“Many Americans are jittery about their retirement prospects, but refuse to get the help they need” according to this writer. The mystery … if it is in their interest, why don’t people seek advice?
Many don’t know where to get good advice, feel they can’t afford it, or don’t trust the advice they get. Let’s talk about these in reverse order.
Not trusting the advice makes sense. First, the advice many times comes from someone with a commission incentive. That appears to be okay IF you know what kind of product you need to begin with. But … that’s not advice … that’s a product. Products are okay for those starting out … everyone has to start somewhere. These approaches can be spotted when they begin with what event has occurred in your life … and then match a solution (product) to that event. But at some point you outgrow such a simple product-solution approach. At some point you need to begin to put it all together. And investing is just a small part of the whole. When you interview an adviser … and interview more than one … is the discussion more about you … or more about a product? Go with the adviser who is interested in you.
Feeling you can’t afford advice is harder. Free advice is not free – it’s a commission for buying something. Fee-only is generally better than fee-based (which is the term for those who are paid by you through fees and by a company through commissions). The value of an adviser comes from helping you avoid expensive mistakes. The price of avoiding mistakes makes up for the fees you pay for that advice. Morningstar has issued results of a study on the value of an adviser that puts a value on avoiding mistakes.
Where to get good advice? Yellow pages? Not really anymore. Online – yes. The author in the article I link to at the beginning addresses iffy credentials. He suggests one site to look at. I suggest another before that site. The fee-only type advisers can be found at NAPFA.* The above writer suggests a website to find an adviser that is sponsored by the CFP® Board – however these advisers tend to be fee-based, although fee-only advisers are listed there too.
The value of working with an adviser comes from their experience working with clients older than you are. Why? Because those advisers have seen the problems you may face when you are older too. Why is that important? Because planning is not just about solving todays problems … it also involves knowing what lies ahead and putting into a place a plan that addresses those problems too. Yes, advisers can read about those problems, but hands on provides more experience.
One of the items that is not talked about a whole lot in the press is additional adviser qualifications over and above a credential. An additional question not found on most lists of questions to ask an adviser when you interview them … where do you get your information from? Are you a thought leader or thought follower?
This questions goes to how deeply they study their craft. If they say from their broker dealer or wholesaler, they don’t study much at all. A better answer would be from industry publications and NON-broker dealer conferences. If they routinely read the Journal of Financial Planning (JFP) then they are getting peer-reviewed insight and research. If they have papers published in the JFP then you are interviewing someone who is contributing to the body of personal financial planning knowledge – a thought leader.
Work with an independent Registered Investment Adviser.
*All new NAPFA advisers will be credentialed with the CFP® beginning 1 Jan 2013 … most are already.