Financial professionals often refer to the products and strategies they offer clients as the “tools in their toolbox.” It’s a good way to explain how they help choose the right options to assist investors and savers.
These days, though, you probably should be looking for help from someone with a very large shed — maybe even a warehouse — stuffed with different tactics, tools and people to help grow your money and protect your assets.
Retirement today looks very different than it did for generations past — in some ways that are good and some that present challenges. There’s a wider variety of retirement accounts to choose from, access to more investments, changes to Social Security and pensions and — the game-changer for many retirees — a longer life expectancy.
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Not to mention that the economy and the market look markedly different than they did when your parents, grandparents and great-grandparents were setting up their nest eggs.
And yet, when we review portfolios for potential clients at our firm, we often see people who are holding onto plans that are dated and limited in their scope.
Old advice can be incomplete advice, and it can happen for a few different reasons:
- Your financial professional may be restricted in what he or she can offer you. Some sell only insurance products, so that’s where they put their emphasis. Others work only in the Wall Street world, and all their advice is based on being in the market. They might not even be aware of the alternatives that are out there — or they aren’t allowed to bring them up because their company doesn’t sell them.
- You might be getting a cookie-cutter plan. That’s not what you’re paying for, necessarily. You probably think your plan was built just for you, based on your goals and needs. But some firms may be more inclined go with the same basic allocation for every client they have.
- Your adviser may have deployed a dated retirement planning philosophy — or is relying on old rules of thumb — and those theories may not be applicable going forward. It could be that system was a “winner” at some point — when the market was bullish and your portfolio seemed bulletproof. But approaches like “buy and hold” make assumptions about the economy and market that could be counterproductive for retirees. Monetary policies such as quantitative easing/tightening have impacts on strategies for those working toward their retirement goals. Whether it comes from ego or complacency, if you hear the phrase “because that’s the way we’ve always done it,” consider it a red flag.
- You could be getting either passive investment management or active investment management but not both. During a particular market climate, you might find that one of these investing methods will be widely praised, while the other is derided — but the best approach is to consider both before making any decisions to be sure you have a complete picture. And, to take it a step further, your financial professional should be working with multiple investment management teams, so you get the investment management team that’s most proficient in each discipline.
What should you look for if you’re thinking of hiring your first financial professional or making a change?
It’s important to ask good questions when you have your first meeting. Make sure you know what kind of firm you’re working with: Are they dually licensed so that regardless of the situation, they’ll be able to reference both insurance and investment products as potential options to use at their discretion? Do they use multiple investment managers from multiple investment firms or a single firm? Are they working in a fiduciary capacity, so you’re sure they’re looking out for your best interests?
Just as significant, though, are the questions they ask you. They’re the financial professionals, after all. Are they diving in and telling you what their philosophy is? Are they asking you about your goals and concerns? Do they have thoughts about the benefits of a traditional IRA vs. a Roth, or passive vs. active management? Do they seem like coaches or salespeople?
If you’re trying to build your retirement with an outdated plan, and the tools you need are broken, old or missing, you could be putting your financial well-being at risk. If you’re worried about stability in a volatile market, now is the time to get a second opinion and get help shoring things up.
The information contained herein is for educational purposes only. It is not intended to provide, and should not be relied on for, any tax, legal or investment advice. You are advised to seek the advice of a qualified professional prior to making any decision based on any specific information provided herein. Investment advisory services offered through Lake Point Wealth Management LLC, an SEC Registered Investment Advisory firm. Insurance services offered through Lake Point Advisory Group LLC.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to protection benefits or steady and reliable income streams on this website refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.
Kim Franke-Folstad contributed to this article.
Disclaimer
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
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