Reader Questions Advisor Recommendation
I recently received a question from a reader in Florida who is taking an early retirement. Like many investors, he was confused after meeting with a couple advisors. My advice to him might save you from making a wrong decision, too.
"Phil" (not his real name), has the option of taking either a lump sum payment or a monthly pension from his employer. He goes on to detail his financial situation: 401k, money market accounts, house paid for, no debt, low monthly expenses. Phil has lived beneath his means, saved his money and achieved financial freedom.
Phil writes: "I met informally with 2 CFP's. They are working with people at [my company]...but they seem to only push annuities. After reading your articles on annuities I am cautious...I have always been conservative with my finances, but I realize that to retire at 55 I might have to expose myself to the equity markets. I would like to talk with an advisor who will show me multiple options and talk straight, with no fluff."
Here's a shortened version of my actual response:
"You are in one of the most important times of your life, and are facing what may be your biggest financial decision. Whatever you do, be careful.
It looks like one of your initial questions is whether you should take a lump sum. Generally speaking, I feel that people should take the lump sum because it gives them greater control, flexibility and access. It also becomes an asset that can increase in value and be passed on at death to your heirs.
There is risk in doing so, though. Many retirees have been duped by advisors into investments that weren't in their best interest and ended up losing large portions of it as a result. You have to be willing to invest some time and energy finding the advisor that is right for you. Even then, you will want to keep track of what is going on at least on a monthly/quarterly basis, so you can alert the advisor if you become concerned.
There are several things to keep in mind regarding choosing an advisor.
First, you aren't going to know if the advisor (or investments) you've chosen is the right one for you until probably 6-12 months down the road. Commission-based salespeople with their packaged products needlessly force you to make a 7-10 year time commitment. That's why it is VITAL that you not be in a situation where it will cost you thousands and thousands of dollars to make a change.
On the other hand, fee-based advisors like me only get paid for the time you use our services. There's no commission, no time commitment and no automatic surrender penalty. This gives you significant control and flexibility. You remain the boss. If I don't keep you satisfied then I'm not going to keep you as a client.
Second, beware of the advisor that promotes buy and hold. They're the ones that tell you to "just hang in there" while they watch your account drop in value--and do nothing. The diversification I use, combined with the technological safeguards I've created, result in my clients being comfortable going for the growth because they know I'll take action should things not go as expected.
Third, don't feel pressured by anybody to make a decision. There's no investment so great that you need to rush into it. You can take your time to find someone you feel comfortable with. Talk to their references (existing clients). Even then, only start with a portion of your nest egg and let the advisor prove him/herself."
As with Phil, you too need to beware of financial salespeople pushing pre-packaged solutions. If it's designed for the masses it's not designed for you. Don't give in to sales pressure. Take your time--this may be the biggest financial decision of your life. A wrong move is costly.
Just because someone has the right initials behind his or her name doesn't mean they will act in your best interest. Most won't. Be very skeptical. Do some independent research.
It didn't cost Phil a penny to get my opinion. It won't cost you anything either. If an investment is being recommended that you aren't sure about, I'll be happy to provide a second expert's opinion. Go to www.guardingyourwealth.com and click on Ask Jeff.
"Phil" (not his real name), has the option of taking either a lump sum payment or a monthly pension from his employer. He goes on to detail his financial situation: 401k, money market accounts, house paid for, no debt, low monthly expenses. Phil has lived beneath his means, saved his money and achieved financial freedom.
Phil writes: "I met informally with 2 CFP's. They are working with people at [my company]...but they seem to only push annuities. After reading your articles on annuities I am cautious...I have always been conservative with my finances, but I realize that to retire at 55 I might have to expose myself to the equity markets. I would like to talk with an advisor who will show me multiple options and talk straight, with no fluff."
Here's a shortened version of my actual response:
"You are in one of the most important times of your life, and are facing what may be your biggest financial decision. Whatever you do, be careful.
It looks like one of your initial questions is whether you should take a lump sum. Generally speaking, I feel that people should take the lump sum because it gives them greater control, flexibility and access. It also becomes an asset that can increase in value and be passed on at death to your heirs.
There is risk in doing so, though. Many retirees have been duped by advisors into investments that weren't in their best interest and ended up losing large portions of it as a result. You have to be willing to invest some time and energy finding the advisor that is right for you. Even then, you will want to keep track of what is going on at least on a monthly/quarterly basis, so you can alert the advisor if you become concerned.
There are several things to keep in mind regarding choosing an advisor.
First, you aren't going to know if the advisor (or investments) you've chosen is the right one for you until probably 6-12 months down the road. Commission-based salespeople with their packaged products needlessly force you to make a 7-10 year time commitment. That's why it is VITAL that you not be in a situation where it will cost you thousands and thousands of dollars to make a change.
On the other hand, fee-based advisors like me only get paid for the time you use our services. There's no commission, no time commitment and no automatic surrender penalty. This gives you significant control and flexibility. You remain the boss. If I don't keep you satisfied then I'm not going to keep you as a client.
Second, beware of the advisor that promotes buy and hold. They're the ones that tell you to "just hang in there" while they watch your account drop in value--and do nothing. The diversification I use, combined with the technological safeguards I've created, result in my clients being comfortable going for the growth because they know I'll take action should things not go as expected.
Third, don't feel pressured by anybody to make a decision. There's no investment so great that you need to rush into it. You can take your time to find someone you feel comfortable with. Talk to their references (existing clients). Even then, only start with a portion of your nest egg and let the advisor prove him/herself."
As with Phil, you too need to beware of financial salespeople pushing pre-packaged solutions. If it's designed for the masses it's not designed for you. Don't give in to sales pressure. Take your time--this may be the biggest financial decision of your life. A wrong move is costly.
Just because someone has the right initials behind his or her name doesn't mean they will act in your best interest. Most won't. Be very skeptical. Do some independent research.
It didn't cost Phil a penny to get my opinion. It won't cost you anything either. If an investment is being recommended that you aren't sure about, I'll be happy to provide a second expert's opinion. Go to www.guardingyourwealth.com and click on Ask Jeff.
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