Plotting your financial future poses a daunting challenge, even if you’re among the most disciplined, industrious savers. That’s why many investors seek a financial advisor to help them attain their retirement goals.
Selecting the right advisor to help you reach your retirement goals requires research. Just because someone comes across as friendly and successful doesn’t mean you should sign on as a client.
“For many people, it’s the single most important financial decision they will make,” said Barbara Roper, director of investor protection at the Consumer Federation of America in Washington, D.C.
The most common way to find an advisor — asking friends and family — is also one of the least effective. Referrals from well-intentioned people closest to you can lead you astray.
“Although many say that they get referrals from friends and family, I’ve never seen that to be a good idea,” said Sheryl Garrett, a certified financial planner in Eureka Springs, Ark.
She’s also founder of the Garrett Planning Network, a national group of roughly 280 fee-only advisors.
Because everyone faces unique circumstances, Garrett argues that an advisor who excels in serving one type of client may not prove equally great for another client. It’s better to vet candidates by focusing on their credentials and retirement planning expertise.
Advisors with a certified financial planner (CFP) designation have undergone “a rigorous training and education process,” Garrett says.
Other professional certifications, such as chartered retirement planning counselor (CRPC) and certified retirement counselor (CRC), further indicate an advisor’s commitment to understanding the complexities of retirement planning.
When evaluating an advisor’s ability to help pave the way for your retirement , take a holistic view. Look beyond your projected investment returns.
“Think in terms of your lifestyle, not just your retirement nest egg,” Garrett said. “You need someone who knows about all aspects of retirement life, from issues tied to aging to health care to home renovations if your mobility is challenged.”
In addition to checking an advisor’s credentials, ask if a financial planner participates in a network of respected peers. Some organizations assemble national networks of advisors who must meet certain prerequisites to join.
The Garrett Planning Network conducts a background check on each financial advisor it admits. The XY Planning Network maintains an online database of advisors who sign and date a fiduciary oath to put the client’s interests first. Both groups focus on fee-only planners.
If you’re considering a specific advisor, use Brightscope.com to see if that individual has any disclosures with regulators, such as the U.S. Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA).
After clicking on the advisor’s name, hit “licenses.” A red flag icon indicates disclosures.
Using FINRA’s ” BrokerCheck ” service, you can confirm an advisor’s certifications, licenses and employment history.
It includes each broker-dealer’s Central Registration Depository (CRD) number. Advisors file a Form ADV with regulators and become part of the Investment Adviser Registration Depository (IARD) system, which is administered by FINRA.
Conducting due diligence is especially important when you seek retirement planning expertise, because unscrupulous planners can cause lasting harm.
Garrett cites a case in which an advisor — a self-proclaimed “retirement specialist” — convinced workers at a telecom company to abandon their defined benefit pension plan in favor of a variable annuity.
That proved a costly mistake for employees, but it netted the advisor a hefty commission.
“There are a range of people out there who call themselves financial planners or financial advisors,” Roper said. “And using the term ‘retirement specialist’ means nothing.”
Meet First, Then Hire
Regulatory scrutiny of financial planners is on the rise. In early March, the SEC announced the creation of a new office to oversee financial advisors.
Meanwhile, the CFP Board offers a host of resources to help investors maximize their relationship with a financial planner. Its website includes steps consumers can take to work with an advisor, whether they are entering midlife, nearing retirement or are already retired.
How can you assess an advisor’s familiarity with retirement issues? Beyond confirming their CFP designation, schedule a face-to-face meeting.
“Sit down and interview an advisor,” said Pamela Sandy, a certified financial planner in Cleveland, Ohio. “It’s a two-way partnership.
You want to have a long-term relationship with someone who’s helping you plan for retirement, so it’s important to get to know them and make sure you’re comfortable” with them.
Sandy, who’s also president of the Financial Planning Association, suggests that prospective clients ask advisors, “Do you put my best interests first?” She also urges investors to learn about the advisor’s compensation.
Posted by: The Trust Advisor