Financial Advice for All Life Stages
4 things you can do to make sure you’re picking the right financial advisor – and getting the best advice
- Start planning and saving early
- Do your research
- Understand why your advisor is making certain recommendations
- The unexpected time in life when you should seek the help of an advisor: when changing jobs
Financial advisors operate in a variety of capacities—some are more focused on saving and investing, some are more equipped to handle high-net-worth needs like estate planning and business succession and some are online robo-advisors—but the key elements remain the same.
“They help people to navigate their way through all of the financial issues as they move through life,” explains Wayne Janus, President of the Financial Planning Practice at Whitnell, an Affiliate of Associated Bank. “When they’re graduating college and they get jobs and they need help; and (then) they get married, they have children, what do they do? What kind of insurance should they have?” A financial advisor can navigate you though just these types of life events.
When opting to work with an advisor, you’re putting your trust in someone to help protect your financial security—a weighty task. Janus offers some suggestions for what to consider when working with a financial advisor.
Start Planning and Saving Early
According to Janus, the best advisors are the ones become invested in their clients’ lives. “And so … if you have a successful relationship, it is long term (one),” Janus said.
The longer you work with an advisor, the longer view they have of your life and your needs, and, as a result, the more personalized the advice can become.
As you move through various life stages, Janus suggests that a good long-term financial advisor will keep an eye on your planning strategies and work with you. For example, if you’re considering options to fund your children’s education, your advisor can help you consider options like a 529 plan or custodial accounts.
Of course, retirement planning is often one of the largest needs for which people seek an advisor.
“They’ll help you through planning for retirement,” Janus said. “Oftentimes, people say, ‘How much do I need to have in my bucket to retire? How much will I need?’ And then when you talk about that, it depends on what you plan to do when you retire. If your (intended future) lifestyle is as it is now and you don’t want to change what you’re spending now, then you need to have an amount of money that will get you to that number, plus cover the inflation so you have to plan to it.”
That planning should start early in your career.
“And you don’t start doing retirement planning when you’re 55,” Janus said. “You start that early on because what you can do, how you save money in your earlier years, has a big impact on the success ratio of being able to retire in a comfortable way.”
Do Your Research
Janus said he always likes to understand how prospective clients find out about him, so he can make sure it’s the right fit for both parties.
“I think the starting point is (regarding) how you got to me in the first place,” Janus said. “You didn’t pick me out of the yellow pages, and so somewhere you got a referral.”
A referral from a friend, colleague or family member is often the best way to begin a relationship with a financial advisor, he notes. After that initial recommendation, however, Janus suggests doing some research.
“But you don’t stop there. Then you check them out,” he said. “The NASD (National Association of Securities Dealers) and the SEC (Securities and Exchange Commission) publish reports about advisors and, if they’ve been sued … or if they’ve been hit by the SEC for doing things that are bad, (that is information that will be available).”
Janus explains that further information about your potential advisors can be found online via either the NASD or SEC websites. With a little research, you can discover any past wrongdoings, learn about his or her reputation, good or bad.
The Unexpected Time in Life When You Should Seek the Help of an Advisor: When Changing Jobs
“People, oftentimes when they change jobs, don’t realize what they’ve given up,” Janus said. “Because if they have a pension plan, and they give up vesting or they have stock options or things where their current employer is, they don’t tend to count anything but (the) cash compensation [when making their job-change decision].”
Considering just the dollar figure on a paycheck isn’t the only piece of the puzzle.
“It’s helpful if you get (the help of) somebody that understands these things and tells them, ‘Here’s the real cost of leaving. Yes, you’re going to get a 10 percent increase on your W2, but you’re missing out on a lot of perks that you’re getting, tax-free perks that you’re getting where you’re at now.’”
Who Needs an Advisor?
“Obviously, the very wealthy people need advisors,” Janus said. But it’s not just because of the figures attached to their name; often wealthier individuals are busy managing a company or acting as a partner in a firm. Having someone assist them with financial decisions can be a huge help.
Janus has worked with new clients to identify areas where they were overpaying. In particular, he recalls helping one prospective client shave off hundreds of thousands of dollars from what he had previously been paying a large firm for financial advice. Janus discovered the individual had paid $1 million for this advising—a figurethe individual found appalling, according to Janus.
“And this was not a billionaire,” Janus said. “This guy had $30 million, so he paid over three percent of his portfolio.”
Janus pointed out to him where various fees had been hiding. “So yeah, you’re a guy with $30 million, but you paid $1 million (for financial advice) and … it will take you ten years to pay me, based on my fee, what you paid him in one year,” Janus said.
Of course, not everyone who seeks—and can benefit from financial advice—is a millionaire. People simply looking to plan and save more effectively can benefit from working with an advisor.
“Just about everybody goes through stages in their life when they need help,” Janus said. “A young couple getting started, having a family, trying to decide what’s the best thing to do.”
Understanding the different benefits and drawbacks of whole life and term life insurance, for example, can have a large impact on the financial health of a family, Janus notes. And sometimes, he adds, the fee for hiring an advisor can actually save someone money in the long run.
Understand why your advisor is making certain recommendations
“[Janus and his colleagues], we are fiduciaries,” he said. “We are bound morally and legally to give the best advice to our clients. And so you owe it to your clients. What (exactly) do you owe to your clients? Honesty. It doesn’t mean that a commission-based person that’s a planner can’t do a good job. But if you’re selling something as opposed to giving advice, disclosure is critical.”
It’s perfectly acceptable, Janus notes, to ask questions of your advisor to better understand the recommendations they’re making.
“If somebody is recommending something to you—an insurance product or an annuity or a mutual fund—the appropriate question everyone should ask that person is: ‘What do you get paid if I buy this?’ If they tell you, ‘Well, if you buy that insurance contract, I’m going to make a $15,000 commission [that might be a red flag].”
“Don’t be embarrassed about it, because it’s good to know whether you’re getting advice or being sold a product,” Janus said.