When it comes to financial planning, especially for retirement, many people only see what they have saved and fail to plan and set goals based upon what they will likely need. When you can’t see the forest for the tree, you focus on tiny details and actually miss the big picture. The saying “failing to plan is planning to fail” comes to mind. Normally detail-oriented investors with limited financial knowledge never make the adjustments that might lead them to success in retirement. Just because you know how to make and spend money doesn’t make you a financial professional any more than living in a house makes you a contractor!
Your Single Tree
Some people may argue that they know their financial situations and retirement goals better than a stranger, so why bring in an outsider? When you have a job to do you first gather the tools to efficiently complete the task. So when you wish to install a new dishwasher, fix the fence or stop that dripping faucet do you go to the tool shed and grab a hammer, a pair of vise grips and some duct tape because these are the tools you have? You need the right tools. When you go to devise a financial strategy you also gather tools, but what tools are in YOUR financial tool belt? You don’t know what you don’t know!
Advisors have tools. Not only is an advisor chock-full of financial knowledge, laws, and applicable options geared towards specific goals, but an advisor can step back from a financial plan. This stepping back may better ensure decisions are thought out and not made on emotions.
For example, say your mutual fund investments are having a rough year. Your first inclination may be to sell and place that money elsewhere, maybe a hot new tech item on the market. An advisor can look at the big picture without emotion and may even recommend riding out the lull with your current investments. Industry knowledge and experience should lead the way not emotion.
Advisors Reveal a Forest of Options
If your company just received new retirement investing options, an advisor can break down each option and explain which might best fit in with your financial goals. By trade, financial advisors should understand the finance industry. Those who specialize in a particular area such as retirement planning likely have knowledge not typical to a layman. This knowledge, combined with an understanding of individual client financial goals helps set advisors apart. The financial advisor likely can’t operate heavy machinery or engineer a road but might be able to help you retire early using a 72(t) distribution or an in-service rollover.
Most advisors make an effort to get to know their clients, typically during an initial free consultation. A financial advisor can’t effectively do his or her job without fully understanding a client’s financial goals, and knowing a client’s relationship with finances. Saving for retirement may be more difficult for an individual with mounds of debt versus someone who is debt-free. An advisor could present options aligned with not only the client’s goals, but also financial situation.
Studies show the big picture knowledge combined with understanding client goals may be a recipe for success. A 2013 Morningstar study examined the success of Gamma advising, where an advisor utilizes certain financial strategies during retirement planning. Compared to a baseline group, the retirees working with advisors who relied on the Gamma method generated 22.6% more in certainty-equivalent income .
Working with an advisor to attain your financial goals can open your viewpoint to include a much larger picture. You may learn of distribution and investing options, be forewarned before making emotionally-based decisions, and better understand how to potentially grow your savings. It’s worth looking into a partner when saving for retirement.
Whether you have a dollar or a million dollars in your retirement account you will be able to explore the value of a real advisor simply by visiting the Self Directed Brokerage Account advisor contact site. From this site you can begin to take advantage of the features of your retirement plan. If you wish you can also download a fact finder sheet that can be used to create your personal retirement financial plan.
To learn more about Rick Willoughby, view his Paladin Registry research report.