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You’re ready. It’s finally time to get help planning for your future. You are about to turn 62 and are wondering if you should start Supplemental Security Income (SSI) early. It’s a decision that affects the rest of your life. Maybe it’s late in your career and you just got a promotion that puts you a step closer to retirement. Or, you’ve been retired for years and the market has you doubting your investment approach. Whatever has you pondering the path you need to take, and if you’re considering professional advice to get you there, congratulations. Now all you need to do is pick the right person to give you that advice.
Financial illiteracy cost Americans $436 billion in 2022. According to the National Financial Educators Council study, the average U.S. citizen lost $1,819 in 2022 because of insufficient personal financial understanding.
With all the alphabet soup after the names of financial professionals, it’s hard to know who will best fit your needs as a trusted advisor. There are over 200 professional designations in the financial services industry. The most respected and widely known are CFP® (Certified Financial Planner), CFA (Chartered Financial Analyst), CLU (Chartered Life Underwriter), and CPA (Certified Public Accountant). All these designations require years of education, a certification process that tests that knowledge, and ongoing continuing education to make sure the professional is up to date on industry changes.
A Certified Financial Planner is a fiduciary and is required by the CFP Board to act in their clients’ best interest, putting their clients’ interests ahead of their own. This means that, like all fiduciary planners, they have an obligation to provide you with unbiased advice and avoid conflicts of interest.
Chartered Financial Analysts work with the investments themselves. They are often portfolio managers and have gone through rigorous education and examinations to certify their competence.
A Chartered Life Underwriter is a professional in the life insurance and estate planning arena and has gone through the courses and experience requirements to earn the designation.
Last on this list is a CPA, or Certified Public Accountant. They are more than just someone who prepares tax returns. They have gone through the requirements of the American Institute of Certified Public Accountants and completed their state regulations to pass the exams and earn this top accounting designation.
Pro Tip: There are many other reputable designations such as MBA, ChFC®, CEBS, CPCU, and more. Unfortunately, many designations are much easier to get. Some are as easy as joining an organization and paying a fee. The primary takeaway is to do your homework and understand what it took your potential advisor to earn the letters after their name.
Additionally, your planner or advisor will be licensed or registered in some way. Registered representatives have passed series 6 or series 7 securities examinations and must follow the regulations governed by FINRA. An RIA, or Registered Investment Advisor, is governed by the Securities and Exchange Commission (SEC). Calling yourself a financial planner or RIA means you have passed either the series 65 or series 66 securities examinations. Life, health, and annuity agents must have passed their state insurance department exams. Just because they’ve passed an exam doesn’t guarantee that they are a good advisor. It is just the bare minimum required to do the job.
The first question to ask anyone who calls themselves a financial planner, investment advisor, or wealth manager is “Are you acting as a fiduciary?” The rules have changed over the years, but even now it is hard for most people outside of the financial services industry to tell who’s who. Many times, a designation alone will tell you. As I said before, a CFP® is required to act as a fiduciary. All fiduciary advisors and planners act only in their clients’ best interest and work to avoid any conflicts of interest. Where there are conflicts of interest, they clearly and completely disclose them.
Not all financial planners are the same. There are fee-only planners who charge an hourly, asset-based, or flat annual fee. This type of planner makes no commission and acts only as a fiduciary. They often provide the information and plan for you to implement. There are fee-based planners who offer both fee and commission options. And finally, there are financial planning services offered as a free service for being a client of the company. These tend to provide simple planning options for having a minimum amount of assets with the firm.
Ask your potential advisor who they specialize in working with. Many planners and advisors have niches that they know inside and out. Some work with teachers or doctors, while others specialize in specific areas such as estate planning. Make sure what you need and what they do matches, or find someone who is a better fit. Millionaires have a different set of problems than new families and vice versa.
