Five simple questions to ask if you are working with an Investment Advisor, Insurance Agent, or a Financial Advisor.

If you are a Baby Boomer in or near retirement, it may we worth asking 5 simple questions to whoever is helping you with your retirement plan. Often, you may mistake your investment advisor or insurance agent as a financial advisor, but you could be missing things that could be making your retirement plan riskier, making tax mistakes, or risk even mistakenly disinheriting your family. It is important that you are meeting with a full-fledged retirement planner that looks at everything in your plan. Make sure they are looking at your income, your risk and fees, tax efficiency, the what if scenarios and your estate plan. These five questions will help you ensure that you are meeting with the right person to make sure nothing will be missed in your retirement plan, but also make sure you are getting the most out of your money.

Does your “financial advisor” work in a Fiduciary capacity?

One of the biggest changes this year is that soon, all “financial advisors” must work for you instead of for themselves. A Fiduciary means that they must put your interest before their own. You may have already thought that your investment advisor, insurance agent, or financial advisor would already have to work in the capacity. Instead, they only have to work in a suitability capacity, which means if what they are providing you is suitable for you, then they are meeting their obligations. This doesn’t mean it is the best thing there is for you, and it doesn’t mean it is the best available. Just because your advisor can sell mutual funds or variable annuities doesn’t mean they are fiduciaries. Technically they can switch capacities during different situations. You may never know if they are working in your best interests or now. Some “financial advisors” already work in a fiduciary capacity, and must. Certified Financial Planners™ professionals and Investment Advisor Representatives already work in a fiduciary capacity. That is why all “financial advisor” will soon have to all work as on a fiduciary capacity, but there are things they can still do to avoid that, such as work on a “Best Interest Contract” capacity. To avoid a headache, make sure you are working with a financial advisor who has a fiduciary capacity in the first place.

Does your “financial advisor” talk more than just investment options?

Most “financial advisors” know more than helping you with your investment options. As a Baby Boomer in or near retirement, it is important to over your pension options, social security, taxes, and estate. Many advisors will only talk about investments, which leaves you with the guess work of trying to match the rest of your plan with your investments. Small tweaks with when to take your pension and when to take Social Security can mean leaving more money to your spouse or leaving a nightmare. It also could mean you might dwindle more of your assets because you aren’t tax-efficient. Most advisors won’t even talk taxes with you because the truth is they don’t know enough about taxes and they don’t align themselves with people that do. If you aren’t making sure your beneficiary forms are updated, it could mean that you may accidentally disinherit your family or leave more money to the government than you hoped. A “financial advisor” will make sure that all these things are taking into account.

Does your “financial advisor” only offer certain products?

If the only thing your “financial advisor” offers to you as a Baby Boomer in or near retirement is an annuity or life insurance policy, then you aren’t working with a “financial advisor, ” and in fact, they cannot call themselves a Financial Advisor. They use creative ways to describe that they are only an Insurance Agent. That doesn’t mean that life insurance or annuities are bad for your retirement plan, it just means that if there is something better out there, they can’t offer it to you. If you find out they only offer mutual funds or variable annuities, then you might find yourself working with only an investment advisor. A full-fledged retirement planner that works as a “financial advisor” will use all products available to you. There is no bad tool that is out there, it just a matter of how the tool is used. That is why it is important to work with a financial planner that looks at your plan comprehensively instead of solely selling you a product.

How does your “financial advisor” get paid?

Understanding how your advisor gets paid may help you understand whether you are working with a “financial advisor” or just an Investment Advisor or Insurance Agent. An investment advisor can usually make a commission or be paid based on a percentage of your assets that are under their management. An Insurance Agent may only be paid by a commission. Neither of which can be paid just to give you financial advice unless they are a Certified Financial Planner™ or similar capacity. It is also important to understand how and when there may be fees. Not only do you have to think about how your advisor gets paid, but also how the mutual fund or annuity company gets paid. Ask yourself, do you feel like you are getting the financial advice that you should be receiving based on how much the advisor is getting paid. If you think you may not be getting advice on other areas of your retirement, it may be because you are not working with a true “financial advisor” and may be only working with an Investment Advisor or Insurance Agent.

