Ask The Right Questions When Speaking With a Financial Professional

Ask yourself this question: when was the last time you asked for an answer, heard something you wanted to hear and then choose to get a second opinion? It’s not natural to question answers we hope to hear. This is critical in retirement planning whether you are trying to do it alone or working with a financial professional.

We have a family that we take care of that went through a tragic divorce with children at home and bills galore. The spouse received $1,000,000 in the divorce settlement. She went to a “professional” in Indianapolis for guidance.

The typical questions were asked (she kept her notes from the meetings) and answered. She needed $75,000 a year after taxes to meet her needs. The “professional” assured her that could be accomplished via her purchasing three annuities. By the time she found us, the $1,000,000 was reduced to $250,000. We got to deliver the very sad news that she couldn’t spend what she had been spending.  Things had to change.

Big buildings, fancy titles and certainly simple insurance and security licenses do not make a financial professional. You most likely wouldn’t go to a doctor that wasn’t board certified and you wouldn’t see your family doctor for a specific issue like neurology or cancer. The good news is your family doctor would send you to the right specialist!

Determine what your criteria are for a “professional” and then work with that person or group. Ask about education and experience but don’t forget about processes. Naturally, you need to like and trust the relationship but they must also be qualified to address the underlying issue. You and only you can determine what qualifications you are comfortable with so that you deal with accurate answers not just feel good statements.

The most deceptive information provided in the financial world in our opinion is the expectation of income. When I login to my 401k, a screen pops up that says here’s how much income I can expect at a given age assuming I continue to save what I am saving. If only I could ask the Genie in the box how he expected to create that much income! Assumptions are dangerous things and often allow the bias of happy answers to take precedence over reality.

Know the Right Questions when speaking with a Financial Professional

The key in our opinion is to know the right questions to ask of the relationship you are working with and the assumptions they are making. Whether the professional acting as a fiduciary would be a good starting point. Any answer other than yes is not acceptable when it comes to your retirement. What is their feeling on inflation assumptions over time would be next? What is your expectation for annual withdraw percentages and how much volatility can you manage to provide that result?

There are many ways to get to an answer. Make certain you are in search of the right answer not just the one you want to hear. A first opinion that is wrong but feels good can be deadly!

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.