There are many advisors who focus strictly on investments. This is part of financial planning, but it’s not a comprehensive financial plan. If your advisor isn’t starting with where you want to end up, you’re not going to get there! Are your goals realistic? True financial planning should consider where you are now and what you need to do for the future; no matter if it’s the kids’ college first and then retirement, or retirement and then your estate. These advisors need to have a process to make your plan and be able to explain it to you in simple terms. A 2022 J.D. Power study found that the giant wealth managers marketing their comprehensive financial advice are only providing that service to just 14 percent of their clients!
The regulations have changed, especially where retirement accounts are concerned. In many cases, everyone in the financial services industry must act in their clients’ best interest on these types of accounts. There are other situations where financial salespeople must only ensure an investment is suitable. The suitability standard is only that the investment is appropriate, not necessarily in your best interest. This could mean you end up paying high commissions or could be stuck in an investment that is difficult to move.
Always know whose best interest is guiding them, yours or theirs.
The first red flag is related to best interests. Listen to what they are saying in their advertising, on their website, and in your first meeting. Are they asking questions about what is important to you, or are they telling you about them, their firm, and their investment products? How many times do you hear them say “I” or “we” in the presentation? This process should be about you and what you want and need, not about them. If they spend most of the time telling you how great they or their products are, that’s who and what they’re focused on.
It’s fine to ask your potential advisor how long they have been in the industry. Ask them what credentials and licenses they have. What type of clients do they normally work with? Can you talk to one of their current clients? This series of questions will let you know if you’re dealing with someone with decades of experience or is brand new to the industry. Do not be fooled by age; many people come into the financial services industry as a second or even third act and may have little experience. Youth is not necessarily a negative. A recent MBA or CFP® graduate has fresh ideas and training. Under the guidance of a good mentor, they can do exceptional work.
Recent changes to advertising regulations now allow advisors to use testimonials and refer prospective clients to talk to existing clients. While no advisor is going to send you to an unhappy client, those that have none for you to talk with could be another red flag.
There should be no mystery about how they make money. They should be clear and transparent about what they charge and how much they are making in the relationship. A vague or evasive answer about compensation is a red flag.
Make sure you’re getting the planning services you need. Any financial professional that is pressuring you to buy something or take action without a clear explanation of how it’s in your best interest is the final red flag you should be aware of. Your financial planner should be competent and explain things clearly. You need to be comfortable with them to make this a relationship that will most likely last for a large part of your life.
The Schwab 2019 Modern Wealth Index found that just 28 percent of American citizens have any form of written financial plan. Interestingly, in 2020, the Employee Benefit Research Institute found that over 70 percent of Americans’ retirement plan was to keep working past normal retirement age. With this making up most Americans, those in the 70 percent who plan to keep working should join the 25 percent who have some kind of written plan.
Working with an accredited financial planning professional to create your financial plan can give you the one thing that can’t be bought: peace of mind. It’s the peace of mind that comes from knowing that your finances are in good hands. These professionals can take care of the details and make sure that you are on track to achieving your financial goals, so you can focus on other important aspects of your life.
For more help with financial planning in retirement:
Stephen J Landersman, CFP, is a nationally recognized financial planner, speaker, and author. He is the co-author of Retire Like a Shark with Kevin Harrington, an original Shark on ABC’s Emmy award–winning show Shark Tank.
Landersman is the founder and president of Unifi Advisors LLC, and he’s been successful in the financial services industry for over 30 years. He earned his CFP designation in 1993 and has been following their tenants of being a good fiduciary ever since.
His focus over the last 2 decades has been on retirement and estate planning since, too often, one goal is unnecessarily sacrificed for the other. When you first meet Stephen, it’s easy to see why people trust him with their future — he has a wealth of knowledge but explains complex concepts in a way everyone can understand. He aims to make his public speaking engagements not only informative but enjoyable. This is something unique in a button-down, jargon-rich industry.
Stephen and his wife enjoy his classic car collection, including her favorite, a Karman Ghia. They like to travel, play golf, and support local charities that positively impact the lives of those in the community. His motto says it all: “Do well by doing good!”