The journey through life is long and complicated. Like ocean voyages, each trip is unique, with its own
twists and turns that demand customized strategies and tactics to successfully navigate.
Like a trans-Atlantic voyage, the journey through retirement allows little room for error in decision-making.
The decisions, and mistakes, that you make today will irreversibly affect the life you live tomorrow. While
few of us would assume to captain an ocean crossing on our own, many will do just that with their trips
through retirement.
With so much at stake and so little margin for error, who do you want at the helm of your financial ship?
You? A magazine columnist? A TV personality? A salesperson? Shouldn’t you want the most qualified
and reliable person you can find and afford to take responsibility for such an important project? Of course
you should, and here’s how to go about finding that person.
It is beneficial to have your financial planning and investment advice coordinated, since one directly
affects the other. Your ability to support your spending needs will depend on how your resources are
invested and managed. A financial planner’s job is to figure out what is financially feasible and to guide
you in making decisions that will further your ability to make the most of what you have to work with. If this
person is not directing your investment decision-making, he or she should at least be working closely with
the person who is.
Your financial planner and investment adviser should accept fiduciary responsibility in their relationship
with you. That is, they should accept responsibility for the outcomes of their advice and be bound to place
your interests ahead of their.
Unfortunately, financial advice is loosely regulated and there are many confusing designations and
credentials out there. While certain credentials may indicate the holder has completed educational
programs, passed an exam or agreed to a code of conduct or ethics, none guarantees that a provider will
do his or her job properly and ethically. The right credentials are desirable, but they’re only part of the
puzzle.
A competent adviser should have at least five years of experience working directly with clients like you in
an advisory or analytic role. He or she should be able to demonstrate expertise in areas that matter to
you. Has he or she produced a body of published work, or is he or she at least able to discuss topics
relevant to federal employees, in a way that demonstrates knowledge and understanding?
You should have at least one in-depth conversation with a prospective adviser before hiring him or her.
This conversation should focus on what you need and expect and exactly how the adviser plans to meet
those needs and expectations. You should be comfortable with the planner’s approach and ability to
communicate in terms you can understand. You should get a clear explanation of the rationale behind
every word of advice on request.
Make sure you are comfortable with the adviser’s preferred methods of communicating. If you’re only
comfortable with face-to-face meetings and your planner prefers to work remotely, via e-mail or phone,
you should probably find another planner. Ask for a description of the steps in the planner’s process and
detailed information about how each step is carried out, including the time typically involved.
Probably the most important factor in the suitability of an adviser is his or her business model. While
many of the other aspects can be compromised a little under the right circumstances, the planner’s
business model will affect every aspect of the relationship and the quality of the advice that is provided.
More than just the policies and procedures used, the business model includes the way the business is
marketed, how it generates its revenue and how the planner is compensated. The adviser’s interests
should not compete with yours, but should be aligned with yours. Avoid advisers who regularly disclaim
any responsibility for what they say or do.
Finally, consider cost. My rule of thumb is simple: Be reluctant to spend more than 1 percent of your
invested assets per year on planning, analysis, advice, management, transaction and other costs directly
related to financial and investment planning. By invested assets, I mean savings that require investment
advice – savings, brokerage, IRA, 401(k) and Thrift Savings Plan accounts, for example – not your home equity or your sick leave balance.
To find a competent and trustworthy financial adviser, start by soliciting referrals from friends and
colleagues. Consult membership organizations to which you belong. Visit the Certified Financial Planner
Board of Standards online at www.cfp.net; the Financial Planning Association, at www.fpanet.org; and the
Paladin Registry, at www.paladinregistry.com.
Compile a list of candidates and screen each one. Just because your office mate likes her planner doesn’t
mean that planner is right for you.
Written by Mike Miles
For the Federal Times
Publication December 3, 2007