When we’re in the peak of our lives, many of us are focused on achieving more now – and we may not necessarily be concerned with saving for the future. And entrepreneurs who have spent their lives building businesses are notorious for neglecting to think about themselves. If you’ve begun to consider retirement (even if you’re still a long way away from that day) you may also have considered the prospect of hiring a retirement advisor. You’ll need someone who can understand not just your personal financial goals, but some of the key considerations that go along with succession planning for your business, too.
As with most things, thinking about retirement early and often can certainly pay off in the long run. Wondering if now is the right stage in life to hire a retirement advisor? Read on to learn more about how and when you should make the move.
What is a Retirement Advisor?
The term “retirement advisor” is often looped in with “financial advisor,” as the responsibilities often overlap so significantly that the two jobs are essentially one in the same for many professionals. A retirement advisor is essentially a personal or family financial advisor who helps individuals work toward the greater goal of a stable retirement. Retirement advisors guide their clients toward the end goal of enjoying their later years, while providing guidance on investments, retirement accounts, income and insurance planning, and tax management, among other things.
Many retirement advisors have distinctions earned through years of experience, tough exams, and rigorous education. One of the most prestigious distinctions a financial and/or retirement advisor can carry is the CFP, or Certified Financial Planner, designation. These individuals have had years of experience, a specific collegiate background, and have taken tough exams in order to carry these three letters behind their name. Other distinctions include the CRFA, or Certified Retirement Financial Advisor distinction; or, less commonly, you may see advisors designated “CRC” (Certified Retirement Counselor), or “RMA” (Retirement Management Advisor).
When choosing a financial advisor, it’s important to only work with fiduciaries. Make sure to ask whether the advisor is a fiduciary before you work with them or take any of their advice. Fiduciary advisors are legally bound to make and recommend only those investment decisions that are in the client’s true best interest. A financial advisor who is not a fiduciary is permitted to recommend or sell investments or other products based on the commission they’ll make as a result.
What Can a Retirement Advisor Do to Help Me?
Retirement Advisors work with their clients to understand the individual’s goals for retirement and what steps need to be taken to get there, including health and long-term care needs, charitable giving, or family legacy bequeathments and devises. They identify potential areas of concern and notify their clients about what the future might look like if they can’t prioritize saving in the right ways. They also give advice on taking full advantage of tax-advantaged accounts like IRAs and 401(k)s, and help you come up with a plan to tackle any debt you’ll be carrying into the next chapter of your life.
Much like what any financial advisor would do, retirement advisors work with you to choose a balance in your portfolio to help you take on only the risks you are comfortable with. Your advisor will take many factors into account, and recommend a particular strategy based on, among other things, your current age. For example, a solid portfolio may implicate a greater bend toward favoring stability as the client heads toward retirement. Advisors may also educate their clients about retirement income options such as annuities, when appropriate.
How Much Does Retirement Advisor Cost?
Retirement advisors structure their fees in different ways. Some of the most common fee structures are:
A charge that represents a percentage of the assets you invest with the advisor. I.e., 0.25 percent of assets under management, or 2 percent of assets under management. This is the most common fee structure, and fees are typically assessed quarterly. The average fee for most financial advisors sits around 1%.
Costs on the higher end of the spectrum will be charged by fiduciary advisors at reputable firms who bring clients all the benefits of their firm’s research and multi-advisor expertise. Costs on the lower end of the spectrum are usually reserved for non-fiduciary advisors or “robo-advisors” (like E-TRADE, for example) that you can access via a mobile app or a do-it-yourself website. Robo-advisors are generally not recommended for individuals with complex retirement goals that overlap with business succession plans.
Hourly rates, usually anywhere from $100 to $300 per hour.
Fixed or flat rates, usually for a short-term service, like a one-time financial plan, and another flat fee for any reviews and adjustment.
Performance based compensation. I.e., you may pay more if your portfolio performs well.
Benefits of Hiring a Retirement Advisor:
Retirement advisors have the education, knowledge, and experience to help you understand the financial implications of your decisions down the road and guide you to make the most of available tax benefits. They can also help you avoid expensive pitfalls or holes in your plan that you might not see. A good advisor will provide you with the peace of mind of knowing that everything from your best to worst case scenario has been planned for. They will keep you up to date on tax laws, regulation changes, and market anomalies that could influence your retirement accounts. Many can even assist you in planning a sound succession plan for your small to mid-sized business. If you’re considering hiring a retirement advisor, doing so early can help you both come up with a strong long-term strategy for your portfolio.
Reach out to a Qualified Financial Advisor.
A solid retirement plan will set you up to enjoy the next chapter of your life. And when you’ve poured your life into building a company, a strong business succession plan is equally important, too. Considering retirement, but don’t know where to start? Start by reaching out to an expert, and take the stress out of the remainder of the process. At DHJJ, our renowned financial advisory and estate planning experts are here to point you in the right direction.
DHJJ offers financial advisory, business advisory, estate planning, accounting, audit, and tax services (and more) to organizations across many industries. When you’re ready to plan for the next phase of your life (and your business) contact us online or give us a call at (630) 420 1360.
