For those of us planning to retire or already enjoying our second act, financial security is a high priority. Once we depart the working world, no longer bringing in a regular paycheck, the money we have saved will have to get us safely through our retired years. Few retirees want to gamble unnecessarily with their nest egg. After all, if you screw up, you won’t necessarily have another chance. Ideally, our investments will be safe enough to preserve our principal and just risky enough to realize reasonable returns. That balance between security and growth to sustain us through the next 20 or 30 years can make our retirement stress-free and allow us to do those things we have always wanted.
With a multitude of complex and often confusing investment options, not all of us are equipped or interested in becoming financial experts. We want to put our money in the right vehicle, but what exactly is that? And will it be the same five years from now? Negotiating the many choices can be challenging for an expert, let alone someone not versed in the nuances and subtleties of investing.
As we inch ever nearer retirement, my wife and I have begun our search for a financial advisor who we can trust with our savings. The reality is that it is not just our savings we are talking about, but our future peace of mind and happiness. We want someone who knows what they are doing and keeps our best interests a priority. As we research what is most important to make the right choice, we are compiling a list of questions to ask prospective financial planners:
Are you a fiduciary? This is a high priority on most checklists, as a fiduciary must place the interests of their clients before their own. For example, a particular recommendation cannot be made because it pays a high commission – it can only be made if it fits in with the overall financial planning. We want to be sure recommendations first and foremost take into consideration our total picture and long-term goals and steer us in the best possible direction.
How do you charge for your services? It is important to identify upfront how you will be charged. We would prefer working with an independent financial planner who does not buy and sell, but rather makes recommendations that we act upon. Some financial planners charge a fixed percent based on the total portfolio. As the value increases, so does the amount earned by the planner. Our goal would be to pay a maximum of 1 percent.
What type of clients do you specialize in? Different clients have different needs and investment timelines. As retirees, we are more risk-averse, more patient, and we’re not looking for a “home run” investment. We prefer not to worry about losing rather than focusing on unrealistic returns. A steady principal is a happy principal in our books. In addition to hearing from the advisor, we will request a few clients to speak with directly.
What is the average investment by your clients? Or what is the spread of investments, highest and lowest? The idea is to see if what we are considering investing in fits within or outside the current range. We would feel most comfortable not being the highest- or lowest-ranked investor, especially if there is a significant discrepancy.
How frequently do you communicate with your clients? We would prefer to receive quarterly updates rather than a single annual report. And we want to know that when we call our advisor, we can expect a prompt reply.
What is your investment strategy? Rather than a blanket overview, we would like to know specifics on investment strategies targeting retirement. A simple open-ended question such as “Can you describe your investment strategy?” should get things rolling and allow the advisor to give us his or her pitch. Then we can compare that with our personal thoughts to see if we have a good fit.
What makes you unique? There are quite a few financial planners, and making the right choice is not easy. Is there anything that makes the planner different or better or more attractive than the others? If the answer is an unrealistically high rate of return, beware.
What do you do outside of work? For us, it is important to establish a relationship with someone who we entrust with our life savings. What they do during their spare time can give an indication of what type of person they are. Someone living in the same area would be a plus. It would be nice to team up with an advisor who has similar values and priorities.
This is our list so far – still a work in progress. Deciding who to choose is very important, and we want to take our time to get it right. The interviews are about to begin. Wish us luck, and good luck in your own endeavors.
Post a Comment