Why is it important to plan for retirement? Do I need a financial advisor to help me?
Enjoying retirement while continually watching your investments can be stressful.
Every single day people enter our office with the realization they just do not want the stress and second-guessing anymore with their investment portfolio. They’ve clawed, scratched and sacrificed for years to bask in retirement glory. Traveling the world over, playing golf with friends or reconnecting with a spouse who has felt more like a business partner throughout the everyday work and family grind of the last 20 to 30 years.
In this blog, we’ll explore who needs professional financial advice, how you know and what type of advice you should be getting.
TYPES OF INVESTORS
We work with investors from all walks of life. Those who hold doctorates to those who came right out of high school into the workforce and meticulously saved their entire lives. Some managed their own assets for 20 years before seeking out financial help, others sought out professional advice immediately after their first paycheck was deposited.
Everyone is an expert at something, but most people are not experts in investing. Determining your portfolio strategy by spending one or two hours a week studying the financial markets or making investment decisions based on the latest headline of a business finance website you enjoy reading is a recipe for a portfolio heartache.
Next to physical health, your financial health is the most important thing a person can choose to maintain. In fact, your financial health often moves in lockstep with your physical health. Those who invest regularly, spend conservatively and overall, live within their means, are typically in better physical health than those struggling to get by each month.
Do any of the following types of financial investors resonate with your situation?
1. THE SET IT AND FORGET IT RETIREMENT PLANNER
We meet investors all the time who say, “We’re afraid to look” or “We don’t closely follow our investments.” If you fall into this financial mindset, you probably knew that you needed a financial professional early on in your life, but once you set up your accounts you didn’t think much about your portfolio from then on.
These investors typically have retirement accounts with their employer, contribute enough to receive the company match, but don’t often consider what changes they could make with the investment portfolio. They may have a financial advisor, but don’t hear from them regularly and aren’t completely sure what kind of fees they’re paying in their accounts.
“Set it and Forget it” investing is easy, but it typically costs the investor thousands in fees or lost performance over the duration of the investment lifetime. If you’ve been on the sidelines with your investments, there’s never a better time to take back control of your financial future.
2. THE DO-IT-YOURSELFER
The second type of investor is one who handles all their investments themselves. These folks typically love the in’s and outs of the stock market. They read and watch large quantities of investment news and are continually looking at their portfolio balances to see how their accounts are doing.
Many of them hold very strong opinions about their investment choices. They struggle with the idea of paying a professional financial advisor because they spend large volumes of time researching investments on their own. They believe if they are going to put forth the time and effort, they shouldn’t have to pay someone for work they are already doing.
Do-it-yourselfers also typically have a high-risk tolerance. They fully accept the responsibility for their investment decisions and can live with a large loss, often-times believing the stock market will rebound, no matter what investment choice they have made. A large portion of our clients were once do-it-yourselfers, but as you near retirement, this methodology can prove especially dangerous for your long-term security.
3. THE DISTRUSTFUL RETIREMENT PLANNER
The third type of investor knows that they need financial help. They realize their investment portfolio isn’t performing well, but they have a hard time trusting a financial services firm to make the change from their employer’s accounts or themselves.
We’ve met with too many investors who have a horror story. They got burned by a stockbroker or bank advisor who promised them the world. They feel betrayed because they put their trust and their money with someone who did not work in their best interest. Generally, these investors are more focused on a relationship and safe investments than they are on hitting a home run in the stock market. A continued steady, safe growth strategy makes sense for them.
These investors can find themselves in what we call an “analysis paralysis” situation when searching for a new financial advisory firm. They know they need a financial change, but they just can’t pull the trigger on where to move their investments to since the memory of being burned in the past is so painful.
4. THE “SHOULD I BE PLANNING FOR RETIREMENT?” PLANNER
The final type of investor we’ll discuss in this blog is the one who hasn’t bothered to consider retirement at all. Unfortunately, we see folks like this at all stages in life and reasons vary for why they haven’t considered building a financial plan.
Some hold large pensions from the military or a former employer which allows them to have fewer concerns about generating income in retirement. Others simply don’t realize that relying solely on Social Security is not a sustainable retirement strategy.
The latter example results in some difficult conversations in our offices across the country.
If you are getting close to retirement age and you don’t have a strong six to seven figure nest egg, trying to retire may be very difficult. Those in this financial category need to begin saving for retirement immediately. We believe strongly that failing to financially plan is planning to financially fail, so let’s circle back to the original question and discuss who needs professional help from a financial advisor.
WHO NEEDS RETIREMENT PLANNING HELP?
Those in or near retirement should seek professional help more actively than those who are just starting out with their financial portfolios. When you are getting close to retirement there are numerous considerations you did not have to worry about when you were still working including tax planning, Social Security and not outliving your money in retirement. These issues should be at the forefront of your decision-making process.
Simply put, everyone needs a financial plan. Even those who love managing their own investments can benefit from having a financial plan. Too often, so-called experts in the financial field by-pass a fiduciary standard for their clients by placing investors in products that benefit the establishment instead of those seeking help. If an advisor starts your meeting talking about products instead of how to meet your needs, you need to find a different financial services firm.
Also, as you approach retirement you no longer have the luxury of time to make up for losses sustained in your investment portfolio. You also may be unwilling or unable to continue working full time or at the high level you maintained in your earlier years. So how do you determine who to get professional financial advice from?
CHOOSING A FINANCIAL ADVISOR
You’ve come to the realization that it’s time to build a retirement plan with a wealth management advisor, no longer going it alone. How do you pick an advisor? Start with these criteria as a baseline:
Work with a Fiduciary Financial Advisor – one who has your best interest in-mind first and foremost as governed by the SEC. If they are dual registered, make sure they are acting as a fiduciary and not working under the suitability standard (Yes you have to ask both questions, to get an accurate answer)
Seek out an Independent Financial Advisor – Money managers and financial advisors come in many different forms. Banks financial advisors and Big Box retail advisors are often limited by the list of products their firm allows them to offer. Many times insurance agents don’t have access to the stock market which limits their clients’ options as well. Seek out an independent financial services firm who can work with you to acquire any investment that fits your financial plan without being held to any type of quota or products that may not be best for you, the investor.
Find a financial firm that serves as a Distribution Specialist – This is a firm that specializes in working with those in or near retirement. The planning that is done for someone in their 20’s looks a lot different than the planning done for those in their 50’s and above. Make sure the financial advisor is specifically trained for your stage of life.
Tax conscious and Social Security focused – Mitigating taxes and maximizing Social Security is paramount for a comprehensive retirement strategy. Make sure your financial advisor is considering taxes over the course of your retirement and not just that immediate year. Proper tax planning can save clients tens of thousands of dollars over the course of their retirement.
Maybe you have been a do it yourselfer for 30 years and you’re tired of the constant work, or you’re not sure what to do with the investments held at your employer now that you’re approaching retirement. Or maybe you’ve had an advisor for years but really haven’t gotten a proper financial plan and don’t know what the actual fees that advisor is charging you. No matter the situation we can help.
We work with clients just like you each and every week. We exist to help our clients navigate a safe and secure retirement.
