If you are in or near Retirement here are two important questions to ask your financial advisor.

Question #1: What are the Advisor’s Areas of Expertise in Retirement Planning?

Here are some areas of expertise that would be useful:
Helping you prepare a reliable and well thought-out budget and cash flow for retirement
Diversifying some of your accumulated assets into guaranteed-money strategies
Planning for the most effective way to utilize Social Security
Developing solutions for a lifetime of guaranteed income for both you and your spouse
Offering tax advantaged solutions for assets and income
Helping with health care (Medicare) planning and protecting against the high costs of long-term care
Assisting you and your beneficiaries with qualified plan rollovers and distributions
Setting up multi-generational stretching of assets
Helping you build a legacy for your loved ones and
Proper Estate planning

If you already have an advisor, in what ways do you consider that person to be an expert in retirement planning? And, in what ways has that person had a positive impact on your retirement or the planning for your retirement? Be honest. Measure their results through good times and bad. Would you truly recommend this advisor to another?

Question #2: How will the Advisor be paid for their service?

You want a professional who can balance your need for trustworthy advice with his/her need to make a living providing it. No one works for free! There are basically three choices for how a Financial Professional will be compensated for service. No one choice is necessarily better or worse than another. And don’t allow a fee-based financial planner to convince you that their way is the best way.

Related Article: What Would You Need to Retire with Financial Peace-of-Mind?

Choice 1: Fee-Only for Service:
A fee-only financial advisor is one who is compensated solely by the client. A fee-only advisor will most likely charge you for service regardless of how successful their advice turns out to be. And, their fees may recur annually and be based on a percentage of the assets they control under management. Don’t bite on the premise that because an advisor is fee-based, it means he or she is unbiased in their recommendations. Many fee-only advisors are far from unbiased, especially when it comes to commission-based products such as annuities.

Related Article: Three Mistakes People Make In or Near Retirement.

Choice 2: Commission Based:
In this case, the commissions will be paid either by you, out of your pocket, or in a much better arrangement, the commissions will be paid by the companies from which you purchase the financial products that have been recommended by the Financial Professional. As for the claim made by some fee-only advisors that agents who accept commissions have a conflict of interest, I would say that a truly ethical professional will always recommend what is in the best interest of the client, regardless of commissions. Commissions do not create a conflict of interest. Bad judgment does. Just look at Bernie Madoff. In his case, there were no commissions involved; only fees.

Choice 3: Combination of Fee and Expenses for Service and Commission:
This can be the costliest form of compensation for you depending on the success of the advisor’s recommendations relative to the size of fees, expenses and commissions that are being charged to you and that are coming out of your pocket. So get a full breakdown of what’s going to the advisor, whether commission or a fee, as well as the underlying costs of the investment itself.


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Written by: Steve Geist, The Retirement Guy
Financial Strategist – Retirement Plan Specialist