A 5-Step Guide to Choosing the Right Retirement Advisor

Retirement Advisors wear many hats — life coach, business coach, financial therapist — though for the most part, we give our clients financial peace of mind.

And when 92 percent of U.S. adults say that they’re happiest when their “financial house is in order,” it’s clear that choosing the right Retirement Advisor is key to a happy, satisfying retirement.

But with so many financial professionals and options out there, how do you select the right expert to work with?

Especially when accounting for all the ambiguity in the finance industry, you need to be extra careful about finding the right Retirement Advisor who meets your Fiduciary and financial needs. That said, when you do find the right Retirement Advisor, they can help you plan a secure retirement and a secure financial future for your loved ones.

As your Fiduciary Retirement Advisor, we go beyond developing your custom investment strategy and managing your investment portfolio. We also help you: 

• Make sense of a complex financial situation
• Balance family financial obligations
• Cut unnecessary expenses
• Create a dynamic budget
• Save for a home
• Pay off debt
• Plan for college expenses
• Create tax efficiencies with your investments
• Increase your philanthropic impact

Read on to learn our 5-step framework for choosing the right Retirement Advisor.

1. Consider what part of your financial life you need help with

Before sitting down with a Retirement Advisor, decide which aspects of your financial life you need help with.

Your financial circumstances and goals are unique to you, and the initial conversation will cover your individual money management needs.

Remember that Retirement Advisors provide more than just drawdown strategies and legacy planning. The best Retirement Advisor is the one who can build a sophisticated retirement plan  that includes:

• Investment planning to navigate aggressive growth goals,
• Tax planning to solve tricky tax problems, and
• Family wealth management for comprehensive financial planning

If you have complex financial needs, as many pre-retirees do, you might also need help with:

• Establishing college funds or trusts for your children
• Building an estate planning, or 
• Annuity and life insurance suggestions to protect yourself and your family

Not all Retirement Advisors offer the same menu of services, so look around to find an Advisor who offers the depth of service you need.

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2. Understand the different types of Retirement Advisors

Unfortunately, there aren’t any federal laws that bar unqualified professionals from using the  “Retirement Advisor” title. While many people call themselves Retirement Advisors, not everyone has your best interest at heart—or is legally required to act in your best interest.

Part of learning about the different types of Retirement Advisors is understanding the Fiduciary standard. Some, but not all, Retirement Advisors are bound by Fiduciary duty. A Fiduciary’s responsibilities and duties are both ethical and legal. The Investment Advisers Act of 1940 stipulates a duty of loyalty and care, which means a Fiduciary Retirement Advisor must put their client’s interests above their own.

Other Advisors who aren’t Fiduciaries are only held to a suitability standard. That means they must only suggest products that are suitable for you, even if they aren’t in your very best interest.

Regardless of whether you choose a Fiduciary or non-Fiduciary Advisor, make sure you know how they earn money. It’ll help you uncover whether their recommendations are better for you—or better for their wallets.

Fee-Only Advisors

A fee-only Advisor earns money from the fees that you pay for their services. These fees are typically charged as a percentage of the assets they manage for you, as an hourly rate, or as a flare rate.

Most all fee-only Advisors are Fiduciaries. The fee-only model reduces any potential conflicts of interests. Because a fee-only Advisor earns income from how well their clients’ portfolios perform, it’s in their best interest to make sure that you have the most optimal retirement plan and financial products.

Commission-Only Advisors

A commission-only Advisor earns sales commissions for the products that they sell to their clients. If you’ve ever seen a “free” Retirement Advisor who doesn’t charge any fees for advice, it’s likely that they’re in the business of selling retirement products, not retirement plans.

A commission-only Advisor is not a Fiduciary, and is not legally obligated to work in your best interest. Because they work as salespeople for investment and insurance brokerages, they’re held to the suitability standard. That means that their recommendations must only be “suitable” for your needs.

Fee-Based Advisors

Some fee-based Advisors are Fiduciaries.

How? Fiduciary advisors may “pause” Fiduciary duty when discussing certain products, like insurance.

To be clear, commissions aren’t red flags in and of themselves. Some financial products are generally only available through a commission model. 

One example is life insurance. A fee-based Advisor who receives compensation for helping you purchase a life insurance policy may still have your best interests at heart when advising on other financial products.

For many financial products, you’ll have to pay commission to a salesperson regardless of where you buy the product. Purchasing products via your Retirement Advisor may be a matter of convenience. What’s important is understanding the difference between a commission-based and fee-based Advisor, and understanding whether your Advisor is or isn’t dispensing Fiduciary advice.

Registered Investment Advisors

Registered Investment Advisors (RIAs) are firms or financial professionals that provide Fiduciary financial advice. 

