Anyone can do great when the market is going up, but when times get tough, a good financial advisor can make a big difference. In this week's episode of The Alemian File, David Alemian explains how to choose and evaluate a financial advisor.
Some of you are thinking about getting a financial advisor, so how do you know how to choose the right financial advisor for you? For those who already have a financial advisor, how do you know if he or she is any good? You may be thinking you have been doing great for the past several years and you figure that your advisor is pretty good. I’m happy for you, the market has been going straight up. The truth is anyone can do great when the market is going straight up. If someone told you that the market was going to keep going straight up forever, would you believe it?
Let me ask you a question, how much did you lose in the last market crash? Okay, lesson learned.
A question that I am often asked is, “How do you choose a financial advisor?” Just like in the world of medicine, things change all the time. There are new techniques and new protocols. As time goes on you learn new and better ways of healing the sick. So why is it that so many financial planners are still stuck in the past and making the same recommendations that they made 30 years ago? It’s not the early 80s anymore. Back then, federal taxes were 50% and on the way down. The 401(k), 403(b), and IRA used to be a good idea, so it made sense to defer taxes to a future date when taxes were expected to be lower. Today taxes are much lower than the early 80s, but they are on the way back up, so deferring taxes to a time in the future when they will be higher makes no sense.
Here is the best advice that I can give you. Let’s look at the outcome you want. The outcome you want is to have enough money to retire, right? That means you need protection from all 7 of the “retirement killers.”
Write down on a piece of paper the list of the 7 Retirement Killers.
3) Market losses
4) Major medical illness
5) Late start to saving, due to a late start in your career
6) College for your kid’s
7) The death of a breadwinner
Let this list be your guide. Does the advisor’s plan protect you from all 7 of the retirement killers? If the answer is yes, then you have a good advisor. If the answer is no, you need to find someone else.
The vast majority of financial advisors will not have the skill set to protect you from all 7 Retirement Killers. You need to be prepared to keep looking until you find one who does have the skill set. Don’t be fooled by big name brokerage houses, or designations such as Certified Financial Planner, CFP, CPA or whatever. The vast majority of them will not offer protection from the 7 Retirement Killers and it only takes one retirement killer to kill your retirement. If you’re not 100% sure, just refer back to your list of the 7 Retirement Killers, because it is your key to a secure retirement. If you have questions send me an email to David@TheAlemianfile.com.
Check out my website www.PhysiciansRetirementplan.com. Make sure you come back here next week to Physicians Money Digest for another edition of The Alemian File.