Are Retirement Financial Advisors Worth the Cost? Pros and Cons to Consider

Retirement planning often involves contrasting emotions. There is a part of you that wants to explore exotic travel destinations or live in opulence after purchasing a dream home with high-end comforts and amenities. And a part of you also rekindles the fear of outliving your retirement savings or making a huge financial mistake that will consume nearly all your retirement income in unreasonable bills.

The point is retirement fears will always be there, and it’s prudent to face them head-on. One way of doing so is by consulting a financial advisor in Portland to better understand and manage the risks of retirement. According to a recent survey, 1 in 3 working adults currently consults with Certified financial planners (CFPs). Moreover, of those who haven’t met a professional advisor today, nearly half revealed they intend to meet one in the near future.

But are fee-only financial advisors really worth it? What are the pros and cons of hiring one? And what are the alternatives to retirement planning for millennials besides hiring a professional financial advisor? Find out more in this guide.

Pros of Hiring a Retirement Financial Advisor

If you’re setting retirement goals as early as now, you’re ahead of the curve. Hiring a professional advisor comes with several benefits to help your process and narrow the gap between where you are financially and where you desire to be. The pros include:

Experience and expertise

Retirement financial advisors possess a wealth of experience and expertise to help couples and individuals set and achieve their financial goals. Your consultant will advise you on key retirement planning concepts and offer financial education. For instance, you’ll learn about behavioral finance, investing principles, and prudent tax planning for retirement. All this knowledge will help you build trust and confidence in your plan.

Customized investment and retirement planning

Financial advisors have in-depth knowledge of investment management. They will evaluate your unique case based on current expenses, income, assets, as well as desired lifestyle to customize an investment roadmap for you. In other words, a professional consultant will help you build a diversified investment portfolio that complements your retirement goals.

Ongoing management and monitoring

Another benefit of having financial advisors by your side is ongoing management and monitoring. Your consultant will continuously monitor your plan to ensure that it remains on track and make adjustments as much as needed based on risk tolerance, market conditions, and time horizon. With a financial advisor, you’ll also learn about what not to do in retirement to stay financially independent.

Cons of Hiring a Retirement Financial Advisor

While hiring a professional advisor to oversee your retirement management portfolio is prudent, the approach has its various cons as well, including:

Cost of fees and commissions

Regulatory bodies, including Congress and the Securities & Exchange Commission, work diligently to ensure professional investing services are more consumer-friendly. However, the set standard disclosures don’t alleviate the challenges of high fees and commissions. For instance, you’ll need to pay fee-only advisors a percentage of the Asset under management (AUM). Free advisors will charge commissions on sales from third parties.

Potential conflicts of interest

It’s common for a conflict of interest to arise, especially when the advisor has a personal, financial, or business interest that could influence their advice. In this case, the consultant may be motivated to make decisions that are not in the client’s best interest. For instance, the advisor may recommend a brokerage or trading plan only for them to earn more commissions.

Limited control over investment decisions

An uncomfortable truth about working with a financial advisor is you’re typically delegating your investment decisions. Consultants also have a fiduciary duty that legally binds them to act in the best interest of their clients. This might mean having the final say on every investment decision made. 

Alternatives to Hiring a Retirement Financial Advisor

While hiring a financial advisor is the best call as you plan to retire, there are various alternative ways of getting hands-on with retirement planning strategies, including:

Self-directed retirement planning

You can take time to research financial planning for retirement and get an in-depth view of how to go about it. For example, you can start by reading books and online sources that cover what to do six months before retirement to attain the knowledge and skills needed to start the journey to financial independence.

Robo-advisors and online investment platforms

The latest industry insights show that 1 in 4 investors leverages automated software platforms known as robo-advisors to simplify investing. While robo-advisors come with caveats, they are relatively inexpensive compared to in-person financial advisors.

Cost-Benefit Analysis

Although retirement financial planners offer multifaceted value that can be hard to quantify, it’s imperative to conduct a cost-benefit analysis of the service and evaluate the potential return on investment (ROI). Some of the factors you can consider to gauge ROI include investment performance, cost reduction in terms of tax-efficient investing, risk management, as well as time and stress savings.

Additionally, it’s important that you evaluate the financial advice in the long term. For instance, a piece of advice based on behavioral guidance can help you build a long-term objective and rational perspective to stay financially disciplined.

Choosing the Right Retirement Financial Advisor

Picking the right financial advisor when planning to retire is an early win. You’ll benefit from expert financial analysis to assess your current situation and alternative investments that suit your goals. That said, here are the factors to consider when choosing an advisor:

Tips for selecting a reputable and qualified advisor

• Research credentials and designations to assess the level of expertise
• Ask for direct referrals and recommendations from family, friends, or colleagues
• Choose Registered investment advisors (RIAs) to avoid hidden fees in commissions
• Sign an agreement after understanding the fee structure and potential conflict of interests
• Engage multiple advisors and trust your instincts when picking the best option

Questions to ask before hiring an advisor

• Are you fiduciary obligated to act in my best interest as a client?
• What investment plan customization options do you offer for my case?
• How do I compensate you for your services?
• Who are your past clients, and do you mind providing references from them?

Conclusion

A financial advisor can add value even if you have a solid retirement plan in place. The pros of engaging an expert in this field outweigh the prevalent cons, such as fees, commissions, and limited control over investment decisions. You’ll tap into a wealth of expertise and experience while benefiting from ongoing management and monitoring. But as you pick an advisor, don’t forget to ask pertinent questions, such as qualification, level of experience, and compensation structure.