3 Questions You Need To Ask A Financial Advisor Before You Hire Them For Your Retirement | Financial Advisors and Your Retirement Planning
Troy Sharpe: What are the three questions that you need to ask a financial advisor before you hire them for your retirement?
[music]
Hi, I’m Troy Sharpe, CEO of Oak Harvest Financial Group, Certified Financial Planner professional, and host of the Retirement Income Show. There are a lot of questions you should probably be thinking about that you need to know when it comes to hiring a financial advisor. Here at Oak Harvest, we analyze thousands of portfolios every single year from prospective clients who come in to see us. Our analyst team, our financial planning team, they’re digging through these statements, are looking at these portfolios, and we see some very common things that lead to people being unhappy and dissatisfied with their lack of returns, with the lack of transparency, just a frustration with the advisor firm that they hired.
Now, I’m not going to mention any firm names, but there are some very common culprits out there, big firms, once you’ve all heard of, that do this consistently, the things I’m going to talk about in this video. These are the three questions from our experience of analyzing thousands of portfolios every year that we see leads to most clients being the most unhappy with the firm they’ve chosen to hire.
First one, we’ve heard this before. This is an important question. We need to be asking this, are you a fiduciary? There’s a caveat to this that I’m going to get into next. A fiduciary is somebody that owes you the duty of loyalty and care. This means they’re always going to put your interests ahead of their own. We want to be working with people in retirement, or just general, even if we’re in the accumulation phase, the working years, we want to be working with an investment advisor that is licensed as a fiduciary, or that is licensed as an investment advisor that has a fiduciary responsibility. Certified financial planner professionals also have a fiduciary responsibility.
Off the top, number one question, are you a fiduciary? Now the caveat, do you receive compensation from mutual funds? A lot of advisors at these big firms, they’re not only investment advisors that do have a fiduciary responsibility, but they are also brokers that are transactional salespeople. When they’re licensed both ways, you don’t know which hat they’re wearing when they’re working for you. Most of these big firms they’ll have investment advisors in and brokers in their investment management division, but in also the transactional sales department. A lot of times we don’t know who we’re working with.
One way to get to the bottom of that is to simply ask them, do you receive compensation for mutual funds? We have mutual funds out there that have front end fees, often as high as 5% off the top of your investment that goes directly to the firm and to the advisor, or back end fees, or sometimes fees we call it, inside the mutual funds that go to the advisor. One way to cut through all of that, simply ask, do you receive compensation from mutual funds?
Number three, do you provide income tax planning for IRA withdrawals and Roth conversions? You’ve heard me say this thousands of times, tax planning is equally as important as investment management. When you’re in retirement for the first time ever, you get to decide how much income you take, which goes on your tax return, which determines how much tax you pay. Financial advisory, the responsibilities, in my opinion, to be a fiduciary. If you are not looking at tax planning and retirement, you cannot possibly act in somebody’s best interest because you cannot possibly put somebody in the best position to succeed. It’s that simple.
Do you provide income tax planning for IRA withdrawals and Roth conversions? Most of you have retirement accounts, you have non-retirement accounts, maybe you have a Roth. How much are you going to take from each one each year to manage your taxation, to extend the longevity of your savings, and to put your family in a more secure position? We need to work with somebody who cannot only manage our investments, but can also manage the tax planning for those IRA distributions of that tax-infested retirement account and help you with Roth conversions so we maximize your longevity.
Make sure to share this video with a friend or family member, maybe a coworker, so they can be in a more powerful position to ask the right question so they can get it right the first time when it comes to hiring a retirement advisor. Of course, hit that thumbs up, hit the subscribe, and we look forward to seeing you on the next video.
[music]
[00:04:41] [END OF AUDIO]
