How Can Advisers Help Plan Your Retirement?

Choosing the right financial adviser for your retirement planning strategy can be a daunting task. You need to consider many things, such as the adviser’s qualifications, performance history and how well you can trust them. Given the financial services industry has seen major cases of financial fraud in recent years, how can you determine if you can trust someone with your investments? Ideally, you would want someone who works in your best interest to help meet your long-term goals so you can retire comfortably.

To find someone with the right qualifications can, in itself, be confusing. Advisers can call themselves by many names—financial planners, financial consultants, registered representatives, investment advisers and so on. Not all operate the same way. If you’re investing for retirement, you should look for financial advisers who give advice on retirement accounts—not to be confused with a Retirement Plan Advisor, who helps corporate clients manage their employer-sponsored retirement plan. Within the large umbrella of financial advisers are even more categories you should know before selecting an adviser to assist you with your retirement plan.

Fiduciary vs. Suitability

Registered Investment Advisers like Fisher Investments have an obligation to put their clients’ interests first. This requirement is called the fiduciary standard. It means we are required to act in our client’s best interest and put our client’s needs above our own. Under this standard, Registered Investment Advisers (RIAs) are further obliged to disclose to you in writing any conflicts of interest that may exist, along with any fees charged or compensation received.

Many other investment managers or firms are held to a different standard of conduct known as the suitability standard, meaning they can make recommendations suitable to their client’s personal situation but not necessarily in the client’s best interest. For example, if one product with higher fees offers the adviser a larger commission, the adviser may steer clients to invest in that product without informing them of other cheaper options. This can create a conflict of interest since the adviser may try to sell you products that pay them higher commissions.

Looking for a fiduciary is a good starting point, but within fiduciaries, there are differences. One helpful distinction is “fee-only” versus “fee-based” advisers. They may sound similar but there is a difference in how these advisers get paid:

• Fee-only advisers. They receive compensation from clients, which can be an hourly fee, a flat rate just for advice, or fee based on a percentage of the assets under management if the adviser directly manages assets or invests on behalf of clients as a discretionary manager. Most fee-only advisers are fiduciaries. They only offer products or investment advice in the client’s best interest and aren’t compensated through commissions based on what they sell or recommend.
• Fee-based advisers. They can charge fees and collect commissions from third parties on the products they sell. These commissions could be from banks, brokerages, mutual fund companies or insurance companies. Fee-based advisers may be held to the fiduciary standard and/or the suitability standard. They can also charge you for advice or management services. The standard these advisers are held to can change depending on the interaction they are having with a client. There are also advisers who don’t charge any fees and make their income solely from collecting commissions from product sales, which can create conflicts of interest.

To find a fee-only financial adviser held to the fiduciary standard is a great first step, but used alone, it doesn’t offer any guarantees. Accountability is important in retirement planning, and your adviser should be able to clearly demonstrate how they are minimizing conflicts of interest. But the relationship between you and your adviser extends beyond costs.

It is fair and reasonable to ask your adviser to manage your investment accounts at an independent, third-party custodian. Having an independent custodian who provides regular account reporting and trade confirmations can improve transparency and provide added protection from financial fraud.

Trust and Communication

Besides making portfolio recommendations, an adviser should be able to prove their trustworthiness and commitment to your goals. Great service is of utmost importance, but it is difficult to define great service since it depends on the individual client’s needs and lifestyle. Your adviser should:

• Know how you prefer to receive information, so as to communicate effectively with you and help plan your retirement.
• Listen to, and directly address, your concerns. They should be available to you when you need their advice and should follow your directions. However, they should speak up if they believe a decision you are considering could negatively impact you.

Emotions can influence our decision-making, which is why investors can be tempted to abandon their financial plans at the first signs of loss. The other extreme can happen, too. If a certain asset class or part of a market is going through a euphoric phase, investors may over-concentrate their holdings in that specific market. An effective adviser should help their clients stay calm so they avoid overreacting to short-term volatile movements in the markets.

Fisher Investments Can Help

Fisher Investments is determined to offer a service that is simply better than what you are used to from those who typically call themselves retirement advisers. Request an appointment to get a review of your strategy or browse our retirement guides for more tips.