Weighing the Cost of Retirement Planning Advice

Paying for retirement advice may be worth more than you think, but not for the reasons you expect.


Estimated Read Time: 6 minutes

Key Takeaways:

  • Costs are an important consideration when you retire, but advisory fees and trading costs for your assets are far from the only costs to consider.
  • While self-managing your retirement portfolio may seem cost-effective, it often comes with additional responsibility and a large time commitment.
  • Hiring a financial adviser can help save you from yourself, but you should do your due diligence to understand the adviser’s business model and fee structure before signing a contract.

When investing your retirement savings or other assets, you face a choice—seek professional retirement planning advice to help safeguard and grow your nest egg, or go it alone.

The temptation to go it alone can be compelling. You won’t be paying  fees to an adviser when managing your own portfolio, but you may pay management fees for mutual funds or exchange-traded funds (ETFs). You also have a plethora of resources available, such as strategies you can find in books, tips you can find online or advice from family and friends. You may be able to rely on Social Security income as well.

Is this the best way to get quality retirement planning and investing advice? The plethora of “expert” opinions and resources available may not serve you well enough to ensure all your needs are covered in retirement. If you end up making a misstep or mistake when managing your own assets, that could hamper your ability to reach your long-term investing goals.

In this article, we’ll explore some of the costs of professional retirement and financial planning advice and the potential unforeseen costs of directing your own retirement portfolio.

The Cost of Retirement Advice

When working with an investment adviser, you are likely to pay some kind of advisory fee—the cost of investment advice. These costs vary depending on the adviser and the services they provide. For example, your costs may include hourly fees, flat fees or fees based on a percentage of your managed assets.  

Some of these costs are easy to recognize and understand. But they may not always be the only costs.

No Such Thing as a Free Lunch

Whether you pay an adviser on your retirement plan or go it alone,, managing your money isn’t free.

Some explicit costs are often unavoidable whether you receive financial planning advice from a paid professional or not. They might include:

  • Trading fees
  • Management fees on funds
  • Broker’s sales commissions

More importantly, there are also implicit costs that can have a big impact on your potential long-term returns. Perhaps the largest of these implicit costs is opportunity cost of poor planning or decision-making. One example of potential opportunity cost is if you sold stocks after the market dropped and missed out on a subsequent rebound. The opportunity cost is the potential returns you missed from being invested in other assets. If you are a self-manager, an opportunity cost to consider is whether a professional might have created an investment strategy better suited to help you progress towards your long-term goals.

You may also face some opportunity cost in your personal life. By personal opportunity cost, we mean the things you could have accomplished or enjoyed in the time you spent managing your finances. It refers to time lost and emotional stress resulting from your added responsibilities.

The bottom line: opportunity costs may loom large for investors who go it alone. Professional planning advice can help reduce the risk of leaving potential returns on the table.

When gauging the worth of professional retirement planning advice, consider both alternatives before entrusting anyone with your savings. What you pay an adviser should be weighed against the potential costs of managing your retirement investments yourself.

The Cost of Going It Alone

Building and maintaining a retirement portfolio comes with explicit and implicit costs, both of which you should understand. Fees are a crucial consideration of financial advice. But if we view all fees and complicated payment schemes unfavorably, does it follow that cheaper alternatives such as index funds or even robo-advising apps are necessarily better alternatives?

While appealing on paper, taking the low-cost approach when you retire may be even more expensive than advisory fees when you take into account the cost of potential missteps. Some examples are:

  • Facing a savings shortfall during retirement because your retirement accounts weren’t set up to yield the growth required to provide a comfortable retirement
  • Neglecting to prepare for potentially longer lifespans or higher-than-expected expenses when you retire
  • Relying on what feels comfortable and investing in overly conservative investments that don’t provide enough growth to reach their retirement goals
  • Holding too much (or all) cash and not accounting for inflation, which can eat away at your purchasing power over time

Costs to Watch Out For

Aside from fees for financial advice and trading costs, there are other costs you might encounter that may cause you to think twice and ask questions.

Some financial professionals—such as brokers or financial advisors—may be incentivized to sell certain financial products to earn sales commissions. This potential conflict of interest means their sales goals might not agree with your best interests and financial needs. Other advisers—such as registered investment advisers—are required to act in your best interest.

Many financial products, like some variable annuities, carry fees for additional features or severe penalties for early withdrawals. These additional costs can cut into your retirement savings if you aren’t aware or don’t understand them.

The Cost of Neglecting Financial Product Disclosures

Financial product disclosures aren’t always easy to understand. If you have spent time struggling through a prospectus or disclosures for financial and retirement funds, individual retirement account (IRA) or Roth IRA plans, estate planning services, wealth management services, employer benefits, employer-sponsored retirement plans and government documents such as those for Social Security, you will likely come across a web of complex legalese.

When considering any professional planning services concerning your retirement, you should pay close attention to how fees and returns are calculated. It’s important to

Your Retirement Goals Are What Matter

As you prepare to retire, you may have a number of savings options to choose from. Perhaps your employer offers an employer-sponsored retirement savings plan. Perhaps you hold a Traditional IRA or Roth IRA account. Or perhaps you feel receiving Social Security benefits might be sufficient to support a comfortable retirement.

Whatever the case, later in life, how your finances compare to your retirement needs can dwarf any other measure of investing success. Chosen wisely, an adviser can help you design an investment strategy to achieve your retirement goals.

When choosing an adviser to help with your retirement accounts, you want someone who can help you keep a cool head when the markets are volatile; someone who tells you what you need to hear, not particularly what you want to hear; someone who helps you identify and correct destructive decision-making tendencies before they extract opportunity costs you can’t recoup.

Such an adviser can be worth a fortune. To learn more about Fisher Investments, our services and our dedication to clients, contact us and speak with one of our qualified professionals or download one of our retirement guides today.

Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations.