Choosing the right financial advisor: A retirement-era essential

If you’ve managed to save for decades, putting money away for retirement, making it last – and even grow – may depend on getting expert money-management advice. There are plenty of companies that can help you manage your retirement funds, but how do you know if you’re getting the best advice?

With thousands of professionals offering guidance – often with varying credentials, business models, and levels of transparency – knowing what to look for can help retirees avoid costly missteps and secure a financially stable future.

Prioritize fiduciary duty

The first and most important question to ask any potential financial advisor: “Are you a fiduciary?” Fiduciary advisors are legally and ethically required to act in the best interest of their clients at all times. This contrasts with brokers or other financial professionals who may only adhere to a “suitability” standard, meaning the investment merely has to be appropriate, not necessarily ideal.

Fiduciary advisors are more likely to provide objective advice, free from sales-driven conflicts of interest. Many retirees also seek out Certified Financial Planners (CFPs), who are trained to consider a broad range of financial issues and are held to fiduciary standards.

Understand the fee structure

Fees can significantly impact long-term investment returns, especially for retirees living on fixed incomes. Retirees should look for advisors who are transparent about how they charge for services. Common fee models include:

• Fee-only: Advisors charge a flat fee, hourly rate, or percentage of assets under management (AUM) and do not receive commissions from product sales.
• Commission-based: Advisors earn money by selling financial products such as annuities or insurance policies, which may create conflicts of interest.
• Fee-based: A hybrid model combining commissions and fees.

If an advisor is not charging a fee, they are being compensated in other ways, which may not be clear and may not be in the client’s best interests. Many experts recommend fee-only advisors because their compensation structure reduces the incentive to recommend expensive or unnecessary products. Retirees should request a written explanation of all fees and avoid anyone who seems reluctant to discuss costs.

Look for retirement planning expertise

Advisors with experience in retirement income planning can provide tailored strategies to help retirees draw down their assets wisely, minimize taxes, and ensure that their savings last through retirement. Key services to look for include:

• Withdrawal strategies: Guidance on how to take distributions from various accounts (e.g., Roth IRAs vs. traditional IRAs) in a tax-efficient manner.
• Social Security optimization: Helping retirees decide the best time to claim benefits to maximize lifetime income.
• Medicare and long-term care planning: Addressing healthcare costs and insurance coverage needs.
• Estate planning support: Coordinating with attorneys or providing tools to help retirees plan for the transfer of wealth.

Evaluate credentials and background

Retirees should verify an advisor’s credentials, education, and regulatory record. Reputable designations like CFP (Certified Financial Planner), CFA (Chartered Financial Analyst), or RICP (Retirement Income Certified Professional) signal expertise. Additionally, retirees can research any disciplinary history using online tools such as:

• FINRA BrokerCheck
• SEC Investment Adviser Public Disclosure

It may be difficult to find an advisor who lives close enough for in-person consultations. To fill that gap, several major financial services firms have begun providing “robo-advisors.” Retirement Living researchers tested many of them and selected the six best.