Retirement planning is one of the few things in life for which you don’t get a second chance. It takes decades to prepare for the day you leave the workforce, making every move you make and every dollar you save extra important. Almost anyone can benefit from some help from a financial advisor as they contemplate retirement (see Do You Need a Financial Advisor?).
But as you gain more wealth, it’s likely that a single advisor won’t be able to handle all the issues you will need to resolve. But who should be part of your team? Whom do you need to ask for help? Review this list of professionals to help decide.
Financial advisor is a bit of a catch-all term, so let’s break things down a bit more. For retirement purposes, you first need a financial planner. This is an individual with the knowledge and experience to help you plan and achieve your long-term financial goals. Certified Financial Planners (CFPs) are skilled at tax planning, asset allocation, risk management and estate planning. (For more, see Financial Advisor vs. Financial Planner.)
If you’re early in your career and don’t have a lot of assets, a financial planner might be all you need for now. But as your assets grow and your financial picture gets more complicated, you’ll probably bring other people into the mix.
Your financial planner is perfect for planning asset allocations and setting you up in some basic investment products, but as your assets change, you may want someone who specializes in investing strategy. A portfolio manager understands hedging strategies, how to mix different investment products to fit your risk profile and how to adjust your portfolio over time to match your retirement goals while being tax efficient. This term is often used for professionals who manage large mutual funds, but some service the individual investor as well.
Look for portfolio managers who work on a fee basis rather than commission. Although many commission-based advisors are skilled professionals, their pay structure invites a conflict of interest where your interests may be contrary to theirs. Advisors who are paid either hourly or by a percentage of assets are compensated based on performance. (For more, see A Day in the Life of a Portfolio Manager.)
You probably won’t need an accountant until your finances become complicated, but once they do, things like taxes become a much bigger headache. How do you reduce capital gains taxes? Should you have a Roth or Traditional IRA? What do you know about the alternative minimum tax? Are you planning to leave money to the next generation? Your financial planner will know a lot about these subjects; however, once your net worth moves beyond $200,000, it might be time to get the help of an accountant. And if you own a business, you definitely need one. (For more, see How to Find a Smart Accountant.)
Retirement is supposed to be about saving enough money, right? This is true, but protecting your wealth is equally important. That’s where insurance comes in. As you age, medical expenses tend to rise, so what kind of health insurance do you need? How do you keep from paying too much? How does Medicare fit into the mix?
How about life and long-term care insurance? There are many types of insurance in these two categories alone. And don’t forget about annuities. These are often seen as investment products though they actually fall into the insurance category.
You can get the advice of an insurance agent, but be careful. Their compensation is often commission-based, so their primary goal is to sell you a policy. There are also fee-only insurance advisors who will help you evaluate your insurance needs and find the right policy. These advisors aren't paid by commission so their interests are aligned with yours. Fee-only insurance advisors are expensive – often $300 per hour or more – but they can save you far more than that by finding you the most appropriate policies for your needs. (For more, see What Your Life Insurance Agent Makes – on You.)
Estate Planning Attorney
Attorneys often enter the picture when you get into estate planning. While financial planners have basic knowledge of the topic, estate planning is highly complicated and most people will need the help of an attorney to get the job done right. Attorneys may plan for the disposition of the client’s estate, keeping the estate out of probate, planning for estate taxes, and providing creditor protection, to name a few tasks. (For more, see Do You Need an Estate Planning Lawyer?)
Your Team Has to Work Together
Let’s use a sports analogy. Think of yourself as the manager. It’s your job to put together a winning team, and it’s not just about their raw talent. You have to consider personalities. Do these individuals work well with others? Will they take direction even when it involves compromise? Are they OK not being the main person in charge?
As you assemble your team, try to find people who are like-minded in their plans for you, can work with other professionals and may even be around your age. You don’t want your team retiring before you do. The key person is probably your planner, whose role is rather like the coach who decides when to bring in the other players.
Ask About Referrals
Your financial planner should be the kind of person who recognizes when he or she is in over his/her head – and is professional enough to bring in other team members when it’s time. But you still have to vet them. If your financial planner recommends somebody, ask if he or she is receiving a referral fee. Either way, if you receive a referral, evaluate at least three other people in the field just as you should do when you choose your initial planner in the first place.
The Bottom Line
As you accumulate wealth and find yourself buying properties, investing assets and thinking about leaving a legacy, a single financial planner won’t be enough. Bring in other team members as necessary and build a team that doesn’t work on commission whenever possible. If you end up with a great deal of wealth, private banking is another option to investigate as you look at options for retirement planning (see Which Are the Top 10 Private Banks?). Be sure to analyze the fees involved – and the amount of your time various options will take – and decide which choices make the most sense for your needs.