When it comes to working with a financial adviser, I’m really picky: Don’t work with a broker or someone who works on commission. Someone who is compensated by the hour or flat fee is usually best.
Even better is an adviser who is hired by your employer who doesn’t cost you anything. If you need help getting going on your 401(k), this person can help you max out your savings.
There’s plenty of evidence to suggest that those who use professional advice do better than those who don’t. According to research from John Hancock Investment Management:
“Even if the lineup of fund options represents an appropriate set of tools to build a diversified investment portfolio, those tools aren’t much use to a participant who doesn’t know what to do with them, and they’re even less useful to those who don’t contribute much—or anything—to the plan.”
That’s where the adviser comes in, who should be independent of the company providing your 401(k) options. Let me be clear: By adviser, I don’t mean an insurance agent, “retirement specialist,” stockbroker or someone who’s not a certified financial planner. A fee-only adviser can make a difference because you are:
— More likely to have a higher 401(k) contribution rate.
— More likely to be on track with savings strategies and budgeting.
— Less likely to have taken a loan from 401(k) plan accounts.
— While some 71% of all retirement plan participants believe financial matters add stress to their lives, that figure drops to 53% among participants who work with a financial adviser.
Of course, you don’t need a “branded” adviser from a major financial services company to provide this kind of advice. You can find fee-only, independent financial planners all over the country.
Of, you can always run the numbers yourself on how you can budget, save and invest. In any case, if you need advice, seek it. There’s a lot to know and you won’t meet your financial goals without some key knowledge.
