Many people nearing retirement age wonder whether they would benefit from securing the services of a professional financial planner. The answer is, most likely, yes. A good planner, who is your advocate (a fiduciary advisor) in all things, can make a big difference. But the specific benefit for you will, of course, depend on the details of your situation.
As you look at the potential value of working with a financial planner, you could see benefits in several different areas:
- Advice about how to
prioritize your financial goals can fundamentally affect your retirement. Some
questions a financial advisor can help with include:
- Can you afford to travel on a big vacation trip every year in retirement, or should it be every other year? The difference could be major.
- Can you benefit from moving nearer to your grandchildren and moving to a low-tax state?
- Advice about managing
risk to your financial plan is another
important area. When this is done well, it’s also difficult to measure because it’s about preventing a train wreck
that would destroy your plan. If it works well, there is nothing to see. Financial
advisors can help you determine:
- Do you have enough life insurance to protect the family from both the risk of disrupted income and the expense of being a one-earner family?
- Do you have health insurance and long-term care insurance to be sure that retirement does not get consumed by a negative health event for one partner?
- Advice about what to
do when investment markets are going rotten
can be priceless. This includes:
- Having the wisdom to understand when it may be valuable to adjust your lifestyle.
- Knowing when to change investment strategy and when to “trust the process.”
- Having an investment plan that is more resilient during challenging times, giving you more flexibility.
- Advice on what investments to own can make a difference on your performance.
- Advice on what investment accounts to use can make a big difference on the tax impact on your investments.
- Advice about how much to withdraw from accounts and when to make those withdrawals can significantly affect financial performance.
- Advice on how to react to unexpected financial news can be priceless. Having a trusted resource with whom you can discuss upsetting or confusing news can be a significant comfort.
Morningstar Inc., a global financial data firm, did a research study to measure the value of professional financial advice and the estimated and average benefit of about 2.45 percent per year.
| Morningstar Advisor Gamma | |||
| Investor question | Benefit of financial advice (%) | ||
| Low | Average | High | |
| 1. Why invest at all? | 0.05% | 0.30% | 1.00% |
| 2. Which type of account is best for my situation? | 0.10% | 0.25% | 0.50% |
| 3. What is the appropriate risk level? | 0.10% | 0.40% | 1.00% |
| 4. Which asset classes should be included? | 0.00% | 0.20% | 0.60% |
| 5. How does the risk of the goal affect how I invest? | 0.05% | 0.20% | 0.50% |
| 6. What investments are right to help me reach my goal? | 0.00% | 0.45% | 1.50% |
| 7. Should my investments be revisited or rebalanced? | 0.10% | 0.65% | 1.60% |
| Total additional annual returns added by advisor | ∼0.40% | ∼2.45% | ∼6.70% |
Source: “Alpha, Beta, and…More Gamma,” Morningstar
How do I find a financial advisor?
Part of building that plan and executing it successfully is choosing a great partner to help you.
If you think you might retire in the next 10 years, it’s a great time to visit with a CERTIFIED FINANCIAL PLANNER™ professional. Start your search here. The link will let you see CFP® professionals near you.
As you visit with financial planners, I suggest a couple things to check:
- Is the advisor always the client’s advocate – a fiduciary advisor?
- Is the advisor only paid by clients, not any financial product manufacturer or distribution network? That would be a fee-only advisor.
These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.
A fiduciary, fee-only, CFP® professional can help you create a financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I only work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about the value a planner could add to your retirement, contact my office at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.
Tax savings for 2018
