How to Choose a Retirement Advisor

By Arturo Conde | AUG 30, 2023

Planning for retirement can be overwhelming, because it involves figuring out a plan for your money that is supposed to last you for a long period of time, and often involves sorting things out now for a point in time that could be relatively far in the future. Seeking the services of a professional financial advisor may be able to set your mind at ease a little bit, but before walking in any particular financial advisor services, you need to prepare research and a list of questions so that you can understand if they are someone you would potentially like to work with to help set you up for retirement.

Make Sure the Advisor Is Qualified

First and foremost, anyone to whom you choose to entrust your finances should possess the expertise to do so.

• Note the advisor’s educational and professional certifications. Qualifications can include a variety of educational degrees, or certifications common to many financial planners and financial advisors, including certified financial planner (CFP), certified public accountant (CPA), chartered financial analyst (CFA), chartered financial consultant (ChFC) and more.
• Confirm whether the advisor is a fiduciary. A fiduciary financial advisor takes on the responsibility of their client, acting in the best interests of their clients at all times. Fiduciary financial advisors will seek to minimize conflicts of interests, and be transparent with any potential breaches, issues, etc.

Understand the Advisor’s Business Model, Communication Style and Fee Schedule

Knowing more about the financial advisor's business will help you understand the way that they approach their day-to-day administrative responsibilities and the way that they communicate with their clients.

• Find out the types of clients they work with and any minimum investment amount. This will give you a sense of who the advisor's regular clientele includes and whether their current client base and minimum investment is a clientele that you might potentially be part of. Some financial advisors only work with high-net-worth clients or ultra-high-net-worth clients, for example. If you don't have enough to meet this kind of a minimum investment, it may be necessary to seek out the services of another advisor or firm.
• Inquire about the services they provide and what their communication style is. Communication with clients is key, and different clients require various levels of updates and reports. However, a relatively regular schedule of communication is ideal so that you understand what is happening with your financial plan and can have a way to connect in case something changes on either end.
• Ask for fee schedules and information about any extra costs. Fee schedules are often based on a percentage of assets under management (AUM). There are also wrap fee programs and fee-only vs. fee-based distinctions to understand about every financial advisor firm. Performance-based fees may also come into play. It's important to understand all of these up front so that you avoid any unnecessary fees as early as possible in your relationship with a financial advisor.

Understand How They Will Approach Your Money

When it comes to asking the specifics about your retirement finances, specific answers may not be most accurately available until you actually start working with a financial advisor. However, understanding more about this up front can help you understand how they think about working with client assets and the ways that they view retirement planning. It's important to understand if a financial advisor will be able to tailor their specific services to fit both your long-term retirement plans and any of the shorter-term, sometimes unexpected situations that you and your money may face over the course of time.

• Know the advisor’s or firm’s investment philosophy. Analyses will vary from advisor to advisor, but may include fundamental analysis, technical analysis and more. Strategies for your money will depend on your goals, so be sure to note whether what the advisor is saying aligns with what you need.
• Ask about disclosures. Investment advisors who are registered with the Securities and Exchange Commission (SEC) are required to report disclosures in annual filings of Form ADV. This information can be found on the SEC website, but it's important that a potential advisor or firm be able to explain any further questions you may have about their record.
• Ask if the advisor or firm has a backup plan. A backup plan of some kind is always important in case an advisor moves firms or transitions in their career.
• Understand what long-term factors they can help you prepare for. Again, amounts will vary from client to client, and not all exact figures will be available to even estimate until an advisor has all of your information in hand. Still, some important considerations to keep in mind are healthcare, tax consequences, investments, social security, pensions and annuities, to name a few. How skilled is your potential advisor in handling these topics? Do they have a team they can work with or recommend if they are less experienced?
• Ask what their take is on boosting retirement income and reducing retirement expenses. How do they view prioritizing your finances pre-retirement in order to make the most of them later? Do this advisor's answers align with your current financial growth goals and outlooks, as well as your long-term ones?

Bottom Line

Retirement planning doesn't have to be as labor-intensive as another job, especially if you can find the right people to support you. Hiring a financial advisor might be a good step to take. Make sure you understand how to begin your research by preparing a list of questions that value the needs and wants that are important for you and your loved ones to have as you approach retirement. Some of the types of questions to note are questions about the advisor's qualifications and business, as well as questions about how they will approach handling your hard-earned money.

Tips for Choosing a Financial Advisor

• Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Don’t forget to ask yourself some questions, too. Financial advisors have different areas of expertise, so it’s important to consider why you want an advisor before diving into the search. If you’re looking for helping crafting a financial plan, a certified financial planner (CFP) may be useful. If you’re going through a divorce, you might want the assistance of a certified divorce financial analyst (CDFA).

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