How Do You Know if Your Advisor is the Right One for You…

There are four indicators that can tell you whether your financial advisor is the right adviser to help you through retirement. Today we’ll talk about one of them.


Several years ago, either MarketWatch or SmartMoney wrote an article with a title that read, “Your Current Advisor is Probably Not the Right Adviser for your Retirement.” In the article they highlighted how when you invest money while you’re still working, that period of life is about growth and accumulation. Once you retire, the game changes. You’re not putting money into your accounts anymore. Now, you’re taking money out. As a result, you have some different goals that you’re trying to accomplish. You’re trying to protect your principal, take an income, continue to grow the portfolio, deal with taxes and healthcare issues, and many other things that come into play in retirement.


This article was talking about how the skill set that your advisor needed to get you to retirement is no longer good enough once you’re there. You need an advisor with additional skills to help you get through retirement comfortably.


I’ve surveyed a lot of people over the years of my career, and the overwhelming majority of them want to maintain their lifestyle and their financial independence during their retirement years. Imagine that… all the way to the end people don’t want to run out of money. How astonishing.


If you don’t have an advisor and you do everything yourself, one of the things you must be careful about is the fact that you don’t know what you don’t know. When you invest for yourself, if you don’t have an advisor, you may not even realize what you’re missing. It’s not so hard to invest for yourself when you’re still working, but when you’re retired, it’s a whole different ballgame, and a lot of different skill sets come into play.


If you do have an advisor, there are different things you should be cautious of. The first indicator that they might not be right for you is the degree to which they talk about and take action to protect your assets. What strategies are they using to protect the assets you’ve worked hard to build? My parents are a good example of the importance of using wise strategies. I’ve told the story a few times before, but it’s important, so I’ll tell it again.


My parents retired back in January of ‘99. When my dad retired, he had $300,000 in his 401K and he asked me to manage it. He wanted me to protect his principal because it was all the money he had and he needed it to produce income, grow a little, and last his lifetime.


What was the first thing he asked me though? He asked me to protect his principal. It’s all about protecting. So, I did what I was taught to do. I put my parents in a diversified balanced market portfolio and 90% of their money went into some type of mutual fund. Today, people might use exchange-traded funds instead of mutual funds. If you have a financial advisor, and they’re still using mutual funds, it’s time to get a second opinion, stat.


But going back, pretty much my parents’ entire portfolio was in mutual funds. Their very first year of retirement was 1999. That year, the market went up, and it was a good year. At the end of the year, even after taking out $12,000, they had $320,000. Then 2000 hit with the dot-com crash, 2001 with 9/11, and 2002 with a recession. For three years the market went down. My parents were taking distributions year after year and by the end of 2002, their $300,000 had shrunk to $157,000.


That approach we’d tried did not work when markets went down. It only worked when markets went up. Unfortunately, I didn’t do a good job of protecting their portfolio during those down-market years. I did what I was trained to do, but it turned out that what I was trained to do did not work in this situation The financial industry taught me the wrong way.

This type of approach works great for the financial industry because they keep getting your fees, whether you make money or not. For my parents and for millions of other families in the retirement stage, it didn’t work so great.


If you’re nearing retirement, has your advisor set you up fully invested in stocks, bonds, and mutual funds? If they have, they’re not protecting your assets and they’re not the right advisor for your retirement.


Another question you should ask is to what degree has your advisor moved you out of the market when it goes down? Do they move you out of the market into cash or short-term bonds, or do they tell you to buy and wait it out? I don’t have research on this, but from my 25 years of personal experience, the most common cause I factor I see in people going broke in retirement is that they’re buying and holding. I believe this will not work if the markets go south.


I have one last question; to what degree have your advisors put you in accounts where they are insured or protected, like indexed annuities, to provide income for you in retirement? If they aren’t even talking about that, I would suggest you look for a second opinion.


I’m not saying you should put all your money in index annuities, but they have the potential to be a great tool for income and safety. If your advisors aren’t talking about them at all or are lightly dismissing them, it may be time for a second opinion.


Retirement is a different stage. You’re not adding to the portfolio, you’re either adding nothing or taking money out. Either way, it’s a distribution and if you’re in an IRA, you have forced distributions down the road. What you have is all you have, so it needs to last.


The primary job of a retirement advisor is to protect your assets. Is your adviser talking about this and more importantly, doing something about it? Talk is cheap. Action matters. If we’re describing your situation and you’re thinking about getting a second opinion, let me tell you about one of the things we do for free. We create a personalized Retire Right Report. Right is an acronym that stands for Risk, Income, Growth, Healthcare, and Taxes. These are the five areas that I feel you must absolutely must get right when it comes to your retirement planning.













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