The Importance of Partnership | Part 1

Preparing for retirement can be daunting.

Partnering with the right financial advisor to guide you towards your retirement goals can help quell most anxieties and may help give you peace of mind regarding your financial future. In this two-part blog series, I will describe the ins and outs of selecting the right financial advisor for you and review the importance of comprehensive financial planning.

“Beware of the wolf in sheep’s clothing.” -Aesop’s Fables

It is critical to first understand some basics about the financial services industry. There are many types of financial advisors eager to offer you their services; e.g. stockbrokers, bankers, insurance agents, financial planners and so on. Each type of advisor will be paid differently and offer varying types of advice. How will you know which type of advisor has your best interests in mind?

My colleague Janice Deringer wrote, The Top 5 Questions to Ask Your Financial Advisor, which are important questions to begin the process. Asking the right questions will help you determine whether a particular type of advisor is right for you.

You want to be careful to work with someone who puts your interests first. Start by finding out if the advisor you work with, or are considering working with, is a Registered Investment Advisor (RIA). An RIA is held to the fiduciary standards of conduct outlined in the Investment Advisers Act of 1940. An RIA must act in the best interest of the client.  RIAs must disclose any actual or potential conflict of interest they may have with their clients, must adopt a Code of Ethics, and must fully disclose how they are compensated.

In addition to looking for a RIA, you should look for an RIA that is independent and fee-only. There are many in the financial industry that portray themselves as advisors but are actually registered representatives or brokers (and work more along the lines of salespeople than as true investment advisors). Let’s put this in perspective: Say you go to buy a car at a dealership. The salesperson is there to sell you a car. If the salesperson benefits directly from the make and model you buy, and from the service agreement that comes with the purchase, that salesperson’s interests may be in direct conflict with your interests. For instance, you might get a sexy muscle car pushed on you, when in reality it’s the practicality of a mini-van that is best for you and your family. When working with a financial advisor, you shouldn’t expect the same type of service that a salesperson would show you. You should expect the advisor to put your needs first.

In addition to the Top 5 Questions, it’s important to identify several key characteristics to developing a successful partnership with your advisor.

1. Listening: It’s vital that the advisor listens to you. It’s also important that you listen and follow through on agreed-upon financial planning advice.

2. Curiosity: In addition to listening, your advisor should be curious about you and want to know your story.  A good advisor knows that they require this level of understanding in order to appreciate your overall goals and help you plan for your future.

3. Mutual Respect: An effective, professional relationship cannot exist without respect.

4. Common Values: It’s important to agree on core values, such as your tolerance for risk and your advisor’s investment philosophy.

5. Communication: It’s critical to communicate regularly. It’s also important to let your advisor know of any important life changes. Small events can trigger bigger changes in your long-term needs. See the Invest in Yourself Blog Series.

6. Trust: Without trust, what is there really?

Remember, taking the time now to put the financial pieces together can make a significant difference for your financial future. The first piece is partnering with the right financial advisor.  I’ll discuss the next piece in Part 2 of this series.  Check in tomorrow and learn about the importance of putting together a comprehensive financial plan.


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The Importance of Partnership | Part 1

time to read: 3 min