By Morey Stettner
Advisers who excel in helping clients build their nest egg may be less skilled at addressing Social Security or drawdown strategies.
When approaching retirement, we tend to stick with the financial adviser we hired decades ago. Inertia takes hold.
But savvy retirees should ask themselves two questions:
— Am I getting my money’s worth from my adviser?
— What if I make a change?
It’s tricky to answer the first question. Why? Because it’s often hard to know exactly how much you’re paying.
“A lot of people don’t know what their adviser is charging them,” said Sara Grillo, a New York City-based marketing consultant.
Expect advisers who manage investments to charge an assets-under-management fee (typically around 1%). If your adviser manages $1 million, you may pay about $10,000 a year.
“Over 20 years, that’s $200,000,” Grillo said. “It’s important to ask what’s the tangible value you’ve gotten from that $200,000,” beyond not having to deal with it on your own.
Read: I have $2.5 million and fear that I’ll never be able to retire. Am I being irrational?
“The way adviser marketing is done, there’s no emphasis on the tangible result,” said Grillo, who advocates for transparency in how advisers run their business. “A lot of advisers focus on emotions, the feeling you get” by delegating investment management to relieve you of the burden.
Dissatisfaction can set in if you think your adviser isn’t producing much value. That tends to happen if there’s a mismatch between what you want from the relationship and what the adviser gives you.
“It’s important to align your expectations of what you want with what’s actually accomplishable,” said Pam Krueger, founder and chief executive of Wealthramp, an Osterville, Mass.-based service that connects consumers with vetted, fee-only advisers. “You have to know what to measure.”
Try this exercise: Complete the sentence, “With my adviser’s help, I need to accomplish…” Then seek the adviser’s input on your goal.
“Identify what’s bothering you-what problem or worry you’re facing-so that you can determine if the adviser can solve the problem,” Krueger said. It might be an overriding issue-like whether you’ll run out of money in retirement-or a specific decision like whether to sell your house.
Read: Medicare open-enrollment will be a doozy this year. Here’s how to make smart choices.
For retirees, the question of whether their adviser is worth the cost takes on added importance.
While advisers often build close relationships with longtime clients, they can also get complacent with their service delivery. They might scale back the time and effort they put into your account, take longer to return your calls or reduce the number of times they check in with you throughout the year.
In this age of specialization, another concern arises. Advisers who excel in helping clients build their nest egg may prove less skilled at addressing retirees’ needs such as Social Security and Medicare planning, withdrawal strategies for retirement accounts and legacy planning. If you suspect that you’re not getting your money’s worth, the next question is whether to make a change.
Firing an adviser, especially someone you’ve known for years, isn’t easy.
Before making such a big decision, list your reasons for considering it. (Let’s assume your adviser is a fiduciary who is legally bound to act in your best interests; if not, that’s a fiery red flag.)
Other indicators that might lead you to switch advisers include:
1. They keep pitching products. The adviser presses you to buy a product, such as an annuity, rather than explaining all your options with accuracy and unbiased clarity. If you’re relentlessly pushed to buy something -“when the adviser’s answer to everything is a product,” as Grillo warns, proceed with caution.
If you work with a “fee-only” adviser, that can clarify what you pay, because they are paid directly by you, typically by the hour, for crafting your financial plan, helping to identify and set financial goals and dishing out sound advice. They do not earn commission by selling financial products or trading specific securities.
2. They ignore you. The adviser doesn’t provide ongoing personal attention or timely updates on money matters. Beware if your quarterly statement consists of what Grillo calls “boilerplate printouts or boilerplate investment reports” that lack any customized tracking of your saving or spending goals, tax planning, estate planning, philanthropic priorities and drawdown timetable (including, say, the latest calculations on required minimum distributions from your IRA or 401(k)).
3. They don’t think ahead. The adviser isn’t proposing proactive steps you can take now to address potential problems later. For instance, you want someone who’s knowledgeable about senior housing options (such as continuing care retirement communities), the need for advance directives, how to pick an executor for your estate (and what you can do now to make your executor’s job easier) and when and whether to buy long-term-care insurance.
“You want an adviser with a long-term mindset, who’s thinking about your wealth in perpetuity,” Grillo said. “If they’re just worried about this month or this year-and not what will happen 30 years from now-that’s a red flag.”
While these are all worrisome signals that your adviser may be taking your business for granted, there’s one glaring reason to cut ties outright: If you buy a financial product with your adviser’s urging and wind up feeling confused, misled or worse.
FINRA, a regulatory body, maintains a database of financial planners called BrokerCheck. Among the most common disciplinary black marks against advisers in the database involves those who induce clients to purchase commission-driven products that are inappropriate, poorly explained or deceptively presented.
If for whatever reason you’re pondering a change in advisers, expect turbulence. Breaking up is hard to do.
“They are going to recall the hard times when they stood by you and talk about how great their performance was,” Grillo said. “And they will try to tell you that you can’t do any better with another adviser, that there are a lot of bad ones out there.”
Assuming you can withstand all that, you’ll need to find another adviser whom you can trust. Finding the right match takes hours of due diligence as you research your options, conduct introductory interviews (many advisers offer initial consultations at no cost) and evaluate whether the new firm has the personnel and resources to accommodate your needs.
Specifically, look for an advisory firm with a capable, experienced, long-tenured support staff. That’s because the team will need to get up to speed quickly in understanding your goals, family dynamics and healthcare situation.
“Above all, try to find a relationship where the new adviser will care about you and your family,” Grillo said. “If you have cognitive decline [later on], your adult children might help you so you’ll want an adviser who [connects] with them and who’s sensitive to what your life will be like” as you age.
-Morey Stettner
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10-08-24 0748ET
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