Do You Need a Financial Planner or Financial Advisor? 

Which is right for your needs at this time? Keep reading..

To answer this question, we need to take a closer look at all of the financial professionals who could help you grow your retirement, protect your assets, convert your assets into income and help ensure the wealth you have accumulated is seamlessly transferred to your spouse and beneficiaries should something happen to you.

There are different phases of your retirement.  Different financial professionals may focus their attention to the specific phase you are in.  These phases are the accumulation phase, distribution phase and wealth transfer phase.  Different companies or organizations may use different words to describe these phases but generally the idea is the same.

During the accumulation phase of your life when you are still working and contributing to your retirement, you may be working with a Series 7 licensed stockbroker.  Generally, the stockbroker has more interest in growing an asset and simply riding out market corrections as they occur.

A financial advisor may also have more interest in simply growing the asset.  Generally, a financial advisor is going to be more focused on wealth management.  The financial advisor may also be a licensed fiduciary which means they would have a legal obligation that any recommendation they make must be made in the client’s best interest.  

A financial planner will take more of a holistic approach to planning.  This includes wealth management, tax strategies, estate planning, risk management and income planning.  When you exit the accumulation phase of your life you move into the distribution phase.  This is your retirement which may last for 20-30 years.  Protecting your retirement nest egg becomes a very import goal in this phase.  Running out of money is not an option in retirement and taking a substantial market loss during this phase can make things very challenging.  A financial planner would also be a fiduciary, always acting in their client’s best interest.

During the distribution phase, you may choose to work with an insurance only licensed agent.  These professionals may recommend the use of annuities or life insurance.  Annuities can be appealing during this phase because they offer guarantees against stock market losses and could provide a guaranteed lifetime stream of income.  The only challenge with annuities is that they are not as liquid as we’d like.  Annuities can work very well if there are other liquid assets you can fall back on should an emergency arise.

Planning for the wealth transfer phase needs to happen while you’re still relatively young.  Life insurance and long-term care insurance is much more affordable the younger you are.  The insurance licensed only agent can be a good resource for this type of planning.  The most important thing you can do is to review all of your beneficiary designations.  Your IRA will easily transfer to your beneficiaries if they are properly listed. 

So, should you work with a financial advisor or financial planner?  Just working with any financial professional is a good start.  Generating retirement income, mitigating stock market risk and wealth transfer is not an easy and working with a financial professional can ease that burden.  My recommendation is that you work with a financial planner who takes a holistic approach to all your retirement planning needs. Managing money is only one small part to your planning needs.

Written by Marc Montini, Financial Planner and licensed fiduciary.