RIAs employ Investment Advisor Representatives (IARs), who are bound by fiduciary duty. An RIA may have one or one hundred IARs working under their umbrella.

• IARs may call themselves Financial Advisors
• IARs may include the gold standard Certified Financial Planner (CFP) designation
• IARs may be fee-only or fee-based

When choosing a Retirement Advisor, look for the gold standard CFP designation. It indicates an experienced Financial Advisor who has passed rigorous industry exams covering real estate, investment, and insurance planning. Because of their wide range of expertise, CFPs have the knowledge and competency to help you plan out every aspect of retirement.

Robo-Advisors

Robo-advisors offer inexpensive, automated investment advice. Most are designed to help younger, tech-savvy people invest for mid- and long-term goals through generic diversified portfolios of exchange-traded funds (ETFs).

The trade-off is missing out on personalized, in-depth counsel that is likely to save you more in the long run. If you have complex financial needs, you’ll likely be better off with a human Retirement Advisor.

3. Choose which services you want.

Your financial history, investment style, and retirement goals are unique to you. Depending on your goals, you might need one or a combination of the following services:

• Retirement planning. Your Retirement Advisor will help you determine how much you need for retirement, and how to reach that number. As you get closer to retirement, your Advisor will recommend specific products or advice to help your money last throughout the duration of your post-work life.
• Investment planning. Your Advisor will design an investment portfolio that aligns with your preferred level of risk while also meeting your financial goals.
• Budgeting advice. Your Advisor will help you figure out optimal spending strategies to meet your savings goals.
• Debt management. If you have outstanding debts, your Advisor will build a debt repayment plan into your budget.
• Insurance coverage. Some Advisors will assess your current policies to identify any gaps in coverage. Your Advisor may also recommend a policy that’s better-suited to your individual situation.
• Tax planning. Some Advisors help you minimize your tax liabilities through various ways, like strategic philanthropy or tax-loss harvesting. Remember that tax planning is different from tax preparing; you’ll still need a CPA or tax software to file your taxes.
• College planning. Do you have a child or grandchild going off to college soon? Your Advisor can integrate college planning into your overall retirement plan.
• Estate planning. If you want to leave a legacy to a favorite charity or for your loved ones, your Advisor can help you structure your charitable gifts for the next generation.

Beyond investment management and retirement planning, Retirement Advisors also offer value in other ways. 

For instance, Advisors offer emotional support and perspective during volatile economic times. One recent example is the 2020 pandemic market crash, during which there was a 50 percent spike in client demand for Advisor contact. Your Advisor can be an invaluable resource during times of crisis.

When looking around for a Retirement Advisor, make sure they offer the financial and non-financial services that you need.

4. Research your candidates.

It can be daunting to entrust your retirement future to a stranger. The stakes are high! Take your time to research potential Advisors. You’re encouraged to be picky about personal chemistry, credentials, Fiduciary status, and years of experience. There are few relationships that rival the intimacy of Client and Advisor.

As you begin your research, you’ll notice that Retirement Advisors come in every possible shape and form. Some specialize in small business exit planning, and others specialize in retirement planning for C-suite executives. Make sure they have the appropriate expertise to navigate your financial situation.

The easiest way to find a Retirement Advisor is by asking friends, family, and peers for referrals. You can also look for Retirement Advisors online. Remember to verify your Retirement Advisor’s Fiduciary status.

Finally, you can run a quick background check using FINRA’s BrokerCheck, which will show any disciplinary actions and complaints filed against an Advisor.

5. Interview your top candidates.

Before hiring your Retirement Advisor, be sure to ask:

1. Are you a Fiduciary? If so—are you a fee-only Fiduciary (who only offers advisory services) or a fee-based Fiduciary (who also sells commission-based products)?
2. What is your fee structure?
3. What are your qualifications?
4. What is your approach to retirement planning?
5. What retirement planning services do you offer?
6. What kind of clients do you normally work with?
7. What investment benchmarks do you use?
8. Do you have any account minimums?
9. Who is your custodian?
10. What information do I need to bring for you to look at when developing my retirement plan?
11. How much access will I have to you, outside of scheduled appointments?
12. Will you collaborate with my other advisors, like CPAs or attorneys?

We Can Help

Building a balanced, well-thought out retirement plan can take a lot of time and research. If that feels overwhelming, we can help! If you’d like a complimentary consultation to discuss your customized retirement advice and solutions, please fill out the form below. We look forward to speaking with you.

DISCLAIMER: Advisory Services offered through Prosperity Financial Group, Inc., an Independent Registered Investment Advisor. Securities offered through Fortune Financial Services, Inc. Member FINRA/SIPC. Prosperity Financial Group, Inc. and Fortune Financial Services, Inc. are separate entities.