When Should You Talk to a Financial Adviser?
Planning for retirement is something many people put off for years. When the time to prepare for retirement comes, most people turn to financial advisers who can help them make the best long-term financial choices. After determining how much to save for retirement a person must choose how they want their pension distributed after they retire. One distribution option is a lump sum annuity. This option allows retirees to turn their small monthly payments into one lump sum that they will receive after they retirement. Before making a decision based on the feedback given from your financial adviser you must first decide if you should trust that adviser.
Does Your Financial Adviser Acknowledge Lump Sum Annuity Cons?
One of the jobs of a financial adviser is to educate you about the possible risks associated with any financial venture. No investment opportunity or financial plan suggested by your adviser should be explained as a risk-free, guaranteed to work, venture. Your financial adviser should explain that receiving your retirement in one lump sum does create some risks. Depending on your age and retirement plan set up there might be tax implications that could affect you in future years. Also, receiving a lump sum of money creates the possibility that it may all get spent leaving you no funds to draw on in the future and no choice but to return to the work force your recently left.
Is Your Financial Adviser Registered?
Most financial advisers have titles such as “investment adviser” or “wealth management specialist” but these titles do not necessarily mean the adviser is registered. A registered investment adviser, also refereed to as a fiduciary, is bound by law to act in your best interest. Once an adviser is registered they must work to secure your financial interests by providing you with financial advice that does not necessarily benefit them or their direct employer.
A financial adviser who is not registered has no legal obligation to place your needs above their needs to earn a commission or impress their employer. While a wealth management professional or unregistered financial adviser might have as much experience and knowledge as a registered financial adviser, the contract they have signed with a broker, company, or employer legally obligates them to place your needs second.
How Does Your Financial Adviser Answer Questions?
One of the only ways for you to grow to trust a financial adviser is to find out about their professional background and their professional ethics. The internet gives investors a discrete way to research their financial adviser, but sometimes asking direct questions is the only way to get the answers you need. How your financial adviser handles you asking tough questions along with their responses will help decide if that adviser is trustworthy.
Ask your financial adviser how they are compensated for their services. Does the financial adviser only receive the fee they advertise, or are they eligible for additional commissions and performance based incentives? Some financial advisers receive money for encouraging clients to receive lump sum annuities. Most importantly, ask your financial adviser if they are legally obligated to act in your best interest for as long as you remain their client? If your financial adviser is unwilling to answer your questions, or refuses to disclose all of their fees, it may be time for you to consider choosing another financial adviser.
When you are making financial decisions about lump sum annuities, it is important to speak with a professional. If you don’t understand what you are doing, costly mistakes can follow.Speaking to a qualified financial adviser that you can trust is the best route.