Amid a Pandemic, How to Find the Right Financial Advice
It’s crucial to understand what you need — and don’t need
Even in boom times, managing your affairs can be a demanding juggling act. Add in the personal and financial upheaval of a global pandemic, and it can seem overwhelming.
Little surprise then that, in a recent Nationwide Financial survey of more than 2,000 adults, three in four people said they’re concerned they won’t be able to meet their financial obligations due to the pandemic.
Interestingly, one in four added that they’d recently hired a financial advisor for the first time. That can be a wise move. Some tips for finding the right help:
If what you want is investment help, check out robo-advisors first. The bear market that hit in mid-February was a destabilizing event. But it was also just “another” bear market — that is a natural part of the investing cycle.
If you no longer want to be the sole driver of investment decisions, hiring an investment pro is a fine option. If what you’re looking for is sound diversification and asset allocation help, you might want to consider a robo-advisor.
Robo-advisors run clients through detailed questions to ascertain investment goals and risk tolerance and use that to place them in an appropriate portfolio (typically a mix of low cost exchange-traded funds) that the advisory oversees. Annual fees can be two-thirds less than hiring an advisor to personally manage your money. You can Google ”robo-advisor” or check out this list.
Red flag: a financial pro who, at a first meeting, starts telling you that you must/should move money out of your 401(k) and 403(b). That’s a tip-off that the pro is a wee bit too eager to get the money into an account he manages and collects a fee on. (Yes, he. There are currently very few women advisors.) There are fine reasons to do a 401(k) rollover, but it should only come after careful consideration of many factors, such as investment fees.
If you’ve recently been laid off, you now have the option to move your 401(k) or 403(b) retirement account into an IRA. But as long as you have at least $5,000 in the retirement account, you also have the option of doing nothing. And doing nothing may be the smart move, if your old employer’s plan offers low cost investments.
Careful vetting is a must, must, must if you want to hire an advisor to oversee your investment accounts. At a minimum, anyone you hire should be eager to put in writing that they are a fiduciary.
Anyone who starts explaining why that’s not really worth anything should be crossed off your list. And be sure to use the BrokerCheck tool to see if an advisor has any disciplinary issues. The regulatory system for advisors could be more robust — oversight is a bit convoluted and the various parties don’t necessarily communicate well with each other — but it’s an important step nonetheless to see if anything negative pops up.
If the advisor is only a licensed insurance agent, that should be a huge flashing red light. Agents earn commissions on what they sell you. That’s not who you want giving you investment advice.
A financial planner provides the best bang for the buck and can take a look at the whole enchilada. If the current financial crisis has you worried about, well, just about everything, take a deep breath and consider taking a wide-angle lens approach. Too often we get wrapped up in investment decisions and forget that there are so many important moving pieces to financial security.
A financial planner can help you put every piece out on the table: the current bills, the future savings needs (emergency, college, retirement), the insurance, and yes the investments, and then step back and build a cohesive long-term plan that addresses your most pressing priorities.
To be clear, financial planners aren’t magicians. They can’t snap their fingers and give you a six-month emergency fund. Or fix your retirement stress if you’re only saving 3% of your paycheck. They can help you best navigate current financial stress, and ideally work with you on a longer-term plan.
What a good planner will do is analyze everything. Assets and debts. Spending, not just saving. The really good ones will help nudge you to consider hard-but-smart tradeoffs: saving more for retirement rather than paying for a child’s college. (There are affordable student loans for that.) Suggest the right-size mortgage to keep your housing costs at a level that doesn’t interfere with other goals. And review insurance coverages, to make sure you have the right level of protection.
You can hire planners for one-off assignments. For example, a full blown financial plan typically costs around $2,400.
Or if you have a more specific concern you want to address, there are financial planners who operate as fiduciaries and charge hourly or project fees. If you don’t have references, you might check the Garrett Planning Network and the XY Planning Network for potential leads.
Unless you have a strong preference for in-person meetings, in today’s Zoom and Skype worlds, you don’t need to hire a local advisor. If someone you know across the country has a great relationship with a pro, maybe check ’em out.