Written by There are several financial decisions you must make in life, but few are more important than planning your retirement. For that reason, you want to make sure you choose the right financial planner for retirement. To help you make the best choice, here are some tips to help your search end in success.
Holistic approach
Retirement plans work best when they take your entire financial life into consideration. Many fall short of their retirement goals because their retirement strategy lives in a silo from the rest of their life. Let’s say you determined you need $100,000 per year for a comfortable retirement. You felt this number would allow you to travel and maintain your current lifestyle. This is a great start for a retirement plan. When you bring this information to a financial advisor, they should ask you several questions to ensure you have the right amount. One thing to consider is how much your current income totals. If you have additional income because you can work overtime or have a side-business, you may need more money than you originally anticipated. You could also need less money if your retirement is going to have fewer expenses. For example, if your current lifestyle includes a car or mortgage payment that will be downsized or paid off, then you don’t need $100,000 per year to maintain your lifestyle.
Four most common risks to a successful retirement
You will also need to ensure your retirement strategy includes some contingencies. When you choose a financial advisor for retirement, you need to hire someone who can help you understand the risk. The four most common risks to a successful retirement are longevity (living too long), market (investments losing money), inflation and the risk of rising medical costs (disability and long-term care). If your retirement plan assumes you have no health issues, then having a stroke or contracting cancer could deplete your retirement within a few years. The same holds true when it comes to estimating how much money you need in retirement. If you are not taking inflation into account or you are assuming the market only increases, then you may not have enough in retirement. Inflation cuts your earning power in half every ~17 years. This means, what you could purchase with $100,000 at 50, can only purchase $50,000 worth of goods at 67 years old. Ultimately, the right financial advisor for a successful retirement is going to take a holistic approach. An approach that will make sure you are able to achieve your financial and retirement goals.
Independent advisor versus big bank
Regardless of whether you choose an independent advisor or a big bank advisor, you want to make sure you are choosing a fiduciary. By law, a fiduciary must put the interests of his clients above his own. So much so that if an advisor made an investment with her own account and made more money than when she executed the trade with your account shortly after, she would need to trade her shares with yours. If you are a high-net worth individual who is more comfortable working with a big bank, then the big bank route may be for you. The big banks usually have larger teams with relationship managers, account executives and financial advisors. You have the additional benefit of simpler transitions in the case of your advisor retiring. If your advisor retires, you have the option of remaining with the big bank and they can continue to look after your account. The cons usually surround the recommendations of big bank advisors. There are times the advisor may recommend a mutual fund of the bank, and those feeds could be higher than a comparable fund elsewhere. This could expose the advisor to a conflict of interest. Which is not to say every they will recommend something that is not in your best interest, but to simply bring to your attention the possibility. You want to spend some time learning about the expenses and fees before making any decision. This is critical because the fees associated with your retirement savings is one of the top reasons you may not reach your retirement goal.
The path to independence
If you are interested in the independent advisor route, they tend to offer more customizable services. As the saying goes, big ships turn slowly and there is not much bigger than a big bank. When you work with an independent firm, they have the flexibility larger banks often don’t. In addition, most of your conversations are going to be with the financial planner directly. Therefore, you don’t need to be burdened speaking with account executives, managers or secretaries. Your advisor usually owns the business and as the ultimate decisionmaker, they can make the changes you seek. The downside often found with independent advisors is they don’t usually have the longevity of the established banks. An independent advisor could be out of business 10 years from now and that will leave you looking for a trusted advisor again. The banks have been around for hundreds of years and even if your advisor retires, your money can remain in the same funds. You only need to be assigned a new advisor by the bank. Both independent advisors and big bank advisors may have account minimums. There are independent advisors without account minimums, but most private wealth divisions of big banks have account minimums.
Ability to give freely
In many ways, your money is a reflection of your values. If you provide financial support to your local church, a nonprofit, or family in need, you may want to continue this into retirement. A comfortable retirement includes the ability for you to provide financial support to the things you believe in. Now, all support does not need to be financial. Since you have more control of your time in retirement, you may want to give by donating your time. You could volunteer at the next event, mentor an at-risk youth or work as a fundraiser. However you decide to spend your time, know it is valuable and can provide a financial benefit. When you choose the right financial advisor for a successful retirement, your advisor should be as interested in your values as they are in your money. Accumulating money is never your end goal, it’s the experiences money can help you create that your advisor needs to focus on.
Specializes in retirement
Having an advisor who understands your needs is important to choose the right advisor for a successful retirement. Oftentimes, if you ask an advisor for commonalities among their clients, you can determine if they would be a good fit for you. If you don’t want to ask about their clients, see what credentials they have to handle your retirement. Do they have an advanced degree or do they have a retirement certification? Gathering this information is meant to help you gauge whether it makes sense for you to hire the advisor. In addition to retirement planning, you may want an advisor who has experience helping families transition wealth. A family office structured experience helps you to plan for retirement in the scope of leaving a sustainable legacy for your loved ones.
Final thoughts
Retirement is going to be the largest expense of your life. You need to devote the proper amount of time to making such an important decision. It is more than saving up a ton of money and then hoping you don’t run out. Retirement planning is about allocating your money in an effective way. The goal is to ensure you can enjoy today as much as you enjoy your life 50 years from now. Retirement planning is about protecting yourself against risk, and for many, it is about building generational wealth for those you love. It is about living your best life and making sure you can leave this earth with few regrets. The best way to ensure your needs are met and your financial goals are achieved is to build a comprehensive plan that is aligned with your values.
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