How to Select the Right Retirement Advisor

A common challenge that most investors will encounter is selecting the best advisor. The main reason is because most sound good. Yet, underneath it all their track record is less than desirable. In the case of retirement planning, having the wrong individual can lead to disastrous results. Over the course of time, this can make it difficult in having sufficient funds to cover the upcoming expenses down the road. To ensure that everything works smoothly in the process of planning for retirement requires asking advisors a series of questions. This will help in deciding the best advisor for handling the portfolio.

What is your philosophy on investing?

Understanding the philosophy of the advisor will assist in determining how the portfolio will reach the objectives. This means looking for signs of what tools will utilized during the process. For example, in a discussion with a potential advisor an individual learns that he has a consistent track record of 10% a year. The basic philosophy is to purchase well-known companies. These areas will provide strong dividends and growth. This is telling the investor how the advisor could be a possible match. The reason why is because they are focused on purchasing conservative companies to achieve the individual’s investment objectives.

Do you have any complaints?

Photo credit: Alex E. Proimos

Always conduct an investigation of any potential advisor. The best places to locate information about the disciplinary record of the firm / individual are: through FINRA or the state securities commission. In all cases, the advisor and the firm should provide you with their CRD number. This is given to anyone who is licensed in the securities industry. Once the regulators are contacted is when they will list all disciplinary action taken. This will help in determining if a particular firm or individual is a good match.

Does the strategy make sense?

If a specific person or firm will refuse to discuss their strategy it is a dangerous sign. The main reason is the investments could be in areas that are very risky. This is designed to increase the overall return. In most cases, these tactics are often associated with hedging. This is an approach that involves purchasing derivatives (options) to reduce the risk. The problem is that when options are used there is the possibility of increased volatility. Once this happens, is when the value of the portfolio could have increasing amounts of pressure. As a result, investors need to find someone who will explain the strategy (in a way that makes sense). Anyone, who will not do this (outside of legendary investors like Warren Buffet), will more than likely not be able to outperform the markets over the long term.

Obviously, selecting the right advisor can be challenging for most investors. The reason why is because they do not know how to do this (based on their lack of knowledge and experience). Those who are able to use the above questions will identify the right person for reaching their retirement goals.  This is the point that all investments will be focused on achieve consistent results for the portfolio.

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