You’ve worked hard and saved diligently for years to prepare yourself for a successful retirement. Now that it’s within reach, you’re starting to take a serious look at when you might be able to retire and what that next chapter may look like.
As you start to wrap your head around making retirement a reality, you soon realize there’s an overwhelming amount of decisions that you need to make - what to do with your 401(k), how to draw from your investments the most tax-efficient way, when to claim your Social Security or pension, and what the heck should you do about health insurance?
For many families, it’s at this stage where they recognize they need some professional advice.
But where do you start and how do you know who you can trust?
Unfortunately, it can sometimes be challenging to discern the professionals who give advice that’s in your best interest from the salespeople that pretend to be doing the same job.
The good news is that there are many honest and expert professionals in Buffalo who provide comprehensive financial planning to help you make the right money decisions for you and your family.
If you’re ready to start your search for a financial advisor, you’ll first need to know what to look for, and what you should avoid. Here are the critical factors to consider.
The Landscape Today
Financial planner, financial advisor, wealth manager, investment advisor, financial consultant.
Our industry certainly hasn’t made it easy for consumers. With the endless titles and jargon, it’s no wonder that people procrastinate when seeking financial help.
It’s important to know that whatever someone decides to call themselves, the title itself doesn’t signify anything when it comes to experience, training, certification, or how they will serve you.
There’s a reason everyone has a nephew, friend, or brother-in-law that works in the industry. While most will say they provide financial planning, some only sell insurance or other products that may not be in your best interest.
So how can you narrow down the field when searching for an advisor?
Look for a CFP® Professional
CFP® stands for the CERTIFIED FINANCIAL PLANNER™ certification, which is widely recognized as the highest standard of excellence for financial planners.
Of the estimated 300,000 financial advisors in the United States, only 29% (Source: CFP.net) hold the CFP® marks. To receive certification, CFP® Professionals must complete a rigorous process that includes a bachelor’s degree, comprehensive course of study, passing an exam, three years of financial planning experience, and adherence to an ongoing code of ethics.
With more coursework and higher standards, CFP® Professionals are trained to implement a holistic approach to wealth management that includes investment management, retirement planning, insurance planning, tax planning, estate planning, and more.
Find a Fiduciary
Of all of the financial buzzwords, the most important one for you to remember is the term fiduciary.
Simply put, a fiduciary is legally and ethically required to put your interests before their own at all times.
Sounds pretty obvious, right?
Unfortunately, not all financial advisors are required to always act as a fiduciary. Sometimes, they do, and sometimes they don’t. Most of the large firms also operate under a “suitability standard,” meaning they’re only required to give advice that’s “suitable” for you — not necessarily that’s in your best interest.
When interviewing a financial advisor or financial planner, ask if they’ll be a fiduciary to you 100% of the time. If they say yes, ask if they’ll put it in writing. This is a standard request, and a red flag if they’re reluctant to do so.
By working with a financial planner who has pledged to be a fiduciary to you 100% of the time, you’ll receive genuinely objective advice specific to your situation.
Understand How They Get Paid
In addition to finding someone with the CFP® marks who also acts as a fiduciary, it’s critical to understand how your potential advisor is compensated.
When a financial professional operates under the “suitability standard,” they can sell products in return for a commission. While many ethical advisors earn commissions, it creates a potential conflict of interest in the advice they give.
Part of the reason our profession gets a bad rap is that consumers are often sold high-cost, overly expensive products that they don’t fully understand.
Instead, you’ll want to look for a fee-only financial advisor. The term “fee-only” means that the only compensation your advisor receives comes directly from you, the client, and they never sell products or receive commissions of any kind. This arrangement allows your advisor to provide truly objective advice. You’ll always know exactly what you’re paying and will never have to worry if they’re recommending a financial product just to earn a commission.
Watch Out for Investment-Centric Conversation
Back in the day, consumers used to pay financial advisors for their portfolio management and access to financial markets. Today, with the advancement in technology and the availability of information, the value of working with an advisor is in the advice, not the products.
No one can predict short-term market timing, and that’s perhaps never been more apparent than this year. If the primary focus of your conversation is around performance, “beating the market,” or their shiny investment process, you should be wary.
While investment management is an integral part of financial planning, it’s only one piece. The extent of a good financial advisor’s investment-talk should center around what you can control, diversifying your portfolio, reducing expenses, and minimizing taxes.
A financial planner’s job is much like a doctor’s in the sense that they can’t fully prescribe solutions without first having a diagnosis. The focus of the conversation should be first and foremost around your family’s unique situation and where you want to go, not the tools that help to get you there.
Look for a Specialty
Navigating the transition into retirement is a significant life change that comes with a unique set of challenges and decisions.
When selecting an advisor, it’s important to ask who it is they work with and what outcomes they help their clients achieve. Just like you wouldn’t go to a heart surgeon if you need a knee replacement, you shouldn’t readily hand your life savings over to a firm that claims to be all things to all people.
For example, at Eudaimonia Wealth, we specialize in helping families within 1-2 years of retirement. We focus on creating a framework for preserving your wealth, creating a reliable income stream, and reducing the overall taxes you pay in retirement. By working exclusively with families who are at or near retirement, we’re dialed into the unique challenges you face and understand where we can make the most meaningful impact with our planning.
No matter what your age or situation, it’s important to find an advisor that specializes in clients like you.
Find Someone You Like
Keep in mind that the best choice of advisor may come down to personality fit. Do you genuinely enjoy and trust the person you’re sitting across from?
Financial planning is a long-term, ongoing process that evolves with your life. Money conversations are incredibly personal, and it’s critical to select someone that you feel genuinely understands you and your family’s unique goals and needs. And sometimes that comes down to a gut feeling.
Putting It All Together
To recap, here’s what you’ll want to make to ask any advisor you might potentially work with:
- Are you a CFP®?
- Are you a Fiduciary 100% of the time?
- How are you compensated?
- What’s your investment philosophy?
- Who do you specialize in working with, and what value do you provide them?
You can also consider the following professional organizations and associations to help guide your search:
If you’re seeking a CFP®, fiduciary, fee-only financial planner in Buffalo, I can confidently say you’ll be selecting from a group of competent professionals with integrity who care deeply about their clients.
At the end of the day, the whole point of financial planning is to align your money with your version of a fulfilled life. These tips should help you find someone who can help you work towards that vision.
If you’re approaching retirement and aren’t entirely confident about the plan you have in place, please feel welcome to schedule a 30-minute call with me to see if I’m the right fit to help you out.
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Brett Koeppel is a fee-only Buffalo financial advisor, CERTIFIED FINANCIAL PLANNERTM , and the Founder/President of Eudaimonia Wealth. Eudaimonia Wealth is a fee-only, fiduciary, Buffalo financial planner and wealth management firm dedicated to helping families prepare for and transition into retirement by providing independent, objective financial planning and investment management advice.