On the surface, when people think of an investment advisor, financial planner or retirement planner, what they think of is someone that’s going to assist them with making the selections of their stocks, bonds and mutual funds.
As you transition into the retirement stage there are many other important areas of retirement that also need to be considered.
Selecting the right retirement guide that will be able to help in all of these areas is crucial for you to have a fulfilling retirement.
We call ourselves many different things, Financial Planners, Investment Advisors, or maybe even Retirement Planners. Regardless of the title, you probably go to us all for the same thing – to use our knowledge and expertise regarding the financial markets to invest your funds for you.
On the surface, this describes the role of the advisor. However, we feel that this limited role of the advisor specifically covers one period of your investment lifetime, the accumulation period, when you are trying to build and grow your wealth.
As you transition into retirement (the portfolio distribution phase), it’s important that the advisor begin to take on a larger role when it comes to your financial well-being.
As an advisor that specializes in the distribution phase, the investment selection must be complimented by a strategy of when best to file for Social Security Benefits, a plan to minimize the amount of taxes that will be due, and a sustainable withdrawal strategy to ensure that your needs will be met for the remainder of your lifetime.
Fiduciary vs. Suitability
When it comes to the investment selection, it’s very important to understand what type of advisor with whom you’re working. There are two different types of advisors that plan within two different sets of rules.
There’s the investment advisor, who is held to a fiduciary standard, and then there is the registered representative, or an insurance professional, who is held to a suitability standard. Understanding what standards that they’re held to and how they’re compensated is part of the investment selection process that, as the consumer, you need to be aware of. The differences are crucial.
A fiduciary standard is a legal obligation where the advisor must act in the best interest of their client and puts the client’s best interest ahead of their own. It is the highest standard of care available under law. Fiduciary advisors can be regulated by the SEC or state regulators.
An example to explain this standard is an advisor with two identical products that have different fees, who must recommend the one that is lower in cost. They can’t recommend the product that makes more money for them or their company. A fiduciary advisor is often paid by a quarterly fee that is calculated as a percentage of assets.
According to the FINRA Industry Professionals manual, the suitability standard requires that a registered representative or insurance professional must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer.
This is based primarily on financial objectives, current income level and age, in order to complete a commissionable sale of a financial product.
There is no requirement to find the best investment for you, only ones that are seemingly suitable for you. They offer a range of products for sale carried by the company he or she represents.