Need Advice? Be Careful Who You Ask

Recently, while surfing channels one evening, I landed on a new political drama. The scene was a familiar, if not cliché, routine where the President was managing a crisis in the Oval Office, surrounded by his closest advisers who were jockeying to have their opinions heard.

There was a military general demanding that attacking the enemy was the only option, even if it wasn’t entirely clear what enemy was deserving of retribution. An intelligence agency representative offered a range of options, but was non-committal. Instead of offering a firm conclusion, most answers were hedged by suggesting the probability of information being correct. A political advisor measured all the angles to try and deduce what choice best furthered their agenda, irrespective of what was right or just.

Seemingly, only the President truly cared about what was ultimately best for the country, even if it meant he may pay a political cost or lose the next election. After adjourning the meeting, he later talked things over with his one true confidant, his wife, while lying in bed. 

We’ve seen the plot in dozens of movies or TV shows. Sometimes, the Commander in Chief is duped by a conniving bureaucrat.  Other times, like Solomon, the President sorts through all the agendas to arrive at an ultimately satisfying decision. But how much different is this from life?

Just the other day, I saw a sign at a local stockbroker’s office that reminded me of the scene in the fictional Oval Office. The sign read, “If you’re not at your last job, why is your 401(k)?” 

What if you could assemble a table of advisers to counsel you and provide a range of opinions to help you make decisions for the good of your financial future? What kind of advisers would you prefer?

Perhaps you would gather traditional stockbrokers or insurance salespeople. The broker/salesperson would probably, like the sign I saw, start with a question such as, “Why wouldn’t you want to rollover your 401(k)?” This isn’t the sign of an adviser looking out for your best interests. It is a tactic to probe for your objections so that they can respond in a well-rehearsed reply designed to overcome your reasonable concerns.

The broker/salesperson will likely provide “solutions” from their area of knowledge (sales training), access (company sales agreements), or incentives (sales goals and commissions). They are licensed by regulatory agencies such as FINRA and/or the state insurance board to sell investments, insurance, or hybrids between the two, such as annuities. The “answers” they provide will almost certainly be a costly one such as an annuity or a proprietary product. The worst kinds of these “advisers” will even go as far as to suggest that you aren’t paying them for their advice, even though the fees you pay for the product can be much more than non-broker sold alternatives.

The accountant, on the other hand, would likely be able to explain the tax consequences of all your options, such as taking a distribution versus rolling over the funds to another retirement account. They would probably try and understand your objectives and offer a suggestion based on tax laws. Some CPA's even specialize in providing personal financial advice. The designation of those CPA's is Personal Financial Specialist (PFS™). Most CPA's don’t sell products other than their advice, which can give you confidence that their answers are factually correct and not biased by compensation conflicts.

The independent adviser would preferably be a Registered Investment Adviser (RIA) with professional designations such as a Certified Financial Planner™(CFP®). They typically are paid for their time or assets they manage, not the solutions they sell. They put their customers' interests ahead of their own by working to understand their clients’ goals, needs, preferences, and personal situations to tailor advice. 

They would seek to understand the features of any retirement account you participate in and would only suggest a rollover if it was clearly in your best interest. Questions such as how much it costs, what are your investment options, are you taking any loans, or do you qualify for any unique situations (such as penalty free withdrawals if you retired at age 55 but before 59.5) would precede any leading question such as the one I observed on the local brokers sign.

Even with RIA's, you should be wary that some may pay brokers to “sell” their service to customers, but most, like ATX Portfolio Advisors, work independently from those channels. We do work closely with other independent professionals, such as CPAs and attorneys, when specific expertise is needed.

As you consider your next important financial decision, it is perfectly normal to have questions and to reach out for advice. Just be careful who you ask.