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Read Our Latest Thoughts on Annuities and Other Investing Topics

JULY 23, 2013

Who Benefits Most from Your Financial Adviser's Recommendations - You or Them?

The overall health of your retirement savings - as well as your plan going forward - can be compared to keeping your physical health in check. This should begin with checking out several different advisers before initiating your long-term financial plan of attack.

In fact, while getting a second opinion in the medical arena is almost protocol, it isn't so much when it comes to financial matters - but it should be. Because most financial advisers have differing backgrounds and training, it is possible you may get vastly different recommendations - even if you share identical financial goals and asset amounts with each of the advisers you meet with.

One of the biggest catalysts for the difference in financial advice is the type of firm where an adviser works. For example, those who are affiliated with insurance companies will typically recommend insurance and annuity products to move you towards your ultimate goals, while those with more of an investment background may likely lead you towards mutual funds, equities, and other types of securities.

Comparing Apples and Grapes

Setting up your investment portfolio is only the beginning though. Changes in your financial circumstances may also require the adviser to make various adjustments to your portfolio over time. And, just as getting different medical treatment will result in differing outcomes for your health; the alternate recommendations from different financial advisers could end up having vastly different outcomes in terms of your retirement lifestyle in the future.

With this in mind, it is important that the advisers you interview can provide the planning, execution, and long-term service that best helps you reach your investment goals. Product based sales agents often have only one solution to any problem. And as the saying goes, “When all you have is a hammer, everything looks like a nail.”

Your financial goals should be a top priority. An adviser that offers a product base on your risk tolerance may only offer you what is comfortable, instead of what is appropriate. And they may not provide ongoing service or advice outside of the sales process. From wealth creation to income generation, your adviser’s job should be to offer the most appropriate path without an eye towards the commissions generated or product loyalty.  Independent Registered Investment Advisers have a fiduciary responsibility to act in your best interest.

The Bottom Line

Just as with most major health issues, it is imperative to get a second opinion—or even a third or fourth—on how you should proceed with your retirement savings. Certainly, before you make any type of final decision, it is imperative to determine exactly how your adviser will be paid.

Regardless of the adviser's expertise or product offerings, his or her pay structure could have a much bigger bearing than any other factor on the advice that is ultimately provided.

Most advisers are more than willing to disclose how they are paid - so be sure to inquire about this at the onset. And, those who aren't so willing to discuss it may be a red flag for you, and  a strong indication  you should continue your search elsewhere.

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