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Author: Don Obrien

What You Should Expect From a Financial Adviser


I plan to retire in a few years, and I would like to begin working with a financial adviser. I recognize that fees for financial planning can be steep. My questions: What services should I look for from an adviser? Or, put another way, what services should I expect for my money?

You should look for, and expect, a substantial amount of help.

First, you’re correct: Financial advice can be expensive—and appears to be getting more so. A 2020 survey by

Michael Kitces,

head of planning strategy at Buckingham Wealth Partners in St. Louis, found that median hourly fees, retainer fees and stand-alone fees (for individual projects, such as drafting a financial plan) all had jumped between 12% and 25% from just two years earlier.

Second, I can’t say precisely what services you might need; every investor is different. But recognize that retirement today—with, among other challenges, the demise of traditional pensions, extended lifespans, and couples frequently trying to coordinate two retirements—can get very complicated very quickly. As such, you want an adviser who does more than simply manage your investments.

Start with Vanguard Advisor’s Alpha. Starting in 2001, the asset manager has published a series of papers, explaining how advisers can add value (read: “alpha”) to the work they do for clients. Yes, this research is meant primarily for financial planners, but would-be clients can learn about the tools and talents that a good adviser will bring to the table. Among them: asset allocation, rebalancing portfolios, behavioral coaching (stopping you from doing dumb things with your money) and withdrawal strategies for nest eggs.

Beyond these basics, look for the following when evaluating advisers and their services:

A focus on retirement. It might sound obvious, but you need an adviser who specializes in retirement finances—and not all advisers do. “You want comprehensive retirement planning,” says

Derek Tharp,

an assistant professor of finance at the University of Southern Maine who specializes in retirement research. “That means an adviser who, in addition to your investments, will help you with Social Security, Medicare, estate planning, insurance and long-term care.”

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Tax planning. In particular, Mr. Tharp singles out tax planning as among the most important services a retiree needs. And that means more than filling out annual tax returns. “The focus should be on the long term,” he emphasizes. “You want an adviser who is thinking strategically about tools, like Roth IRA conversions, that can help reduce taxes in the future.”

With that in mind, a good adviser will ask for, and spend a healthy amount of time with, your tax returns, Mr. Tharp adds. “If a financial planner is telling you, ‘Talk to your CPA about taxes,’ that should raise a red flag.”

How many clients? This is critical. Early on, ask a would-be adviser: How many clients do you have? Even with the best skills and intentions, an adviser who is juggling too many clients likely can’t give you the services you need. “I think a lot of people overlook this factor,” Mr. Tharp says. “An adviser who has, say, 200 clients isn’t going to have time to develop a good, personal connection with you.” A better figure: about 50 clients. And perhaps a few dozen more if the adviser has sufficient staff to help with administrative duties and the like.

To return to your original point: Good financial advice can be expensive. If you’re a retiree with an ample nest egg, you should be getting a lot of help and services for your money. Don’t settle for less.

Iam currently 60 years old, still employed and plan on waiting to draw Social Security benefits until 70. My present earnings will allow me to draw a maximum payout. My wife is 57 and doesn’t have enough credits to qualify for Social Security (although she’s close), and it would be a minor payout. Am I correct in assuming that she will be able to draw a benefit of 50% of my payout in addition to me drawing my benefit once I file?

Well…yes and no.

This question involves the always confusing topic of “delayed retirement credits” and who is eligible for them. These credits are, in effect, a bonus that the Social Security Administration pays you if you delay claiming benefits beyond your “full retirement age.” (Which the agency defines as the age when a person can first collect an unreduced benefit.) For each month you delay, your benefit increases two-thirds of 1%, or 8% every 12 months.

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So, yes, if you first claim Social Security at age 70, and if your earnings are as large as you indicate, you will receive the maximum benefit possible. At that point, your wife will be 67, her full retirement age. And once you have claimed Social Security, she will be eligible to file for a spousal benefit.

But her spousal benefit won’t be 50% of the payout you receive at age 70.

Social Security spells out this rule on its website: “The benefits for your spouse don’t include any delayed retirement credits that you may receive.” Rather, your wife will receive 50% of the payout that you would have received at your full retirement age. (Which also is 67.)

So, once you claim benefits at age 70, you and your wife will be able to draw two benefits: first, your age-70 payout and, second, a spousal benefit. But again, the latter will be capped, initially, at the amount you would have received at 67. Going forward, both of you, of course, will be eligible for cost-of-living adjustments.

One final wrinkle: Surviving spouses are eligible for delayed retirement credits. So, if you should die first—and if you first claim Social Security at age 70—your wife, assuming she has reached her full retirement age, would become eligible for your full age-70 payout.

Mr. Ruffenach is a former reporter and editor for The Wall Street Journal. Ask Encore examines financial issues for those thinking about, planning and living their retirement. Send questions and comments to askencore@wsj.com.

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