How to Determine If Your Advisor is a Qualified Retirement Expert

Ever heard the old maxim, “If the only tool you have is a hammer, you will start treating all your problems like a nail?”

That’s actually insightful regarding many scenarios we are faced with in life. No more so than when it comes to your financial security – especially pertaining to your retirement.

When it comes to retirement planning, you can’t use just any broker and advisor. This is a scenario when using the same hammer you may have relied on in the past can be a big mistake – one that can lead to serious issues that could imperil your retirement.

Key Considerations

When it comes to retirement, there are many moving parts and tons of consideration, including, but not limited to:

• Taxes (they can eat you up) and strategies (they can save you up to tens of thousands of dollars)
• Rules and regulations (examples – when and where you can rollover assets, required minimum distributions or RMDs, etc.
• Social Security – another form of income in retirement
• Healthcare and Long-Term Care
• Estate/legacy/charitable giving and trusts (protecting assets, passing money to family, insuring your money goes where you want it to, etc.)
• Products, tools and strategies to ensure you have lifetime income and don’t end up outliving your assets
• And many more

7 Important Areas to Cover

Retirement and the accompanying issues and challenges can be very complicated, so you owe it to yourself to ensure you are using the right tool and not simply settling for the old hammer.

When it comes to your retirement, you need to be certain you are working with a qualified retirement planning specialist who can ensure your retirement is successful and what you’ve planned it to be.

Here are 7 key areas to cover with your present advisor or anyone else you are considering:

Fiduciary Responsibility

The very first question you should ask is whether the individual or their firm has a fiduciary responsibility to you.

Many talk about being a fiduciary, but there’s a difference between saying it and actually being one. To be clear, a fiduciary is a person or organization that acts on behalf of another person or people that is legally bound to put their client’s interest ahead of their own.

To be considered a qualified fiduciary, an individual or firm generally does so through licensure or a combination of education, training and time in the advisory industry. A Certified Financial Planner or CFP would be a good example.

Fees

When it comes to financial advice, fees are a huge issue. There are actually many types of fees covering different services. Questions should focus on how an advisor gets paid (example – flat rate fee, commission or a combination), full compensation disclosure, incentives from 3rd parties, those associated with suggesting products (e.g., mutual funds), and much more.

(Note – Rather than cover everything on the issue here, a future article with focus on fees and all the important associated issues you should be aware of before working with any advisor.)

For now, I do advise that you ask any individual or firm you’re considering to show you their fee schedule, disclose all fees charges they’ll take from your account, and inquire as to the services their fees cover. They should be very transparent and willing to provide all fee-related information up front.

Income

As part of a holistic financial planning approach, an advisor needs to identify all categories and types of income that will be utilized within your customized retirement plan. IRAs, 401(k)s and annuities are but a few of the income sources you may rely on in retirement.

Taxes

Will they provide you with an annual tax plan? Tax planning is critical, especially when you are nearing or in retirement. Many firms don’t offer tax planning as part of their financial and retirement planning offerings.

Healthcare

Will they create a plan to help you with healthcare decisions like Medicare and Long-Term care insurance? If so, is this something that they’re offering that is covered by their fee?

Social Security

How about Social Security, which is an important income stream for many. Does the firm that you’re interviewing offer Social Security analysis to help you maximize every dollar that you can from Social Security in the context of an income plan?

Estate Planning

Does the firm offers any assistance when it comes to estate planning? In my view there are a lot of benefits to having a CPA, estate planner, financial advisor and retirement specialist all on the same page, working together and acting in your best interest.

Final Questions

• What licenses (securities, insurance, etc.) do they possess?
• Who do they use as a custodian for their client accounts?
• Do they work with insurance companies and do they utilize insurance strategies? (Note – This is an important area, so I plan to come back to the issue of insurance and the many questions and considerations, especially when it comes to retirement and estate planning.)
• Do they have any conflicts of interest they must disclose?
• What is their normal process when it comes to client meetings? How often will you meet to review your investments and plan to ensure everything is on tract?

Conclusion

When it comes to retirement, you can’t settle for any tool. You need to remember that a retirement specialist is about as different from a wealth manager or broker as a cardiologist is to a proctologist.

An additional word of caution while talking with you current advisor or interviewing others. If the conversation itself, or asking any of these questions (especially regarding fees) seems to tick off or put that person on edge, run the other direction. That’s a definite red flag.

Bottom line, your advisor should come to you with a heart of service and really want to make sure that you’re as good a fit for them as they are for you.