Click the video below to learn what you NEED to ask your financial advisor…
One of the most lucrative transactions in the ‘Financial World’ is when Savers retire and make the decision to rollover their 401(k), 403(b) or Lump Sum Pension. If you’re retired or retiring soon and about to make the decision on how to invest your hard-earned retirement savings, it’s a good thing you’re reading this informative white paper. What’s to come in the next few pages will help you better understand how the industry looks at your money and give you the right questions to ask in order to find the right Retirement Planning Specialist.
There’s Gold in Them There 401(k)s
Hundreds of thousands of advisors in the United States
are licking their chops to “handle” your 401(k) plan. With your permission to invest the money, these advisors are set to make management fees, commissions or both. Within ten miles of our Louisville, KY office, there are over 2,000 advisors that would all be thrilled to find a way to invest your hard-earned retirement savings and charge you a fee for their services. However, there are even more ‘advisors’ with only an insurance license that are able to sell you commissionable products like annuities. Many commissioned salespeople are not fiduciaries and are under no obligation to work in your best interest. Some simply pick annuities that pay the highest commission to them (I’ve see them as high as 12%).
The problem with fees charged by money managers is this: “while they/we do better when you do better, they/we do just fine even when you do worse.”
You see, the vast majority of money managers make money on your 401(k) by charging recurring fees each quarter. The average recurring annual fee is 1.5%, but I’ve seen some as high as 3% per year…
Ouch!
Notice the example of the chart above with a firm charging 1.5% in an up and down stock market… while they brought no money to the dance they made as much money in fees as you made in growth. And keep in mind, assuming you have them managing a 401(k) or IRA, this money still must be taxed one day which means an even bigger loss to your account. This is why we try to charge more reasonable fees, currently at .8% per year. While we still make money when you do better and when you do worse, we feel that this fee is more equitable to you and trust you’ll be pleased with the service provided to the account. As for annuities, the commissions we earn vary depending on the company, the product and the circumstances of how the different annuities we select will be used with your personalized GamePlan. There is no one-size-fits-all annuity product. If you meet with an advisor who quickly recommends one type of annuity and nothing else, be sure to get a second opinion. Let’s face it, you don’t want to get “stuck in the wrong annuity!”
The Ten most important Questions to ask an advisor:
The ‘Financial World’ runs on OPM – Other People’s Money. While there’s nothing wrong with that, the problem is when advisors hold themselves out as retirement planners.
Most financial advisors are not planners; they are merely looking to make money on transactions, whether it is rolling your 401(k) over to their management to charge recurring fees, or to earn a commission from the sale of financial products. There is nothing wrong with financial products, even if they pay commissions to advisors. However, if these products are not a part of a plan specific to your needs and goals – you might be stuck!
Our mission at Tony Walker Financial is to Help Savers Worry Less About Money®. Helping Retirees develop a written GamePlan is not a one-shot deal. Products are used, but as part of a detailed process that’s taken almost forty years in the industry to develop. A process is never truly perfected, but the pursuit of perfection is our focus and our relationship with our clients may last 30-40+ years; from retirement to death.
Any advisor can talk to you about retirement, buy you a free steak, allow you to download a ‘free retirement report’ from a website, but it takes a very unique individual with a passion to want to help Savers for as long as that advisor can. In my 37 years in this industry, here are the best questions I would suggest asking that advisor hoping to invest your 401(k):
