I’m considering my options as I approach retirement in six months. Currently, I have my investments with a large firm, but my employer is urging me to move my funds to a financial services firm they partner with. The thing is, the fees there are significantly higher than what I’m paying now. I know that costs matter, but I’m not sure what else I should weigh before making a decision. Both companies have solid reputations, so what should I keep in mind?
Cost is important, especially at this stage of life, but it’s not the only thing to think about as you head into retirement. There are several factors when choosing a financial advisor—like their approach to retirement planning, credentials, and whether they act as fiduciaries. You might want to explore a free tool that can help you find a fiduciary advisor.
Ryan Heiss, a certified financial planner, emphasizes that comprehensive guidance is crucial as you get closer to retirement. This includes optimizing Social Security benefits, creating tax-efficient withdrawal strategies, and adjusting portfolio risks.
It’s also smart to look at total costs, rather than just the advisory fees alone. If a pricier company offers valuable ongoing, personalized financial advice that helps you navigate market fluctuations, that could justify the added expense, according to Heiss.
Consider reaching out to other certified financial planners to compare their rates and services. This will give you a better sense of what each firm offers and whether those services align with your retirement goals.
How to compare costs between companies
When comparing costs, ensure you’re doing an apples-to-apples comparison. Some advisors work on a fee-only basis, meaning they charge flat fees or percentages without hidden incentives. Others might earn commissions on the products they promote, which could lead to potential conflicts of interest. Fee-only advisors may initially seem more expensive, but when you factor in hidden costs, the difference might not be as significant as it appears. Sometimes, a transparent fee structure may even be advantageous.
Fee-only advisors usually charge anywhere from $200 to $500 per hour, while project-based costs can be from $1,500 to $7,500, depending on the complexity of the work. The standard average for assets under management (AUM) is about 1%. Advisors earning commissions may have conflicts because they could sell products that aren’t necessarily in the client’s best interest.
What to look for in an advisor
Though cost is a factor, consider other vital points when deciding whether to stick with your current firm or switch to the one working with your employer. First, be certain whether the advisor is a fiduciary; they are legally obligated to act in your best interest. Non-fiduciary advisors might only need to recommend suitable products, which could lead to conflicts of interest.
When evaluating your options, compare the range of services provided—such as retirement planning, tax strategies, and insurance advice. Ask if they have a documented strategy, at the minimum, a clear investment policy and cash withdrawal plan.
Examine the advisor’s background, qualifications, and their areas of expertise. Reputable titles like CFP (Certified Financial Planner) and CFA (Chartered Financial Analyst) can indicate credibility. CFPs cover many aspects of financial planning, while CFAs focus on investment strategies and risk management.
Think about whether you want a dedicated advisor or a rotating team and how that fits into your risk tolerance and investment approach. Are they mainly active investors, or do they take a passive stance? Consider how they make investment decisions and whether they use proprietary products or allow for broader investment access.
According to Jim Hemphill, a financial planner, it’s essential to know how an advisor can facilitate the transition from full-time work to retirement, as this can be challenging both financially and emotionally. Choosing the right advisor can help you feel confident about the next chapter in your life.
If you’re having issues with your current financial planner or looking for a new one, feel free to reach out.
Note: The question has been edited for clarity. By contacting us, you agree to have your query published anonymously.