Does your “financial advisor” have a detailed written retirement plan for you?

One of the most important things a financial advisor will provide you is a detailed written retirement plan. What is a written retirement plan? A detailed written retirement plan works with your plans, your goals, your needs, and your desires that you want in retirement. Whatever you have for investments should either help you meet or exceed those objectives, not just for returns, but also to make sure you do not have too much risk. It will allow you to receive income to maintain your lifestyle tax efficiently, but it will state as far as how to do that in the retirement plan. A detailed plan will help you with required minimum distributions, whether to make Roth IRA conversions. It will go through what-if scenarios, especially if you have an early loss of a spouse and understand what it will mean to your total income. It will also help you self-insure or come up with a plan to make sure you and loved ones are still covered if you have a long-term care stay. A detailed written retirement plan is vital to give you the best success in retirement. If your “financial advisor” has not provided you one, then you are not working with a full-fledged retirement planner and most likely working with an investment advisor or insurance agent.

The problem with the financial industry is that a lot of people use the term “financial advisor” loosely. You may get a false sense of security based on how Investment Advisors or Insurance Agents represent themselves in your retirement plan. Make sure to ask these questions to yourself and your “financial advisor” to determine whether you are truly getting the best out of your retirement plan. As a Baby Boomer in or near retirement, it is vital to the success of your retirement. Remember, it is your money. Make sure you are meeting your objectives with your money.

Video Transcription

Hi. Vince Oldre here again to talk to you about what is income planning. Income planning is different than what it was for you when you first started working. I’m talking about income planning when it comes to retirement.
We now have to figure out how to distribute all these assets that you’ve now accumulated. The basis of retirement is that you cannot have a retirement, or you cannot retire without income. That’s why income planning is all that more important in retirement.
There’s three things, or three levels that I believe that you need to have when it comes to your income planning. One is you need to have the income to maintain your lifestyle.
I know most of you, if you are a baby boomer, or a pre retiree, or someone that’s already retired, you want to make sure that you can have that same amount of income that you’ve been able to have throughout your entire life.
That way, you can maintain your lifestyle and do the things you want to do, still gift to your grandchildren, or you children and do those trips that you like to do, maybe travel the world, or golf. It’s important to have that income when you retire to maintain your lifestyle. I hope, for everyone that’s watching this video, is able to maintain their income, or maintain their lifestyle when they retire.
What you need to do to make sure you can have enough income is first understand how much you are spending. Believe it or not, a lot of you do not know how much you’re actually spending every year.
First, calculate how much you’re spending. Then you’ll have a better idea of how much you need in retirement as far as how much income you need every single year.
Now that we have your income covered to maintain your lifestyle, the next thing that I have as far as a retirement bucket, or for an income bucket is your reserve. The reserve bucket needs to be there for any type of unexpected event such as maybe we have to replace a roof, maybe buy a new car. Maybe we have to help someone that if we have a medical, or a health event we might need to have cash available. As long as we have some reserve, that’s great.
The next bucket is our legacy. If we have our income covered, then we can take a little bit more risk with our reserve bucket. The rest of our assets that we plan on leaving to our children, or to our beneficiaries, or maybe to charity, we might be able to take a little bit more risk with. That’s because it’s our legacy bucket. We may or may not really need that for income when we are in retirement.
Now that we have our three buckets, our income for now, our reserve bucket, and then our legacy bucket, we have to think about how we’re going to allocate those funds based on our risk.
If we want our income to be there for the rest of our lives, we might want to take very little risk with the income that we need to maintain our lifestyle. We can take a little bit more risk with the reserve bucket and maybe even a little bit more on our legacy bucket depending on what your risk tolerance is.
Before you make any of these changes to your own retirement plan, as always, I recommend that you meet with a financial advisor that can help you with this. If you have any questions when it come to retirement, please feel free to email us, or leave us a message here.
If you want to attend one of our complimentary educational workshops, you’re more than welcome to. Just go to our web site and look at our events page. You can sign up for one of our complimentary workshops. Until then, I’ll look forward to talk to you next time.

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Investment Advisor vs. Insurance Agent vs. Financial Advisor.
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