What to Look For in a Retirement Financial Advisor

financial advisor talking to seniors

Some things in life are of the do-it-yourself variety, where the consequences of messing up aren’t that dire. Other things are better left to the experts, especially when potential missteps can have a detrimental impact.

Financial planning is one of those gray areas where many people think they know enough to go it alone, but could probably use a little help navigating the options. When you’re young, you have time to take some investment risks, ride the ups and downs, and recover from mistakes. When you’re nearing or in your retirement years, however, time is not on your side and you need a more conservative strategy for managing your wealth (or lack thereof). Consulting a pro to help guide you at this stage is a prudent recommendation.

While some people manage to amass a fortune over their working years, many others struggle paycheck to paycheck. We all know we should be saving for our retirement all along, but the realities of life often intervene. Priorities shift at different life stages and when unexpected events cause circumstances to change. Whether you’re sitting on a cushy bank account or wondering how you’re going to subsist off your Social Security income, a retirement financial advisor can help you optimize your money and prepare you for the future.

Sadly, there are some unscrupulous firms and planners out there who are more about lining their pockets than padding yours. Here are some tips to help you find a good retirement financial advisor.

Understand the Various Kinds of Planners Out There
The first step is to up your financial literacy and learn the different terms for financial planning services. They’re not all the same, and you must choose the kind that best suits your needs. The three main types are:

Financial Planners, who focus on all aspects of your financial life, not just your investments. They help guide you with everything from how much money to save and what kind of insurance you need.

Investment Advisors, who help you decide what investments to own and in which accounts. They look for investment opportunities as a key part of your financial planning process.

Retirement Income Planners, who focus on how to coordinate all the pieces of your retirement puzzle, including Social Security, taxes, pensions, investments, your retirement date and more, helping them all align toward your financial goals.

Check Credentials
A financial advisor or financial planner is different from a stockbroker, CPA or tax preparer in that they are fiduciaries. This means they are legally obligated to act in your best interests, not just sell products for their own commissions. Look for professionals who have a Certified Financial Planner (CFP) certification, which indicate they have passed a comprehensive evaluation, keep updated through continuing education courses and adhere to an ethics policy. Another reputable designation is Personal Financial Specialist (PFS) , or find an investment advisor with a Chartered Financial Analyst (CFA) certificate. Being a member of The National Association of Personal Financial Advisors is also a good indicator.

Find Out How They Make Money
There are various fee structures among financial advisors.

  • Flat Rate: Some charge a fixed sum to provide you with investment advice and services. This tends to be most common these days.
  • Annual or Hourly Fee: Some charge a flat annual fee that covers a certain number of meetings, or charge by the hour for time spent managing your money.
  • Percentage of Assets: Some planners base their fees on a percentage of your invested assets, maybe 1 to 2 percent annually. This used to be the popular way to go, but it seems to be phasing out these days.

Work the Search Engines
While getting recommendations from friends is good, the Internet is also your friend when it comes to looking for a financial advisor. If you want an advisor who is in your area who you can meet with in person, search by city or Zip code. Working remotely is certainly doable these days, so you can narrow things down by other pertinent criteria like credentials and billing structure rather than geography. You can also search online for good/bad reviews or a history of complaints that should steer you in another direction.

Check their records with the Financial Industry Regulatory Authority (FINRA), the Security and Exchange Commission (SEC), the CFP Board, or with other organizations they are associated with.

Question Them
Before selecting a planner, you are in the interviewer seat. Don’t just sit there and listen to their pitch. Ask them some questions to determine if you have good communication chemistry with them.

For example, find out how long have they have been practicing, and ask for references. Ask them to explain a financial term to you, and see how well you understand them. Ask them if they manage other clients with similar goals and assets to you. Find out about their areas of specialization. Ask them about their compensation and payment structure. Ask them to walk you through various retirement projections. If they are unclear or reluctant to be upfront about everything, consider that a red flag.

Trust Your Gut
You’re own sixth sense is a good indicator if you’re going to want to work with someone or not. This is your money and financial security we’re talking about, so you want to be comfortable with your advisor. If anything they say makes you uneasy or sounds too good to be true, run.

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