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Not Just a Matter of Luck: Finding the Right Financial Adviser Takes Diligence and Careful Planning

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Here at the AgingOptions blog, we enjoy reading the common-sense opinions of syndicated financial columnist and podcast host Chuck Jaffe. In a Seattle Times column we first read last fall, Jaffe writes about the haphazard way in which many people select a financial planner, often choosing someone based on little more than casual acquaintance or a friendly voice on the radio. We agree with Jaffe’s view that finding the financial adviser who is truly right for you can’t be trusted to dumb luck.

The fact is, you need to plan carefully and choose wisely. Your financial future could literally be at stake. With that in mind, we’re bringing this important article back for a second look.

Choosing a Planner Because He “Sounds Honest” is a Bad Idea

Jaffe begins his column with the story of Linda and her husband Stan—retirees in Daytona, Florida—who heard Jaffe speak as a guest on a 2021 podcast and liked the way he sounded, so they reached out. Linda and Stan contacted Jaffe because they thought he would be an ideal financial adviser to help them manage their money and estate in their retirement years. They appreciated the way he spoke and they thought he sounded honest and thorough on the podcast. They were very hopeful he could help them.

There was only one problem, and it was a big one: Jaffe isn’t a financial adviser. He’s a journalist – knowledgeable, yes, but not trained in the sort of wisdom Linda and Stan were looking for. He doesn’t take clients, and he doesn’t sell his services. Jaffe tried to explain, but surprisingly his refusal seemed to fall on deaf ears.

“Even as I told her that,” Jaffe explains, “Linda was hoping she could convince me to accept some of her money for advice, despite never having heard of me until I wound up as a guest on one of her favorite financial shows. That’s no way to pick a financial adviser.” As Jaffe relates the anecdote, he could have been literally anyone, including a scam artist. It’s very fortunate for Linda and Stan that he wasn’t.

The point is clear: it isn’t enough to pick an adviser based on personality. If they’re going to handle your money, you want to make sure they are a real expert in the field, and an honest one at that. 

Choosing the Wrong Adviser is a Huge Financial Blunder

The stakes are high in choosing an adviser, perhaps higher than you can imagine. And yet Jaffe notes that most people “put less time and effort into selecting an adviser than they do in buying a new toaster.”

A mismatch between investors and their advisers is very common, and it’s easily preventable if you put a bit more leg-work into the selection process. Choosing at random with a Google search simply isn’t going to cut it. This is one area where you definitely don’t want to rely on luck. You want to make sure that the adviser you choose is both experienced and willing to listen to you and discover your unique goals and situation. You want a person of honesty and integrity who will put your goals first.

Your Search Needs to be Organized, Not Haphazard

How do you make sure you’re putting in the right amount of work at the front end of the search? It starts by being organized, and launching your search earlier rather than later. Jaffe explains, “Typically, individuals, couples and families come to the conclusion that they need financial help after years of trying to build a nest egg and manage money on their own,” and by the time they realize they need help, they’re open to almost anything that sounds right.

As a result, too many people choose an adviser through what Jaffe calls “Providence.” They may meet a financial adviser in a social setting, through a recommendation, or via a quick search online, and think that the perfect person has fallen into their lap. But the cracks in the relationship show up later, and by then it’s too late.

The best way to find the optimal candidate is by treating the search with the seriousness it deserves: interviewing multiple candidates, cross-referencing their different skills and personalities, and thereby building a better idea of the standard you’re looking for.

Make Sure Your Financial Adviser is a Fiduciary

Checking boxes on your “adviser wish list” isn’t always enough. At the core, you want this relationship with your financial adviser to be built on trust, because they are going to be handling some of the most important decisions in your future. You want someone who is a fiduciary, pledged to make your best interests paramount in the recommendations they make.

Jaffe suggests that you’re looking for a healthy, solid mix of credentials, along with what he calls “bedside manner.” You want someone you feel comfortable with, someone who works well with clients, but who also inspires confidence through their level of experience. We would add that a fee-for-service planner is typically your best bet. If you’re paying for good advice, you’re better off than if your planner makes a commission on everything he or she sells you.

Several Tools to Help You Evaluate Your Options

On the credentials end, there are resources Jaffe suggests taking advantage of. He insists that every financial advisor candidate you consider should be put to a background check. This saves a lot of hassle—and even possible fraud—later on. Most brokers and investment advisers can be checked through FINRA’s BrokerCheck service. You can also take advantage of your state securities regulator to check out a candidate, and if the candidate sells insurance as well as securities, you can also use the National Association of Insurance Commissioners.

But in the end, the credentials aren’t the be-all, end-all. You also want to know that your personalities click, too. “Don’t rely on an adviser’s credentials to be a sign that they’re good at the job,” Jaffe advises. “The credentials – and you should check with the authorizing agency if it impacts your decision – aren’t a true measure of how someone works with clients.”

Recommendations from Friends May Steer You Wrong

Personal recommendations can only get you so far with a decision this big. Jaffe points out that “many of Bernie Madoff’s victims were folks he met at his country club, on the golf course, at charity functions, or through some personal affinity; he counted on those ties raising trust and lowering resistance.” While it can be tempting to outsource a decision like this to someone else, even someone you trust, you alone are the only one who can choose the right fit for you and your money.

To simplify the decision-making process, Jaffe writes, “Focus mostly on what you are getting for your money, the service being provided and the cost you are paying for it. You’re looking for a reasonable balance between services, costs, and method of compensation.” Most importantly, Jaffe urges you to keep asking questions: ask for references, ask for sample plans. If you have a question, voice it. The way a candidate handles your questions before you’re paying for their services will speak volumes.

In his article, Jaffe lists some resources that offer potential questions you could ask a candidate, including his own books. But he also notes that the CFP Board of Standards has a good list and lots of other valuable help on their website.

We would add that the financial adviser you really want will help you create a financial dashboard. Of all the planning tools out there, we think this is the most important one for you to have, and we strongly suggest you choose an adviser who will take that strategic approach.

Choosing a financial adviser doesn’t have to be a grueling experience, but with a bit of organization you can be as certain as possible that you’re getting the right value for your money. All it takes is the right questions, a bit of determination, and a solid plan.

My Life, My Plan, My Way: Get Started on the Path to Retirement Success

At AgingOptions we believe the key to a secure retirement is the right retirement plan – yet statistics show that 70 percent of retirement plans fail. That’s why for nearly two decades we’ve been dedicated to the proposition that a carefully-crafted, fully comprehensive retirement plan is the best answer to virtually any contingency life may throw your way as you age.  Our slogan says it all: My Life, My Plan, My Way.

When it comes to retirement planning, most people focus on one fairly narrow issue: money. Financial planning is an important component of retirement planning. However, people heading towards retirement often make the mistake of thinking that a little financial planning is all that’s required, when in fact most financial plans are woefully inadequate. What about your medical coverage? What if you have to make a change in your housing status – will that knock your financial plan off course? Are you adequately prepared legally for the realities of retirement and estate planning? And is your family equipped to support your plans for the future as you age?

The best way we know of to successfully blend all these elements together – finance, medical, housing, legal and family – is with a LifePlan from AgingOptions. Thousands of people have discovered the power of LifePlanning and we encourage you to the same. Simply visit our website and discover a world of retirement planning resources.  Make certain your retirement planning is truly comprehensive and complete with an AgingOptions LifePlan.  Age on!

Photo Credit: Alan Cleaver, Flickr (https://www.flickr.com/photos/alancleaver/2212178413)

(originally reported at www.seattletimes.com)

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