Daily Gains Letter

Four Simple Steps to Finding the Perfect Retirement Investment Planner

By for Daily Gains Letter |

210313_DL_whitefootFor those nearing retirement or already enjoying it, retirement planning and wealth management has become a dangerous place for unsuspecting seniors. After saving diligently for decades, baby boomers are relying on their retirement savings to take them through their golden years. At the same time, there are unscrupulous individuals out there selling financial products and touting retirement “wealth-creating” practices that can drain your accounts before you know it.

What’s one of the biggest investment traps retirees should be wary of? According to the North American Securities Administrators Association (NASAA), one of the biggest threats to investors is “inappropriate advice or practices from investment advisors.” (Source: “NASAA Top Investor Threats,” North American Securities Administrators Association web site, August 21, 2012, last accessed March 20, 2013.)

That’s right—investment advisors—though obviously not all retirement investment advisors (RIAs), just the unqualified ones. But spotting the “bad” ones is easier said than done, especially when you consider how many well-off, financially solid millionaires saw their retirement assets vanish at the hands of Bernie Madoff. If Madoff and others of his ilk have taught us one thing, it’s that serious problems can exist undetected in a qualified investment advisory firm.

Aren’t retirees supposed to be able to trust RIAs? Technically, yes. Investment advisors are licensed to give specific investment advice, as opposed to brokers, who simply handle securities transactions. And that’s where part of the problem lies.

Thanks to Bernie Madoff, RIAs are under increased scrutiny from both state regulators and the Securities and Exchange Commission. Between 2010 and 2011, state actions against investment advisor firms doubled and focused on general compliance practices and advice to clients.

Why the large increase? Aside from tighter restrictions, some think the increase is being caused by shady stockbrokers transferring their skills to the world of retirement investment advising—meaning that abuses once found in the world of brokers are now popping up more regularly in the RIA world.

So, what steps can you take to avoid being saddled with a less-than-honorable RIA?

Step #1: Know Before You Go

Decide what you want from your advisor before you go to meet with them. Do you want a financial planner who is specialized in retirement planning, or do you want someone who can handle your retirement, taxes, and estate planning? Make sure you ask lots of questions up front and get referrals.

Step #2: Look for Credentials

Anyone can say they’re an RIA, but not everyone can prove it. Track down someone with a “Certified Financial Planner” or “Personal Financial Specialist” designation. Ask them where they went to school and what their field of specialty is. Or, check with professional associations, like the National Association of Personal Financial Advisors or the Financial Planning Association, to find qualified advisors in your area.

Step #3: Find out How Your Advisor Makes Money

Financial advisors are either “fee-only” or “commission-based.” Fee-only financial planners don’t receive a commission for any of the products they sell. Commission-based financial planners might not charge for the hourly visit, but they are compensated by the companies whose products they represent. Then again, there are some fee-based financial planners who get paid for just some of the investment products they sell. If the prospective RIA hasn’t told you how they get paid, ask! It’s your money and your future.

Step #4: Ask Questions and Check Back Regularly

Don’t buy a product or service just because your RIA suggests it or it looks good as a full-color pie chart. You’re hiring an investment advisor—not a promoter. Ask questions. And make sure you check back regularly (quarterly or annually) to ensure your retirement plan and goals are still in sync.

While many retirees are in charge of directing their own retirement fund, there are a number who would rather use the experience of a certified RIA. By doing a little legwork, you can find a retirement planner who is best suited to your needs, one who complements your lifestyle and helps you realize your long-term retirement plan.

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