Certified Safe Money Admin
Certified Safe Money Admin
Choosing the Right Financial Advisor – Choosing the Right Financial Advisor
As you approach retirement, the financial advice that you receive can mean the difference between living a stressful or a worry-free future. But choosing the right financial advisor in 2021 is far different than it was even just a few short years ago.
For instance, today, many who work in the financial advisory field are still using “traditional” planning methods, such as income strategies that rely on the unpredictable stock market or “safe” investments that are currently paying out pitifully low rates. Unfortunately, though, these “tried and true” strategies can oftentimes leave retirees short in terms of both income and assets going forward.
With that in mind, choosing the right financial advisor today is crucial to how and how well your retirement lifestyle will be. So, before you commit to handing over your hard-earned savings to just anybody, there are several important criteria to keep in mind.
Don’t Just Randomly Pick a Financial Advisor
Unlike purchasing a new pair of shoes or trying out a new restaurant – neither of which may turn out to your liking – choosing the right financial advisor should not be done randomly. Rather, you really need to spend some time reviewing several potential possibilities before you give anyone the green light.
This review should ideally entail checking out the advisors’ backgrounds in terms of experience, specialty, and even disciplinary actions that have been taken against them (if any). One of the first places to start, then, should be the Broker Check page on FINRA’s (the Financial Industry Regulatory Authority) website.
This free online tool will provide you with a snapshot of a broker’s employment history, as well as his or her licensing information and complaints that have been filed against them. In addition, BrokerCheck also tells you instantly whether an advisor (or a firm) is registered, as required by law, to sell securities, such as stocks, bonds, mutual funds, and more. You can access FINRA’s BrokerCheck tool by going to https://brokercheck.finra.org.
How to Narrow Down the Best Financial Advisor for Your Specific Goals
Choosing the right financial advisor can be similar in many ways to working with medical professionals. For example, if you’re feeling good and just need an annual check-up, then sticking with a general practitioner will often be ok.
But as we get older and at a higher risk of facing specific health issues, such as diabetes or heart disease, we tend to seek out specialists who can provide us with much more customized advice and solutions that may reduce the severity and show us how to move forward.
Today, most of the Baby Boomer generation is either retired or getting close to that time in their life – and while many have worked with a retirement financial advisor who provided advice on growing wealth over time, few of these professionals are adept at converting a portfolio into an ongoing, sustainable retirement income stream that can last for the remainder of one’s lifetime.
Questions to Ask a Prospective Financial Advisor
Moving forward with a financial advisor is frequently similar to hiring an applicant for a very important position – and that’s because it is! In fact, the financial advisor that you ultimately choose can make or break your financial future.
So, it is essential that you ensure that they have a good reputation and vast experience with helping people achieve specific goals, such as retirement income, protection of assets, and tax reduction.
In order to help you determine whether or not a financial advisor is right for you, there are several questions that you should ask him or her, including:
- How are you compensated? Advisor compensation can be a key motivator in what an insurance or financial advisor recommends for you. For instance, if the advisor is paid via commission, they may be more apt to suggest products that will earn them more money.
- Are you captive or independent? Captive advisors work for one company and are limited to selling only the products that their insurance carrier or brokerage has available on their “shelves,” whereas an independent advisor has the ability to go out into the marketplace and find the financial tools that will best fit your specific objectives. An advisor may be more likely to offer you what is available versus what will really help.
- How long have you worked in the financial advisory capacity? Although everyone has to start somewhere, you will likely be better off working with an advisor who has the experience and may be more adept at guiding you through good and bad market environments.
- What licenses do you have? Most insurance and financial advisors are required to obtain specific licenses before they can offer any products. So, if an individual only has an insurance license, they will only be able to suggest insurance-related products. Likewise, a stockbroker who only has a securities license won’t likely provide you with insurance products that could help to protect you, your loved ones, and your financial security in case of the unexpected.
- What, if any, professional designations do you possess? Many advisors attain one or more industry professional designations, such as the CFP (Certified Financial Planner) or the RICP (Retirement Income Certified Professional). This not only helps the advisor to learn more in-depth details about particular areas of planning, but it can also be an indicator that he or she is serious about the business versus just treating it like a “job.”
- Are you a fiduciary? Fiduciaries work on behalf of others to manage assets and are trusted to act ethically, legally, and in their clients’ best interests. From a financial planning perspective, this means only recommending products that are suitable for a client – even if that means forgoing a “sale” and recommending that the client work with someone who can more closely help them meet their objectives. Being a fiduciary is deemed as the highest legal duty of one party to another.
- Do you specialize in any particular area of financial planning? Similar to medical professionals, a “jack of all trades” may be able to help you in some capacity. Still, when it comes to specific needs like securing an ongoing income in retirement, it is typically best to go with someone who has a key focus in that area of the industry.
- Is it ok to contact some of your current or past customers? If you want to get an idea of how a financial advisor does his or her job, it is extremely helpful to talk directly to some of their current and past clients. This can give you a better feel for how the advisor operates when working with actual investors or retirees.
Are You Still Looking for the Right Financial Advisor?
There are several factors to consider when you are choosing a financial advisor. But taking the extra time and effort to do so could mean the difference between struggling financially in the future or achieving your ultimate financial and retirement income goals.
If you are still seeking the right financial advisor – particularly one who will ensure that your assets are protected and that you don’t run out of income when you need it the most – we can help.