Here’s the analogy I would use when it comes to hiring a retirement adviser.
I believe you have been to more than one private hospitals before. You will have preference on one hospital over the others though. Assuming the difference in healthcare costs is negligible among these private hospitals, it is likely your preferred private hospital is exceptional. Exceptional in the sense of how transparently sensitive and caring the medical practitioners are. In a realm that is often populated by practitioners who can come off as detached and overly scientific in their approach, it is always a breath of fresh air to encounter a practitioner who truly seems to have your best interest at heart.
It is the same when you seek retirement advice.
After our health, our concern for our financial well-being in retirement occupied a high place on our totems of life. “Wealth care” ought to be approached with the same level of competence, caring and integrity that has proven to produce great results in the realm of health care.
The temptation to put one’s interest ahead of those whom we ought to be serving can and does manifest in every realm, whether it be a doctor recommending a procedure, a mechanic recommending a repair or a retirement adviser recommending how you best manage your retirement funds.
In every realm of practice you will find the Good, the Bad and the Ugly. Many people have been harmed by incompetence, by a lack of concern and negligence, or by a lack of integrity in their financial matters, just like they may have been harmed by the same inadequacies in their health care pursuits or other matters in life.
If you have a bad experience with a doctor, do you neglect medical care? Think of money management as fiscal health. For every selfishly-motivated financial sales person, there is a highly competent and personable professional out there who has built his reputation by helping others reach their goals by putting clients’ interest first. We simply need to know how to distinguish one from the other. It can be easy to get fooled.
Here, I want to make the case for finding a retirement adviser who is competent, caring and trustworthy for the very simple reason you are saving yourself the stress is worth the price of oversight in the long run. For the purpose of this sharing, I will use the specific term ‘retirement adviser’ which refers to an independent financial adviser/planner whose service are consultation-focused instead of product-focused.
Some of the reasons I think it is worth considering hiring a competent retirement adviser include:
1) You do not always know what you do not know on retirement
Do you remember the online brokerage or forex trading ads and the do-it-yourself proponents who wanted you to believe that nobody is to be trusted and that you should do this all on your own?
Call me stupid, but when I am looking to blame someone for making the wrong financial moves back in the days when I was still working as an engineer, I find myself at the top of the list.
I have made more than my share of mistakes – many of which would have been averted with a professional consultation. The opposite also holds true. There have been incidents when my gut feeling were right and I allowed a professional to talk me out of a decision.
My point is – I’d rather find an expert in that particular field, worthy of my trust and not have all the stress myself. An expert that advises and consults, not product-based or commission-driven – when I think I have an idea.
2) You are Tempted to Follow the Crowd
Bubbles occur in the market because everyone is doing the same thing and it also happens to the worst possible thing they could be doing at the same time. The common thread through bubbles is greed. This is human nature, and it is unlikely to change in the next one thousand years. People will follow other people, and majority will get burned. It is good to seek some contrarian advice or second opinion, whatever you want to call it – every now and then.
3) Managing Money is Time-Consuming and Stressful in Retirement
I see many folks who are what I would call ‘hobbyists’ with their money – they devote a great deal of time to market news, stocks and fund prices. However, I rarely see such a hobbyist who is not fairly high strung and experiencing manic periods of financial stress.
The fact is – there will always be stress around financial decision making, but you need to choose between the stress of finding the right advice or the stress of advising yourself on a day-to-day basis.
Some people manage their own stocks and/or mutual fund portfolios and get decent returns. Some of these people truly are savvy investors, and others are fortunate beneficiaries of a bull market (or they simple are missing bear markets) and good timing.
The more your portfolio grows, the more you may feel the need to get some help in making the right financial decisions. This is more true as you age, because you lack the time to recoup the losses from financial mistakes.
Ask yourself the 3 questions below:
- Do I know everything I need to know about asset allocation and protection, tax-reduction strategies and estate management?
- Do I want to invest the time and effort to learn these issues?
- Do I want to continue invest the time it takes to keep up with the market and remain competent as an investor?
If you answered YES to these questions and have time and interest in devoting yourself to building and protecting your assets, then you can go it alone.
One caveat – don’t assume you can possibly now all there is to know. Even if you want to do it on your own, it would be wise to pay for a consultation and get some second opinions.
If you know exactly what asset allocation you need and are not bothered by the stress of keeping up, then you may be a candidate to do it on your own. This assumes you are well-informed and can keep up on these holdings for any changes that could threaten the security of your retirement nest egg.
What you need to know about engaging a retirement adviser
In the financial industry, you have brokers, planners, advisers, bankers, etc. Some of them are so busy selling that they don’t really keep up with the products they are supposed to be expert in. They just keep telling the same story and selling the same products to everyone. Others listen with great curiosity to each of their clients to figure out a strategy that is best for clients, then work hard to earn the client’s trust.
There are bad and good apples out there. You need to establish a clear profile of the type of retirement adviser you want to work with and start asking questions until you find a match that feels right to you. Finding a match is as much about personal chemistry as it is financial philosophy.
The 8 questions below can be used to assess a retirement adviser, and doing this will greatly increase the odds of finding the adviser you need for your retirement stage in life.
- What was your first impression of the individual?
- What kind of questions did the financial professional ask you?
- Did the financial professional demonstrate good listening skills?
- Did the financial adviser explain matters in a language you could understand, or did he use jargons and talk over your head?
- Is he willing to disclose her own personal holdings?
- Does he has a track record that can be documented?
- Does he articulate a clear philosophy regarding investments and wealth building?
- Ask him how and why he got into this industry
If you walk out of an interview satisfied that these bases have been covered, you have a greater chance of partnering with a trustworthy retirement adviser. Cunning individuals may have the ability to fake these integral traits, but they cannot fake them for long. You want a concerned and competent professional who is in the profession for the right reasons. You want to find out what the personal motives are. After taking him through the preceding questions, you will have a fairly good indication