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Important Questions to Ask When Considering a Financial Advisor

A common financial misconception in the world is that only people with loads of money need a financial advisor. But that couldn’t be farther from the truth. While getting a professional’s advice is important in any field, it’s especially relevant when it comes to your financial well-being and confidence. For example, I could probably figure out how to build a back deck on my house, but if I hire a contractor, I have the assurance that the deck will be structurally sound and not collapse while I’m out there working on my Irish tan.

Retirement planning is no different. Sure, you could probably figure it out by yourself, but what if you’re not handling it in the most efficient manner? Working with a financial advisor who supervises your retirement income strategies frees your time to focus on what’s important to you – family, friends, and fun – and not worry about running out of money once you retire. That’s the whole goal of a financial advisor – to help take the worry and guesswork out of your retirement income strategy and make sure your money keeps working for you in the most optimal way possible. 

Today, I wanted to share some questions you should have answered when considering a potential or existing financial advisor (and yourself!) to make sure they are the best fit for your particular situation. 

What is their area of experience?

Although there is no true “right answer” here, you need an advisory practice that, at its core, seeks to understand your goals, aspirations, risks, and fears before making any recommendations.

There are so many facets to financial strategies that tend to change throughout the different phases of your life. An ideal advisor is one whose experience lies in the areas in which you need the most help.

For instance, an advisor may focus on Social Security and Medicare, but if you’re 30 years old, you may need more help figuring out how much of a home you can afford, setting up a college fund, or how to reach your long-term goals. Thus, that advisor is probably not the best match for you.

On the other hand, if you’re nearing retirement age, you’ll be more interested in advisors who have experience in legacy planning or understand what Medicare supplemental plan you need to help make sure your money is protected. Asking this question will help inform you whether the professional you’re speaking with is the right fit for your stage in life.

How do they manage financial matters not in their area of experience?

This question is often overlooked. The financial world is multifaceted and it’s unusual to find one advisor who wears all these hats. Honestly, if they claimed to I’d find that suspect. You’re familiar with the expression, “Jack of all trades, master of none,” right? Does this advisor handle all financial matters? Do they have strong relationships with tax accountants? Estate lawyers? Medicare professionals?

It’s not just about returns and making money, although that’s really important. For example, with the exception of their home, the largest assets for most people we meet are their 401(k) or 403(b) employer-sponsored plans. They look at the total and think it’s all theirs, but the reality is they have a silent partner named Uncle Sam who is going to take a piece of that money. It’s imperative you are using every possible piece of the tax code to help minimize your tax liability. You’re not trying to avoid paying taxes, but you don’t want to overpay if you don’t have to. How can your advisor help develop a tax-efficient strategy for this?

As you get closer to retirement, these financial matters are critical to a comprehensive strategy, so bear in mind that your strategy would benefit from a team working together and understanding each facet of your strategy.

How often do/will you meet to make sure your strategy is on track?

If you want a long-term relationship with your financial advisor, you must ensure that it’s a two-way relationship and that you’re in communication regularly. For instance, your financial advisor should be able to anticipate any changes to the tax code or market volatility that could impact your retirement strategy. 

Knowing where you stand financially is important, and you want an advisor who keeps you in the loop along the way. Are you happy with the level of communication with your advisor? Do you speak with them on a frequent basis? Who is initiating that communication? You or the advisor? If it’s you all the time, is that a problem?

Communication is important in any relationship, the one you have with your financial advisor is no different. Make sure you know when you will hear from them and how to contact them. I’ve spoken to too many people who always have to initiate their communication with a financial advisor, which is never a good sign.

Good advisors take a more proactive approach and stay in constant communication with their clients so they understand what’s going every step of the way – they let clients know where their money is coming from when times are good, and let them know how their money will be protected when times are bad. Because, at the end of the day, people just want to make sure they’re going to be ok in retirement and never run out of money. 

What kind of relationship do you envision with your advisor? 

Sometimes when people sign on to a new firm, they’ll meet two or three seasoned advisors at an initial meeting only to be passed off to servicing advisors who are much less experienced once the ink has dried. That’s an ok business model if that’s made clear at the start of the conversation. But not all financial professionals take that approach. So know your preference.

At South Shore Retirement Services, for example, we want the people you meet when you walk through our doors to be the same people you’ll meet with going forward. Our rationale behind this decision is that I want the relationship will continue throughout a client’s retired life. Not just at the start. Not just when they’re transitioning into retirement, because lots can happen during life. People welcome new grandchildren. People get sick. And I can’t tell you how many knee and hip replacements come up.

Clients need different things during these seasons of life. I find with a smaller organization, they are confident when they pick up the phone that they’ll speak with someone they know. This also holds true in the reverse, they expect a call when we anticipate a change in their situation. It’s all about the relationship and if you don’t have a relationship with someone who is managing your life savings it can be a problem.

Does your advisor communicate clearly or in jargon? 

A lot of clients have shared experiences with me where they’ve had advisors who talked down to them or tossed around jargon and esoteric phrases that only confused and overwhelmed them.

The job of a financial advisor is not to dazzle you with their intelligence, but to help you understand why you would do something and what the impact of XYZ strategy might be. When you leave a meeting with your financial advisor, you should feel more confident. It’s not our clients’ job to understand every detail of the financial world. It’s the advisor’s. That’s why they hired them. But they should help you understand the basics of how your money is working for you, what options are available, and why you’re pivoting to a better strategy when one arises. 

Does your advisor understand YOUR goals?

Great advisors understand that the key to success lies in first understanding your needs to accomplish your specific goals. We constantly talk about goals, and they change over time.

When you’re still working, your goal is likely to accumulate. You want to accumulate as much as you can for your retirement years. But when you hit your 60s and 70s, you’re nearing the distribution phase and you need to put accumulated money to work. Once you retire, your goals may change. Some people want to travel more or spend time with their grandchildren in Arizona. Some just want to play golf twice a week or go on a cruise once a year.

As goals change, you want to focus on the things you want to focus on and not worry about having enough money to accommodate the lifestyle you’ve worked hard for. That’s why it’s invaluable to have advisors who listen to you, understand your goals, and work to make them happen. 

If the chemistry isn’t there, keep looking

I know it can feel intimidating to search for an advisor – the financial services industry is intimidating enough without interviewing. But keep in mind, the right advisor for you will ensure you feel comfortable and free to ask questions.

If you’re not sure where to start in your search, ask your friends, colleagues, neighbors who they work with. Google financial professionals in your area and read their reviews. If you’re considering an advisor, ask them to connect you with an existing client so you can chat about their experience. A good advisor will want to put you at ease and be happy for you to speak with a client.

At the end of the day, if you don’t feel a basic level of comfort or if your gut is telling you it isn’t a good fit, head for the hills. It’s your finances, your retirement, and your life. Make sure you feel confident about who you’ve chosen to help manage it.

Rowlette and Associates, LLC DBA: South Shore Retirement Services – an affiliated company – is an independent financial services firm offering both insurance and investment services. Investment advisory services are offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Rowlette and Associates, LLC DBA: South Shore Retirement Services not affiliated companies. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 01259149 – 05/22

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