By Ronnie Thompson
Each morning as I get ready for the workday, I ask myself one question, “how can I be the most unlike a typical financial advisor?” The reason and reality behind that question is the typical experience people have when working with a financial advisor is void of some of the most important and intricate aspects of the very reasons you would ever select to have a financial advisor helping you in the first place.
At True North Advisors we focus on those things that we know will bring the most value to a client in fulfilling their needs and meeting their goals and objectives. When it comes to helping the retiree, there are three major components that we believe makes us different than other financial professionals.
Accumulation vs Distribution and Understanding the Difference
Most people working with an advisor tend to have an experience that is driven by two things; TRANSACTION and ACCUMULATION. In a sense pretty pie charts and confusing analysis that suggests the person in front of you can grow or accumulate your money better than the current situation you are in. So, with the idea of making more money you move your money to that advisor (the transaction). Next thing you know it is 2-3 years later and you forgot about the pie charts and the reason for the change in the first place.
Understanding the difference between investing while working (accumulation) and investing in retirement (distribution) carries a significance that in some cases can mean the difference between living comfortably in retirement and not.
Addition vs Subtraction
When you are working and accumulating money in the market there are up to three ways money gets added to you accounts; your contributions, employer contributions if you company provides a match and the market if the market goes up. There is only one-way money can be subtracted and that is if the market goes down. While retired the trend reverses, money will be subtracted three ways; the income you take, taxes owed on accounts that will owe tax and the market if the market goes down. There is only one-way money will be added and that is the market if it goes up.
Many people become immune during their working years to the significance of this simple facet. It is IMPERATIVE whomever you are working with that they understand this and are assisting you on this like what to be invested in based on your goals and objectives, how can you be most cost and tax efficient in your investments and how much should you take and from where?
A Commitment to Service
Your life is a living and breathing thing, so too is your retirement plan – This is another key area that tends to not exist or falloff for most people with advisors. It is important that your advisor is reaching out to you to meet and review your plan MINIMALLY on an annual basis. Retirement planning and distribution is not a SPRINT but a MARATHON. Coming up with a plan is half the battle. The other half is making sure things stay on track and adjustments that need to be made are identified and resolved quickly. In retirement this is paramount to ensuring that you avoid major concerns like outliving your money.
Suitability vs Fiduciary Standards – Understanding your Advisor’s responsibility to YOU
It is key to understanding clearly who you are working with and what their responsibilities are to you as an advisor. In retirement you no longer have the time to make up for mistakes in the market as you did when you were young and working. The difference between a Suitability Standard (most advisors) and a Fiduciary Standard (Advisors at FSG) can help you understand a lot about an advisor and their approach to their clients. Here are a few key differences:
Suitability:
- Instead of having to place his or her interest below that of the client, the suitability standard only requires that the advisor must reasonably believe that any recommendations made are suitable for the client, in terms of the client’s financial needs, objectives and unique circumstances.
- The need to disclose potential conflicts of interest is not as strict a requirement as it is with a fiduciary.
- An investment for a client only must be suitable; it doesn’t necessarily have to be consistent with the individual investor’s objectives and profile.
Fiduciary:
- An advisor must place his or her interest below that of the client.
- An advisor must do his or her best to make sure investment advice is made using accurate and complete information. The analysis must be as thorough as possible.
- An advisor must avoid conflicts of interest. As a fiduciary, an advisor must disclose any conflicts of interest or potential conflicts of interest.
The right financial decisions will never be more important than while you are retired. It is important to make sure that if you are following the advice of an advisor that you seek out someone who understands the intricate differences of investing while working versus when retired. It is also important to make sure that they have your best interests in mind and are doing everything in their power to ensure the retirement you worked tirelessly to create is protected. At True North Advisors we recognize the great responsibility our retired clients have placed in our hands, and we will work as hard as they have in creating it to insure it is protected.
Ronnie Thompson and Steve Wilbourn are investment advisory representatives of and provides advisory services through CoreCap Advisors, LLC. True North Advisors and CoreCap Advisors are separate and unaffiliated entities. Securities trades are not accepted through email, voicemail or fax. Please contact your representative at the number listed above to place any securities trades. This e-mail message and any attachments are solely for the confidential use of the intended recipient. If you are not the intended recipient, notify us immediately by return e-mail and promptly delete this message and any attachments from your computer. These independent views and opinions expressed are those of Ronnie Thompson and Steve Wilbourn and are not necessarily the opinions of CoreCap Advisors. Investing involves risk and investors may incur a profit or a loss. Any information should not be deemed a recommendation to buy, hold or sell any security. You should consult with a licensed professional for advice concerning your specific situation. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market.
