A great financial advisor can make or break your retirement. You need someone you can trust, who will give you proper guidance, and who is available when you need them. Asking the following questions can help you find the right advisor.
1. Are you a fiduciary?
A fiduciary is someone who has a legal obligation to put your interests before their own. Some advisors never act as fiduciaries, many advisors are a fiduciary some of the time, and some are a fiduciary 100% of the time. It’s critical to find an advisor who is willing to act as a fiduciary 100% of the time so you don’t have to second-guess whether your advisor’s advice is for your own benefit or theirs. The best method to determine this is to ask the advisor in writing to say they will be a fiduciary 100% of the time for you.
2. Do you charge a flat fee for your services?
Many advisors charge fees based on a percentage of the assets under their management. This is an outdated model that produces large conflicts of interest, as the advisor’s compensation is directly tied to how much of your money is managed by them. Additionally, while 1% of your assets sounds like a small fee, it adds up over time. Below is a comparison of a $1,000,000 portfolio compared with a 1% assets under management fee to a $10,000 flat fee. Under the assumptions below, after 30 years, the flat fee portfolio is worth over $1,500,000 more than the percentage of assets under management fee! Please note that this is a hypothetical illustration and investment performance is NOT guaranteed.
3. Do you specialize in retirement planning?
When you’re having issues with your heart, you don’t go to your family physician, you see the cardiologist. In the same manner, your advisor should be a specialist in retirement planning. The easiest way to determine this is to look at the advisor’s website. If their website says they work with small business owners, retirees, and families, that means they aren’t a specialist, they are a generalist that works with everyone. It should be clear from their website what their specialty is. You can also ask, “what percentage of your clients are people who are within 5 years of retirement or are retired?” If they don’t know the answer, or the answer is less than 60%, they probably aren’t a retirement planning specialist.
4. Do you advise clients on taxes?
Taxes are so intertwined with retirement planning that it is impossible to provide high-quality retirement planning advice without being tax smart. This doesn’t mean your advisor needs to do your tax returns, but your advisor needs to understand the tax consequences of decisions and be proficient in planning for them. It’s difficult to determine how tax-smart an advisor is before working with them, especially if you aren’t comfortable with the tax code. One question to ask is if the advisor gives tax advice, and see what they say. Whatever their answer, immediately follow up with, “Could you give me some examples of this?” If the advisor struggles to give you some concrete examples with taxation around retirement, and answered they don’t offer tax advice, it means they likely aren’t very helpful with taxes, or aren’t well-versed in situations around retirement.
5. Are you an independent financial advisor?
When you shop for a car at the Toyota dealership, do they ever recommend you buy a Honda? Of course not, because they are employed by Toyota. The same conflicts of interest exist with financial advisors affiliated with the company that makes the products they sell. The majority of advisors are employed by a company that financially incentivizes them to sell the company’s products. Independent advisors avoid this by only recommending financial products that are separate from their company.
6. Do you ever receive a commission when I purchase a financial product?
If the answer is anything other than “No” be very careful. You should immediately stop thinking of them as a “financial advisor” and begin to think of them as a “financial salesperson.” A commission is a huge conflict of interest, and most of the time an advisor doesn’t have a legal obligation to act in your best interest recommending the product. Salespersons are valuable and a critical part of business, but they should be clearly labeled as such. Unfortunately, in the financial advice industry, financial salespeople are allowed to call themselves “financial advisors”.
7. What is the maximum number of clients you will serve?
If they say the number is over 100, you are likely going to be slotted into a system, and you won’t get much face time with your advisor. This is fine for some, but if you’re looking for personalized advice, you may want to try elsewhere.
See Optimum Retirement Planning’s answers to these questions below.
1. Are you a fiduciary?
Yes, we are a fiduciary 100% of the time with our clients. We are happy to put this in writing.
2. Do you charge a flat fee for your services?
3. Do you specialize in retirement planning?
Yes, 100% of our clients are within 10 years of retirement or are retired.
4. Do you advise clients on taxes?
Absolutely, there are too many tax consequences of retirement planning to ignore taxes. We educate our clients on the tax consequences of their investment and retirement planning decisions, and proactively plan for these to minimize their lifetime taxes in retirement. We do not prepare tax returns, nor do we give tax advice on complex or gray areas of the tax code. We also work closely with our client’s tax professionals to ensure your tax strategies are coordinated and effective.
5. Are you an independent financial advisor?
Yes, Optimum Retirement Planning only provides investment advisory services, and is not compensated in any way for our investment recommendations. If we mutually determine with our clients, they need bank or insurance products, we refer them to specialists in those areas. We are not compensated for these referrals.
6. Do you ever receive a commission when I purchase a financial product?
No, our only compensation is transparent fees paid by our clients.
7. What is the maximum number of clients you will serve?
Currently, we are looking to stop taking on new clients once we reach 50 client households. We may expand our client to advisor ratio in the future.
If you’re interested in finding a financial advisor that specializes in retirement planning and charges you a flat fee, book a call with us to get started.
None of the information provided herein is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement, of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. The content is provided ‘as is’ and without warranties, either expressed or implied. Optimum Retirement Planning LLC does not promise or guarantee any income or particular result from your use of the information contained herein. Under no circumstances will Optimum Retirement Planning LLC be liable for any loss or damage caused by your reliance on the information contained herein. It is your responsibility to evaluate any information, opinion, or other content contained.
