Secret #1: Financial Planners rarely, if ever, consistently beat index returns after netting out their fees

You know that friend or relative who’s always telling you they’ve “got a guy” who can deliver outsized returns? Well, it’s a good thing if you’ve been skeptical of their claims, because almost no financial planner can consistently beat the market. Why? Because they’re human. Very few, if any, can time the market perfectly and pick the right stocks every time. Instead, most smart investors engage in a buy-and-hold strategy known as passive investing. 

Passive investing is the opposite of what your friend who’s “got a guy” is likely doing, which is aggressive investing. Aggressive investing can yield big short-term gains but that comes at the cost of greater risk and volatility, which is not a good strategy for those in or near retirement. 

With passive investing, you’ll hold a diversified portfolio of assets based on an index like the NASDAQ or S&P, riding out the highs and lows long-term in an effort to match index performance instead of trying to beat it.  

Aside from the lower risk and volatility, passive investing makes sense because you don’t have to pay a stock picker 1% or more since most indexes cost far less to buy on your own. 

Secret #2: Your financial planner is probably having someone else pick your stocks and you’re paying their fee, too

To add insult to injury, chances are the 1% or more in fees you’re paying your “stock picker” financial planner is just the tip of iceberg. That’s because you might also be footing the bill for someone else to do the picking instead. 

The truth is many financial planners don’t pick stocks anymore. They pick mutual funds—which in turn are managed by others who do the actual stock picking. You end up paying an additional fee to the mutual fund—generally called the “annual fund operating expenses”—which goes toward the cost of paying the managers and others who run the fund. Keep in mind, that’s on top of other fees, like sales loads that can be as high as 8.5%. You can see how your costs quickly add up. 

Secret #3: Many financial planners don’t help their clients plan for nursing home care costs

Long-term care is hands down the largest financial risk for almost every retiree. Yet it gets almost no attention from financial planners, aside from those who run long-term care insurance quotes. Unfortunately, many people don’t qualify for the coverage or don’t want to pay the high cost of premiums.  

There are other avenues for planning for long-term care costs, some of which are legal tools. However, many financial planners don’t have the expertise to know when these might be useful, or the relationships with elder care and estate planning attorneys to facilitate seamless planning for clients. The other unfortunate reality is that some financial planners don’t want to put in the work needed to help clients plan for long-term care expenses because they can’t make money doing it.  

Secret #4: Financial planners often accidentally (or intentionally) overlook tax planning

It’s no secret that your 401k and IRA will be taxed. But it might be news to some retirees that just how much you pay in taxes is within your control, especially when it comes to avoiding the widows penalty and kiddos penalty. So why don’t more people know about this? 

Tax planning ought to be part of every retiree’s financial plan, though not every financial planner knows how to build a tax plan, nor do they have a CPA on staff to provide that guidance. Worse, some may avoid helping their clients take money out of their IRA, because it could reduce their fee if it’s based on assets under management. 

No more secrets. Retirees need someone who will actually protect their retirement. They need a retirement planner. At Golden Reserve, we offer not only a team of experienced retirement planners, but also the tools and expertise clients need to feel confident they have the right resources to protect their retirement. Learn more about what makes us different, or schedule a no-cost, no-obligation consultation.