Even for a conscientious investor, the task of planning for retirement can be daunting. Most people find it difficult to wrap their minds around their financial future. Intellectually, we understand the importance of long-term financial planning, but too often, our present day concerns take priority. This can be just as true for people already employing a financial advisor as for those who don't. “Did I forget to consider something? How do I structure my retirement to reflect changing circumstances and goals over time?” are some of the questions an investor may have. That's why it's especially important for investors and their advisers to forge a collaborative relationship, and even more so for couples, because the number of factors to consider doubles.
Vetting Your Advisor
First, it's important to vet your financial advisor, even if they have been recommended by family or friends. Find out about their fee structure and how their paid, as well as their certification and licensing. Find out what their education is. Check Financial Industry Regulatory Authority's (Finra) BrokerCheck for their profile and whether the have any enforcement actions. (For more tips, see 5 Questions To Ask Your Potential Financial Advisor.)
Make It a Collaboration
Most importantly, look for a financial advisor who employs a collaborative approach. Such an advisor will assess your spending habits, goals and risk tolerance, and create a financial plan tailored to your specific needs, while keeping you involved in the planning process every step of the way. Ask how and how often they prefer to communicate. Do they schedule regular meetings? Do they insist that both halves of a couple are fully involved in planning? A collaborative financial advisor will ask you questions and really listen to the answers. They will pay close attention to your specific circumstances and be willing to discuss your investment philosophy.
Be sure to level with your advisor. Be realistic about your spending habits, for instance. Do you need to budget for vacation travel or luxury items? What are your bottom-line goals, and what are your wishes? A collaborative financial advisor will help you prioritize your goals and come up with solutions you may not have considered before. Also make sure to disclose all assets to your advisor. A complete set of data is crucial in financial planning. (For more, see How To Select A Financial Advisor and 5 Facts Financial Advisors Wish You Knew.)
Find out what kind of technology an advisor utilizes; that can illustrate how technically adept they are and how well they communicate. Two popular ones are Instream Solutions and MoneyGuidePro, which help synthesize the information investors provide, creating graphics that help visualize a plan. As the financial advisor and the investor make adjustments, the investor is able to picture how these adjustments affect his or her portfolio. What happens over time if you adjust your monthly spending, for instance? If you're a business owner, should you consider selling your business, and when? Does it make sense to push back retirement? The investor can see the answers to these questions and track the changes immediately on their screen.
The Bottom Line
Like most things in life, the effort and thought you put into any endeavor will determine what you get out of it. Maximizing the benefit of utilizing a financial advisors means taking a collaborative approach highlighted by being honest about assets and liabilites and communicating expectations. Only then can your advisor help you formulate a realistic plan that reflects your priorities and long-term goals.