December 20, 2014 — Last December we posted an article asking women to tell us what they were looking for in a financial advisor, along with their war stories on how it went when they did find one. Many did, and others also asked us to continue on with a followup that summarized that input. So here goes. The first part of this article provides you with the insights and comments of those who responded to our request. Part 2 provides advice for women at 2 top firms on how to find and get the most value out of your financial advisor.
What you said
We were fortunate to receive a multitude (19) of different comments with a wide range of helpful advice. Although we recommend you read all of these comments in detail, this section summarizes and provided samples of most of them here.
– Found it hard to find a financial advisor. Went to meet prospective advisors but felt that they were just selling and looking for new clients
– Many commentators recommended hiring a Certified Financial Planner because they have extra training, and spend a lot of time understanding goals and personal situations
– One had bad luck with brokers who didn’t give much advice. Was concerned about paying a lot in fees for advice of uncertain value
– Another hired an advisor for an initial appraisal and guidance. She found that useful as a road map and has subsequently managed her own money
– Others recognize that advisors can give good advice on a variety of financially related topics, including Social Security and when and how to take money out
– I have a CPA firm that handles my small business/personal taxes yearly. My main reason for not using a CFP is a lack of trust that they will be looking out for my best interests. I think that is what most people would say holds them back. They are also pretty pricey with no guarantees they will do a good job for me. I have extensively used the online free retirement calculators to give me direction and goals.
– These days, every insurance company puts themselves out there as financial advisors, but most are not – they are sales people. I used a CFP even before losing my husband in 1992 when I was 47. She takes all of my life plans into consideration, including short term and long term goals, LTC insurance, SS, income tax brackets, etc.
– In my opinion, there are too many risks with turning our financial futures completely over to someone else. There is a wealth of information on the internet and in libraries. It’s never advisable to stop reading or rely on one article or one advisor, even a trusted one — after all, it’s our money. We know our risk tolerance, future plans, and goals better than anyone else.
– Beware of financial planners who are mostly trying to sell you something else like long term care insurance, life insurance, or annuities
– A young widow had bad luck with an advisor, losing money. After several mis-steps an associate recommended an advisor who has managed her money for the past 4 years. He has kept his promise of monitoring her portfolio. He has done a great job
– You have got to have a plan that includes goals; without goal setting any plan is worthless.
Ric Edelman is a nationally known analyst and his web site has TONS of good info regarding retirement, investing, financial planners and so forth
– Do they give general advice about estate planning or is that included in the fees? Is it all separate fees… one for a financial plan, one for managing investments only, another for estate planing, etc.? If a financial plan is included how many scenarios are included and how often to they redo it. Are any new ones when your situation changes done free or is there another fee?
– I am using TIAA-Cref. My financial advisor is doing more of what you are looking for, financial information, than investing. Meredith, my advisor, actually comes to my home. She made sense out of all the whole picture for me and gave me a better understanding of mandatory distributions and how to prepare for them
– I have been with my financial planner for about 13 years. He has been a godsend and watched out for me since I became divorced. He is fee based at 1.5%. I can call him anytime or e-mail him and I always get a speedy answer. He re-balances my portfolio every year and discusses how best to prepare for retirement.
Part 2: What the experts say
Advice from a Woman Financial Advisor – Part 1
As part of our research for this article we interviewed Alexandra J. Miele CFP, a Wealth Management Advisor at The Andriole Group, which is part of HighTower Advisors, an industry-leading financial services firm. Alex specializes in helping women clients with their financial planning needs, many of whom find themselves unexpectedly single for a variety of reasons, including the death of a spouse or a divorce.
She and our other expert agree that many women are often intimidated by the financial and retirement process. Although they are often familiar with investments and financial decisions in their daily lives, somehow “financial planning” seems complicated and technical. The connection between the technical side and the big picture isn’t there – as in “How does this recommendation connect to me being taken care of in my old age, how can I pay my bills, etc.” Her approach is to explain how each piece of the finance puzzle fits in with overall goals, as in, “Will this approach allow me to live my life in retirement the way I want to?” It is often a discussion that contains some emotional content rather than just technical or historical details.
In her experience financial advisors working with women will have the best success if they avoid jargon and focus on education. As an example, several of her female clients have said they enjoy working with her because she does not speak in acronyms. Complex financial terms and abbreviations often intimidate women who subsequently feel embarrassed to have to ask what they mean.
Her woman clients expect that she will advocate for them with the other advisors in their lives, such as the clients’ contacts in insurance, legal, and banking. She gets a lot of satisfaction from helping with this interface.
