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  • James Veal

I'm Retiring Soon! What Are the Top Questions to Ask A Financial Advisor?


There are several financial transitions throughout life. One of the most significant financial transitions is retirement. The shift from pre-retirement when you are earning, saving, and growing assets to retirement when you are withdrawing assets is monumental. A successful retirement transition can make or break retirement.


It’s important your retirement financial advisor is able to make this journey with you. If you’ve never worked with a financial advisor or if you already have a financial advisor but are not sure if they can help you make the retirement financial transition, the following five questions will help you better understand their capabilities, experience, and philosophy when it comes to helping you create a successful retirement.


1. Why do you do what you do?


This is a question that doesn’t get asked often enough. At the end of the day, you don’t just want an advisor to legally put your interests ahead of their own. In fact, you don’t even want an advisor that has a moral obligation to put your interests ahead of theirs. You want a financial advisor that is honored to always put your interests ahead of his/her own – an unbiased and independent steward of your money. Talk to the advisor. Find out what makes him tick. Why does she do what she does? Ask why they do what they do so you can learn why they want to work with you.



2. How long have you been working as a retirement financial advisor?


I’m not certain if you've heard about the 10,000 hour rule before. This rule was coined as a result of the work by psychologist Anders Ericsson on exceptional performers. His research shows that great performers practice a lot. The 10,000 hour rule is a rule-of-thumb for how much practice is required to develop an expertise in a field of study. What this means is that it often takes at least 10 years of focused effort and experience in order to gain mastery in an area. However, there are some talented and skillful retirement financial advisors out there with less experience. But keep this in mind when you interview retirement financial advisors.



3. Does your firm hold my money and investments?


What you want to hear is "no". There is a clear - but significant - difference between a firm that manages your investments and one that manages and holds your investments. It is hard to overemphasize the importance between these two types of retirement planning firms. Why is this question important? It has to do with investment fraud (remember Bernie Madoff). If the firm managing your money also holds your money, there is a greater opportunity for embezzlement. The goal is to protect yourself and your finances as much as possible. This is why I feel so strongly about having a custodian -- an unaffiliated and large firm – hold your investments (such as Charles Schwab, TD Ameritrade, Fidelity, etc.) and a separate RIA retirement advisory firm to manage the assets.



4. How do you make money?


There is nothing wrong with getting paid to provide expertise and a service. At the same time, you need to know who you are working with and how they get paid. It’s important that you are getting value and expertise that exceeds what you are paying. If you work with a good retirement financial advisor, this shouldn’t be too difficult. There are many ways to reduce your taxes, plan your estate, build an appropriate retirement asset allocation, and help you create lifetime income to live on in retirement. Good retirement advice should more than make up for the fee.



5. Can you help me create an income strategy for retirement?


In retirement, this is one of the most critical and overlooked areas. Retirement is all about income. Once you stop working, the only sources of income for most retirees is Social Security, maybe a retirement pension if they are lucky, and their investment portfolio. A good retirement plan is one that provides the necessary income to live on and one that lasts a lifetime. This requires special planning and an investment approach that may look different from the accumulation phase during the working years. Your retirement financial advisor needs to be well-versed in creating retirement portfolios that provide for lifetime income and be able to communicate their approach to you in a way that makes sense.


If you are in or near retirement, seeking advice from a professional retirement advisor is usually a good decision. Speak with two or three of them to get a feel of their retirement planning process. In the meeting, just remember to include asking the advisor these five important questions to get a general sense of their ethics and if this is someone you would want to work with.

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