Let’s start with the most important one: spend plenty of time vetting financial advisors before you hire one. Take time and do your homework to find someone that has experience, a good track record, and who is a constant student of financial planning and investment strategies. Those are the qualities you want.
To make the search process easier for you, narrow the field to include only Certified Financial Planners. Unlike many financial advisors, CFP® professionals are required to complete a comprehensive financial planning curriculum, pass an examination that tests their ability to apply financial planning knowledge to real life situations, and complete several years of delivering financial planning services to clients prior to being able to use the “CFP®” certification.1
They act as “fiduciaries” too, meaning they are obliged to act in your best interests and not their own.1 When you find the right one (step 1), there are 5 more steps they should take you through when building your retirement plan:
1) Set Measurable Financial Goals
Create specific targets for what you want to accomplish in retirement. Instead of ”a comfortable retirement,” the conversation should be geared toward specific retirement income needs and personal desires. “I want to generate $100,000 of retirement income each year from my portfolio, and I’d like to leave $200,000 to each of my three kids.” These are measurable goals that can be tested.
2) Analyze Your Financial Situation and Testing Different Investment Approaches
Your CFP® professional should collect all of your relevant financial information, list out your goals from point #1, and test various asset allocations and investment approaches to see what types of outcomes are produced.
3) Develop Investment Recommendations
Once an asset allocation is chosen, they should recommend various money manager strategies designed to move you toward the desired outcome. Included in your recommendation you may see an income-producing strategy, a fixed income strategy to reduce volatility, and a tactical money manager strategy that can move to cash if the managers sense higher risk.
4) Put the Investment Plan in Motion
Once you’ve discussed and are comfortable with the recommended money manager strategies, they can invest your portfolio accordingly and put the investment plan in motion.
5) Review Your Investment Plan Regularly
This is a two-step process. On one hand, they should monitor the money manager strategies in your portfolio to help make sure the approaches remain sound and effective. On the other hand, your CFP® professional should constantly be aware of any changes to your financial situation and goals, which could merit a change to your investment plan. Making sure you remain on track every step of the way is crucial.
Ask One of our Certified Financial Planners for Advice
Our Certified Financial Planners can take you through each of the above steps to set the course for your retirement. Learn about how we build investment plans and what money manager strategies we’re recommending now by giving us a call at 1-800-541-7774. You can also get started on your Investment Plan by answering a few questions here.
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