A question I often ask myself is, “How can I set myself apart from a ‘typical’ financial advisor?” When I have had discussions with clients about their past experiences with other financial advisors, I often find consistent communication with that advisor dwindles after the first year.
At FSG, we focus on those things we know will bring the most value to a client in fulfilling their needs and meeting their goals and objectives. When it comes to helping the retiree, there are three major components we believe make us different than other financial professionals.
1) Accumulation vs. Distribution and Understanding the Difference – Most people working with an advisor tend to have an experience that is driven by two things: TRANSACTION and ACCUMULATION. Essentially, these are presentations of colorful pie charts and complex analysis suggesting the financial advisor in front of you can grow or accumulate your money better than the investment you are in currently. With the idea of making more money, you move your money to that advisor (the transaction). Next thing you know, it is 2-3 years later and you forgot about the pie charts and the reason for the change in the first place.
Understanding the difference between investing while working (accumulation) and investing in retirement (distribution) carries a significance that, in some cases, can mean the difference between living comfortably in retirement or not.
Addition vs. Subtraction – When you are working and accumulating money in the market there are up to three ways money gets added to your accounts: your contributions, employer contributions, if your company provides a match, and investment returns. There is typically only one way money is subtracted; and that is if the market goes down. (You may be able to take withdrawals but these often come with penalties while in your working years.)
While retired, the trend reverses and money can be deducted three ways: the income you take, taxes owed, and negative investment returns. There is typically only one-way money will be added; and that is if the market goes up. Many people become immune during their working years to the significance of this simple facet. It is IMPERATIVE whomever you are working with understands this and is assisting you on things such as: 1) What to be invested in based on your goals and objectives, 2) How can you be most cost and tax efficient in your investments and 3) How much should you take and from where?
2) A COMMITMENT TO SERVICE: Your life is a living and breathing thing; so too is your retirement plan - This is another critical area that tends to not exist or fall off for most people with advisors. It is important your advisor is reaching out to you to meet and review your plan MINIMALLY on an annual basis. Retirement planning and distribution is not a SPRINT but a MARATHON (Link to my Race for Retirement Article). Coming up with a plan is half the battle. The other half is making sure things stay on track and adjustments that need to be made are identified and resolved quickly. In retirement, this is paramount to ensuring you avoid major concerns like outliving your money.
3) Suitability vs. Fiduciary Standards – Understanding your advisor’s responsibility to YOU - Understanding clearly whom you are working with and what their responsibilities are to you as an advisor is key. In retirement, you no longer have the time to make up for mistakes or downturns in the market as you did when you were younger and working. The difference between a Suitability Standard and a Fiduciary Standard can help you understand a lot about an advisor and their approach to their clients. FSG operates as a Registered Investment Adviser (RIA) which means we have a fiduciary obligation to our clients. Here are a few key differences between the Fiduciary and Suitability Standards.
A. Instead of having to place his or her interest below that of the client, the suitability standard only requires that the advisor has to reasonably believe any recommendations made are suitable for the client in terms of the client’s financial needs, objectives and unique circumstances.
B. The need to disclose potential conflicts of interest is not as strict a requirement as it is with a fiduciary.
C. An investment for a client only has to be suitable; it doesn’t necessarily have to be the best solution for the client.
A. An advisor must place his or her interest below that of the client.
B. An advisor must do his or her best to make sure investment advice is made using accurate and complete information. The analysis must be as thorough as possible.
C. An advisor must avoid conflicts of interest. As a fiduciary, an advisor must disclose any conflicts of interest or potential conflicts of interest.
The right financial decisions will never be more important than while you are retired. It is important to make sure if you are following the advice of an advisor that you seek someone who understands the intricate differences of investing while working versus when retired. It is also important to make sure they have your best interests in mind and are doing everything in their power to ensure the retirement you worked tirelessly to create is protected. At FSG, we recognize the great responsibility our retired clients have placed in our hands and we work hard to ensure they have the best retirement they can have.
View more related content below:
This commentary on this website reflects the personal opinions, viewpoints and analyses of the Financial Strategies Group, Inc employees providing such comments, and should not be regarded as a description of advisory services provided by Financial Strategies Group, Inc or performance returns of any Financial Strategies Group, Inc Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Strategies Group, Inc manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
This article is written by Ronnie Thompson.