Alex also finds that sometimes women don’t know the questions to be asked. To help with that she makes a point of encouraging questions at every step of the way. Social security is a very common area of concern for women, because optimizing benefits as a spouse, widow, and divorced spouse can be very complicated. She helps them get the right answers by working with her clients to help them ask the right questions.
She made an interesting distinction between men and women clients when it comes to the process of arriving at an investment decision. Her female clients tend to like seeing all the possible options (for example what portion of the portfolio should go to generating income, how much to outpace inflation, and what should be left for that all important safe -liquid – money). Women want to see all the details, and then arrive at a decision together with the advisor. Men, on the other hand, tend to want a brief summary of the options and quickly make a decision. The actual conclusion for both sexes is often similar, but the process is longer.
Process to find
Alex has some great tips on how to find a competent and compatible advisor:
– Always interview at least a few advisors to see who is a good fit for you. Advisors should be willing to spend some time talking with a potential paying client at no charge.
– Are you comfortable with the person? Trust your gut. If the person or their program seems too good to be true, it probably is!
– Check out their credentials and history. What certification do they have (there are many, but a CFP is one of the most rigorous)? A CFP is good, but not a guarantee. Designations aren’t everything, so ask for references from current clients or professionals who can weigh in on their competency. Also, you should go to the FINRA website and check for disciplinary actions and customer disputes. Sometimes there might be a few harmless ones, but if you see a pattern, stay away!
– Ask if they have clients you could talk with. Although with confidentiality a big issue today that might not always be possible,it is a plus if you can talk with someone about how they relate to the advisor and their overall level of satisfaction.
– Is the advisor a solo practitioner, or is there a team approach? In her opinion the latter is better, since it allows for collaboration and avoids narrow thinking. Plus it can add stability in the event of your advisor leaving or retiring.
– What is their performance? This is a tricky area, as no performance, no matter how stellar, is ever guaranteed again. What has happened depended on the portfolio and timing. So it is impossible to project how well they will do in the future. Rather, it is more important to understand the risk level vs. performance. How much risk did the advisor take in getting those returns? So, rather than chasing returns based on the past, rely on your own research and gut to get a feel for their demonstrated competence.
– What will the advisor’s proposals look like? At the Andriole Group they put all proposals in writing and explain in writing, along with costs. Seeing it in black and white and having it in hand to evaluate eliminates the mystery and builds confidence.
These observations and advice came in from a firm we know and respect. As an office of one of America’s most distinguished financial firms, our contacts there have many women clients. They were kind enough to share this advice for women looking for and managing a relationship with a financial adviser.
More Intimidated but Willing to Learn
Our experience is that although women have a tendency to be more intimidated by finance than men, they are usually better students. So it’s important for them to look for an advisor who understands this and can articulate complex financial topics in an understandable language. The communication style should feel like a partnership; comfortable but not patronizing. Move on if the advisor can’t relate to you.
Many women lean more towards a conservative investing style. Minimizing volatility is important in retirement, of course. But some element of growth in order to protect against inflation and longevity risk is also important. It’s critical women work with an advisor who is sensitive to their capital preservation bias, but can help them feel more comfortable with taking on some investments that will help increase their income to meet ever growing expenses.
Need to focus on Longevity Risks
We all know that longevity is a greater risk for women than men. Longevity, in our opinion, is the greatest risk for retirees, because it’s truly uncontrollable. Volatility, spending, and inflation are also risks, but there are methods to help mitigate them. Ask any prospective advisor about the tools and experience they have in helping women quantify that risk, and how they would help you understand the best practices for preparing for or mitigating it.
Implications of Divorce or Death on Retirement Income
We have many women who become clients after a divorce or unexpected death of a spouse. That loss is usually associated with a loss of income. Ask your advisor how they would be able to help you if that happened to you.
There is a lot of good advice here both from our Members and our two experts. If you don’t have a financial advisor now, this might be a good time to use it to help you find one that fits your needs. Thanks to everyone for your input.
For further reading
Thanks to Jan Cullinane for suggesting this article in the first place. Her book, “The Single Woman’s Guide to Retirement” is full of useful advice. She also recommends DirectionsforWomen.com , an organization established to address the gap between a woman’s financial capacity and her level of confidence.
(Our original article and comments) What Are you Looking for in a Financial Advisor
How to Find Find a Financial Advisor
Comments? Please share your thoughts and observations about the ideas and suggestions in this article in the Comments section below. What have your experiences been – and what would you do differently?