What to know before hiring a retirement financial advisor

Retirement advisors specialize in the life events that happen after retirement.

  • By Coryanne Hicks,
  • U.S. News & World Report
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Retirement isn't what it used to be. Gone are the days of working until 65, then living off a pension for 15 to 20 years. Today, Americans are living longer, and now that pensions are an endangered species, people are working harder and longer to provide for those extra golden years.

"Just like 55 mph is no longer ubiquitous for how fast you can drive, 65 years old is no longer the universal age of retirement," says Ryan George, chief marketing officer at Docupace, which helps digitize operations in the financial advice and investment industry. "(Advisors) and their clients need to stop seeing retirement as playing golf and long walks on the beach. This life stage is one-third or more of their adult life, and those extra years don't come cheap."

As property values rise, so do property taxes. Then there's health care and the rising costs of prescription medication on top of the costs of long-term care.

"Retirement is more complex and requires an advisor with a different skill set, knowledge and experience to focus specifically on retirement planning," says F&G CEO Chris Blunt.

What makes retirement advisors different

A retirement advisor specializes in helping people plan and prepare for their futures. This should involve more than investment planning or rolling over a 401(k) to an IRA. "At a minimum, it should be a combination of investment, retirement, insurance and financial planning," George says. "Done right, it would also cover estate planning, tax planning and long-term care."

It's important to note, however, that the term "retirement advisor" is not an official designation or credential. "It's marketing," George says. It's a way a professional can communicate his or her expertise or experience in helping people plan and prepare for their future, he says. The best way to evaluate a retirement advisor is not by the title after her name, but by the skills and expertise she can offer.

When you retire, you switch from the "accumulation stage" of your life, when your focus is on growing your wealth and nest egg, to the "distribution stage," when you start withdrawing from that nest egg to fund your retirement. "A true retirement advisor should demonstrate knowledge in how assets are spent, not just accumulated," George says.

"Time is your friend when you are accumulating and saving for retirement, but it can be your enemy when you are decumulating or spending down your nest egg," Blunt says. "The consequences of mismanaging the payout phase can be disastrous without guidance of an experienced retirement advisor who understands the unique challenges their clients face in retirement."

What to expect when hiring a retirement financial advisor

People who hire retirement financial advisors can expect to receive financial planning focused on strategies to take leading up to and during retirement.

At Axberg Wealth Management, an Arizona-based tax, financial and retirement planning firm, the retirement advisors focus on life events that occur during retirement. Firm president Paul D. Axberg gives examples such as losing a spouse, long-term care decisions, choosing pension benefit options, when to take Social Security, family giving and beneficiary planning. And, of course, they focus on cash-flow planning and long-term tax minimization, too.

Given the importance of income protection in retirement, annuities are often used in retirement planning to protect retiree cash flow or provide asset protection. "So expect an advisor to not only be a wealth manager or a registered investment advisor but also to have the licensing and knowledge of various insurance products to meet clients' changing needs that retirement brings," Axberg says.

Working with a retirement financial advisor often follows a planning process that begins with a discovery meeting to learn about your situation and goals, a plan discussion to go over the advisor's recommendations and a deployment meeting when the plan is put into action.

"After this initial phase, plan on meeting anywhere between one and four times per year in person and stay in touch, so the plan can be monitored and adjusted as life unfolds," Axberg says.

Retirement advisors can have different fee schedules for their services. "Some firms charge annual planning fees in addition to advisory fees for assets under management," Axberg says. "The fees vary and are negotiable but usually are around 1% of those assets in the managed accounts."

When to hire a retirement financial advisor

Recommendations on when to hire a financial advisor vary. Some experts say you should hire a retirement advisor when you're 10 years away from retirement. Others say you can wait until you're five years out or nearing decision day on Social Security or pension elections.

Putting retirement planning "strategies into place well before retirement can help shield against volatility in the market and provide greater peace of mind," Blunt says.

George says everyone should hire a retirement advisor. "Just like death and taxes, the reality of retirement will arrive at everyone's doorstep one day," he says. And net worth or income don't change that. "Access to professional financial guidance isn't just for the wealthy, and everyone can benefit," he says.

Questions to ask before hiring a retirement financial advisor

When it comes to hiring a retirement advisor, the place to start is with yourself. Start by asking yourself what you want a retirement advisor to provide, says David McCary, principal at McCary Anheuser Wealth Management LLC. Are you looking for help managing your retirement nest egg and making sure it lasts throughout your retirement? Or maybe you want someone who can help you create a legacy or donate to charity. Is helping to educate the next generation on how to handle their inheritance important?

"The answers to these questions will help folks narrow down the type of retirement advisor that will best meet their needs," McCary says.

You should also consider if you want to work with a fiduciary or broker, he says. A fiduciary is required to put clients' interests first and is more likely to be relationship-focused. A broker will likely specialize in selling investment products.

"Neither type of advisor, a fiduciary or a broker, is right or wrong," McCary says. It just depends on your needs. If you're a do-it-yourself investor who needs someone to help with purchasing investments, a broker may be suitable, he says. However, if you want help with financial planning and managing the investments in your portfolio, a fiduciary may be better.

How to find a retirement advisor

Blunt recommends looking for special certifications, such as certified financial planner, commonly shortened to CFP, or the American College's retirement income certified professional, or RICP, designation, "which can help advisors looking to learn a comprehensive, systemic approach to building an efficient retirement financial plan for older clients."

The Securities and Exchange Commission and Financial Industry Regulatory Authority provide helpful resources that highlight key qualifications to look for in a retirement advisor, George says. He points investors to the SEC's "A Guide for Seniors" resource and FINRA's "Choosing an Investment Professional" page.

"Make sure that your personalities click," Axberg says. "This is a relationship business. If one spouse handles most of the meetings, please make a strong effort to bring your bashful spouse along and get them involved as well." Both spouses should be comfortable with the advisor and the retirement plan, so when one passes away, the other knows what to do and who to contact.

"Hiring a retirement advisor need not be forever," McCary says. "Agreements often have 30-day cancellation provisions." So, if the relationship is not going well, you can alter your course.

"But for those relationships that work, retirement advisors can significantly increase the probability that folks will achieve their financial and lifestyle goals in ways they might not have been able to do on their own," he says. "And that can be priceless."

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