Do You Really Need a Financial Advisor in Retirement?

Do you need a financial advisor in retirement? Before deciding, consider what retirement planning help you actually need beyond investment management.

It’s a reasonable question, especially if you’ve successfully managed your own investments for decades. Maybe you’ve learned to build a diversified portfolio, avoid trying to time the market, and keep your investment costs down. If that’s the case, you might look at the fee charged by a financial advisor and wonder exactly what you’re paying for.

But I think there’s a problem with the question.

Too often, when people ask whether they need a financial advisor, what they’re really asking is:

Do I need someone to manage my investments?

Those aren’t necessarily the same thing.

I was reminded of this distinction while reading the July edition of Kiplinger. Editor Lisa Gerstner had asked readers whether they thought people should hire a financial planner. The responses came from people with different levels of wealth, investing experience, and stages of life, but I noticed a striking commonality:

Most of them talked about investments.

That says something about how our industry has taught people to think about financial advice. And I think it’s worth challenging as you approach retirement.

Why We Equate Financial Advisors With Investment Managers

Several of the Kiplinger readers described their decision to use—or not use—an advisor primarily through the lens of investment management.

One had managed investments independently for most of a career before deciding that an advisor had greater access to data, technology, knowledge, and time. Another had managed investments for more than 40 years before turning that responsibility over to an advisor in their 70s. Others explained why they were perfectly comfortable managing investments themselves.

These are all legitimate considerations.

But notice what’s missing.

There isn’t much about deciding when to claim Social Security. Nothing about navigating Medicare. Nothing about Roth conversions, lifetime tax planning, estate decisions, or making sure a spouse who hasn’t traditionally managed the family’s finances knows what to do if they’re suddenly on their own.

Instead, the underlying assumption is often:

Financial advisor = investment picker.

I think the financial industry deserves some responsibility for creating that perception. For decades, advisors have often presented their value in terms of investment selection and performance.

But that’s not how I define comprehensive retirement planning.

Investment Management Is Only One Part of Retirement Planning

If all you’re looking for is someone who can pick investments that beat the market, I’m not convinced that’s a compelling reason by itself to hire a financial planner. Many people are perfectly capable of managing a straightforward investment portfolio themselves.

In retirement, however, an entirely different set of questions often arises.

You may need to determine:

• When should I claim Social Security?
• Which Medicare coverage makes sense for me?
• Should I consider Roth conversions?
• How should I approach taxes over my entire retirement rather than one year at a time?
• How much can I afford to spend?
• How should my estate plan be structured?
• What happens financially to my spouse if I die first?

Those aren’t simply investment questions.

And that’s why I think the value of a financial planner should be evaluated differently from the value of an investment manager.

Sometimes Financial Planning Doesn’t Look Like Financial Planning

One response to the Kiplinger survey stood out to me.

A widow from Florida described dealing with financial, estate, and other issues after her husband died. The advisor she found offered to accompany her to a meeting with her estate attorney. She described the advisor’s kindness and personal attention as providing peace of mind during a difficult period.

That reminded me of one of my own clients.

About 10 years ago, I was meeting with a woman whose husband had recently died. At the end of the meeting, I asked whether there was anything else I could help her with.

She told me there probably wasn’t, but she wanted to buy a brand-new car.

She was around 70 and had never purchased a new car on her own. Her husband had always handled it.

So I researched the vehicle and pricing ahead of time, put my research into a folder, and went to the dealership with her. The pricing became a little more favorable after we showed them the research, but the bigger point was that she didn’t have to navigate something unfamiliar by herself.

Now, about a decade later, she’s buying another car. Another advisor in our office is working with her and doing the research this time.

That’s not investment management.

But I view this example as the kind of thing that was worth doing as an advisor for this client.

A Good Advisor Should Help You See Your Blind Spots

Another Kiplinger reader from Wisconsin described finding an advisor who could communicate with both spouses despite their different personalities—one analytical and the other creative.

The reader said the advisor understood their goals, recognized what they had already done well, and then showed them blind spots and approaches they hadn’t considered.

I think that’s an excellent description of what financial planning can provide.

You may be perfectly capable of managing your own investments and still have questions you don’t know to ask.

Retirement is particularly susceptible to those blind spots because you’ve never done it before. You spent decades learning how to earn a paycheck and accumulate money. Now you have to determine how to turn those resources into retirement income while coordinating Social Security, taxes, healthcare, investments, and your estate.

You don’t necessarily need someone to take every financial decision away from you.

You may need someone who can help you identify the decisions you didn’t realize you needed to make.

Start With the Problems You’re Trying to Solve

That’s why I’d change the original question.

Instead of asking:

“Do I need a financial advisor?”

Ask:

“What problems do I want a financial advisor to help me solve?”

If the only answer is, “I want someone to manage my investments,” evaluate whether investment management alone provides enough value for what you’ll pay.

If you’re comfortable managing investments but have several retirement planning questions, you could consider getting a checkup from an hourly financial planner rather than delegating everything.

On the other hand, perhaps your list includes Social Security, Medicare, Roth conversions, taxes, estate planning, retirement income, investment management, and making sure your spouse will have someone to call if you’re gone.

Now you’re evaluating a very different service.

The important thing is to define what you’re looking for before you start interviewing advisors.

The Better Question to Ask About Financial Advice

I don’t think every person automatically needs the same type of financial advisor.

Some people enjoy managing their finances and have the time and knowledge to do much of the work themselves. Others would rather delegate more of that responsibility. Many people fall somewhere between those two extremes.

What matters is understanding the difference between managing investments and planning a retirement.

If you’re interviewing a financial advisor, don’t begin by asking whether they can pick better investments.

Bring them the problems you’re trying to solve.

Then ask how they would help you solve them.

That answer will tell you far more about whether you need a financial advisor—and whether you’ve found the right one.

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About the Author:

Jeremy Keil, CFP^®, CFA is a retirement financial advisor with Keil Financial Partners, author of Retire Today: Create Your Retirement Income Plan in 5 Simple Steps, and host of the Retire Today blog and podcast, as well as the Mr. Retirement YouTube channel.

Jeremy is a contributor to Kiplinger and is frequently cited in publications like the Wall Street Journal and New York Times.

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Additional Links:

• Buy Jeremy’s book – Retire Today: Create Your Retirement Master Plan in 5 Simple Steps
• Kiplinger July issue 
• 5StepRetirementPlan.com 
• “What is Fee-Only Financial Planning?” – The National Association of Personal Financial Advisors 

Connect With Jeremy Keil:

• Keil Financial Partners
• LinkedIn: Jeremy Keil
• Facebook: Jeremy Keil
• LinkedIn: Keil Financial Partners
• YouTube: Mr. Retirement
• Book an Intro Call with Jeremy’s Team

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