.feedback@wewaonthenet.com.
I’m also starting a YouTube channel, www.youtube.com/@wewaonthenet where I will be discussing various retirement topics and topics I come across that I think may be of interest. Check it out!
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