A Do-It-Yourself approach in certain circumstances can be an effective way to save money. Renting a moving truck and doing the lifting yourself is far cheaper than hiring a moving company. Performing your own home maintenance can save thousands of dollars over the years (provided you know your way around a toolbox, of course).
But there are some cases where a DIY approach can wind up being more trouble than it’s worth. Financial planning is usually one of them. One of the reasons for this is that money mistakes are permanent. If you misallocate your portfolio or don’t plan for taxes, you’re permanently removing money from your nest egg.
Retirement planning might sound simple when you’re simply contributing to Target Date funds in a 401(k), but the details that go into a full retirement plan have quite a bit more depth.
What is a Fiduciary?
To assist with retirement planning, consider the services of a fiduciary advisor. In 2016, the Department of Labor announced new regulations that put the fiduciary designation into the spotlight.
Although the laws regarding fiduciaries have been tweaked several times since then (most recently in 2021 by the Biden administration), the main theme of the rule is instructing retirement advisors to act only in the best interest of their clients.
Fiduciaries are held to specific ethical standards by the governing body that issues their certification. Recommendations can only be given if they suit the best interests of the client and help them reach their financial goals.
This differs from the suitability standard that non-fiduciaries are held to. Under the suitability standard, an advisor can’t exactly rip you off without recourse, but they don’t necessarily need to disclose conflicts of interest.
For example, if two funds are both suitable for a client’s portfolio, but one will earn the advisor a commission despite being a few basis points more expensive, the advisor can recommend the more expensive fund and still meet their suitability standard, ultimately sacrificing future performance for the investor.
When you hire a fiduciary to handle your retirement planning, you won’t have to worry about reading any legal fine print. A fiduciary advisor is bound to loyalty and transparency through the planning process and this duty isn’t treated lightly.
Depending on the type of certification your advisor has, they will have to report to a governing body or council that ensures they maintain their duty to transparency.
For example, if your financial advisor is a CERTIFIED FINANCIAL PLANNER™ (CFP®), you’ll know that they will have fulfilled certain education, experience, and ethical requirements. But in addition to this competency level, CFPs® must be granted the opportunity to renew their license each year (and pay a membership fee, of course).
This means that any potential misconduct or wrongdoing will be brought to light, while also ensuring that the advisor keeps up to speed with current regulations through continuing education requirements.
A fiduciary will shed light on every aspect of the retirement planning process. All pertinent information regarding investments will be disclosed and you have a trusted confidant to explain anything that’s confusing or uncertain.
Adjusting Plans Based On Major Life Events
Retirement planning isn’t a ‘set it and forget it’ deal, regardless of how easy you think Target-Date funds are to understand. Goals change over time and risk tolerances must be adjusted to compensate for diminishing human capital.
Maximizing your savings potential is one of the prime duties of any fiduciary advisor.
Expect the unexpected is quality life advice. With a financial advisor on board, you can prepare for the unexpected through careful planning and saving. Major life events such as an illness diagnosis, birth of a child, or death of a loved one can cause not only emotional stress but financial stress as well.
A quality financial advisor will help you navigate these difficult situations while maintaining your savings goals. You’ll never be alone – in fact, your financial advisor can help you limit the long-term financial repercussions of personal tragedy.
It might not be much solace at the time, but it will greatly benefit you down the road.
Investing on Your Behalf
Retirement planning might be a constantly evolving process, but some retirement savers have no interest in learning the ins and outs of investing.
We all know that stocks have been a great investment in the long run, but how much should we allocate to US equities vs international ones? What about bonds, gold, and other types of alternative investments?
If you want someone to handle investing on your behalf, a fiduciary will provide peace of mind. They won’t be YOLOing into random stocks based on memes and social media.
Instead, a fiduciary will carefully consider your risk tolerance, investment goals, and personal preferences when investing money on your behalf.
No guesswork will be involved on your end – the advisor will select securities that meet your needs and explain every part of the process in succinct detail.
Even if you don’t quite comprehend how markets work, you’ll have a basic understanding of where your money is and how it’s working for you.
No Conflict of Interest
The financial industry is rife with ‘quid pro quo’ agreements. Making a deal for something you want usually means giving up something you don’t.
That’s not the case when dealing with fiduciary financial advisors. Conflicts of interest are strictly forbidden when making investment recommendations.
All information about potential investments will be disclosed, including any benefits or perks the advisor (or their firm) receives.
Financial advisors held to the suitability standard don’t have to disclose commissions, fees, or other perks they receive from guiding clients into certain investments.
But clients of fiduciaries can rest easy knowing all conflicts will be avoided and the advice dispersed will be uniquely tailored to your best interests. In the end, you’ll stress less on your road to retirement knowing you took the best steps to get you there.
Certified Financial Planners™ at Advanced Retirement Strategies
Working with a Certified Financial Planner™ is an excellent investment of your time and money. With the high standards for CFP® certification, you’ll know you’re getting the expertise and knowledge of a highly-trained and educated professional who will always act in your best interests and with the loftiest ethical standards.
The team of retirement planners and investment advisors at Advanced Retirement Strategies in Bountiful, Utah includes two Certified Financial Planners™ who specialize in helping diligent savers with $250,000 or more of investment and retirement assets (not counting your primary residence) prepare for and then transition into retirement.
If you’re looking for a CFP® to help you live the retirement you have dreamed of, contact us today.