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If you’re thinking about working with a financial advisor to make your money goals a reality, it’s wise to conduct research beforehand and make sure they’ll end up being a good fit.
A financial advisor is someone you’ll be working closely with in one of the most personal aspects of your life. Before deciding on who you should work with, here are five questions to ask a financial advisor before hiring them.
Get In Touch With A Pre-screened Financial Advisor In 3 Minutes
Asking a financial advisor if they work under a fiduciary duty is perhaps the most important question to ask.
Fiduciaries are required by law to put their clients’ best interests above their own. They are not allowed to earn commission from any investment products they recommend to clients, thus making them more trustworthy in recommending products and services you will benefit from, rather than only doing so when they can earn money.
Financial advisors who work for brokerages are generally not working under fiduciary duty—meaning they can offer products with higher fees and bigger commissions for themselves. To find a fiduciary financial advisor, you can use databases from reputable organizations, including the National Association of Personal Financial Advisors (NAPFA) and XY Planning Network.
Social media has made it easier than ever for people to share their input on investing and financial planning, even when they’re not legitimate, formally educated financial advisors. The amount of bad advice money advice out there means it’s crucial to be upfront and ask what a potential advisor’s qualifications may be. Someone who says most of their knowledge stems from their own research and experiences is not formally trained to be a financial advisor.
Aside from pseudo-advisors running amok on the internet, there’s also a confusing flurry of titles to describe different financial advisors. For example, there are certified financial planners (CFPs), investment advisors, brokers and wealth managers. These are all different in their own unique ways, and some are more specific in their expertise than others.
CFPs, for example, have a fiduciary responsibility to their client and can create tailored financial plans to help you achieve your goals. An investment advisor also acts under fiduciary duty and creates tailored plans but focuses specifically on your investment portfolio, rather than assisting with your entire financial picture.
Be sure to also check an advisor’s Form ADV before hiring them. This disclosure document will list out the services the advisor offers, explain their fees, detail their education and work history, and include any legal or disciplinary actions taken against the advisor. You can also use BrokerCheck to find this information.
As with any service you pay for, you’ll need to ask a financial advisor about their fees and how they will be paid. Some financial advisors charge a flat fee, whereas others charge hourly fees or asset-based fees. The most common types of payments are fee-only, fee-based (a mix of commissions and fees) and commission-based.
If a financial advisor discloses that they make money based on the commission of products they sell to you, that means they don’t have to work under fiduciary duty. The products they recommend may not be appropriate for your goals or risk tolerance—so proceed with caution, or look for a financial advisor who works under fiduciary duty elsewhere.
Having a diverse asset class can help your portfolio endure short-term market volatility and set you up for success in the long term. That’s why it’s important to ask a potential financial advisor how they allocate assets.
Good asset allocation typically includes having investments in a mix of categories, including stocks, bonds and cash.
Another important aspect of asset allocation is its associated risk tolerance, which refers to your ability and willingness to lose some or all of your investments while seeking a return. It’s imperative to make sure you and a potential financial advisor are on the same page when it comes to your risk tolerance. If a potential advisor makes you uncomfortable by pushing you to take on more risk than you’re willing to take, then they’re not a good fit for you.
Keep in mind that enduring at least some risk is beneficial; not including enough risk means your investments may not earn a large enough return to meet your financial goals.
If you’re someone who takes pride in investing in ethical companies or those that are aligned with your moral values, you should ask a potential financial advisor about their investment values and principles.
Not all financial advisors are concerned with investing in ethically responsible companies. By asking before hiring an advisor, you both can be on the same page about where your money should be allocated. Some financial advisors even specialize in ethically responsible investing.
It’s also important to ask a potential financial advisor how they’ll measure progress toward your financial goals. You’ll want to make sure that you’re comfortable with the risk and pace of their presented strategy.
Get In Touch With A Pre-screened Financial Advisor In 3 Minutes
Get In Touch With A Pre-screened Financial Advisor In 3 Minutes
If you’re like most taxpayers, you may not need either a tax preparer or a certified public accountant (CPA). There are exceptions, though. Maybe you’re self-employed, own a small business or have lived in several jurisdictions. In these cases you might need some help. If so, here’s your rule of thumb: Hire a tax preparer if you generally understand your finances and just want to make sure your taxes get done right. Hire a CPA if your financial questions extend beyond simply preparing and filing tax forms.
For help with both taxes and other financial considerations, consider working with a financial advisor.
A certified public accountant, or CPA, is a full-service financial professional. The title of CPA is a formal credential issued by the American Institute of Certified Public Accountants, or AICPA. It means that this person is a professional accountant who has also met the standards for CPA certification. This requires two elements:
National – A CPA must pass the AICPA’s national licensing exams and qualifications;
State – A CPA must also meet the requirements set by any state licensing board in which they practice.
To meet the national requirements, an accountant must pass the national CPA exam issued by the AICPA each year. In addition to this exam, each state has its own requirements. Typically these state requirements include:
Minimum educational credentials, such as a degree or a minimum number of credit hours
Minimum relevant educational credentials, meaning that you must have dedicated a minimum amount of your studies to accounting and finance
Professional experience, meaning that you must have worked in the field as an accountant or financial professional for a minimum number of years
Residency, meaning that you must have lived and worked in the state for a minimum number of years
For example, New York sets the following requirements to receive a CPA license:
You must be 21 or older;
You must have a bachelor’s degree and 150 credit hours of post-secondary education. In the alternative, you may waive this requirement if you can show 15 years of related experience under the supervision of a qualified professional;
Of your credit hours, at least 33 must have been in directly related financial fields, and another 36 must have been in generally related business or financial fields;
At least one year of relevant work experience.
For a list of each state’s full requirements, see the AICPA’s website.
As with all professional certifications, many states will waive some parts of their requirements based on work experience. For example a CPA with enough experience can often waive any residence requirements that a state may have. These waiver rules exist so that mid-career professionals can move without significant career interruptions.
You might want a CPA if your finances are complicated year-round. Someone who has to manage large sums of money, for example, or who runs their own business may want to have a CPA manage their books. The same is true for someone who works in several jurisdictions continuously. When your finances raise complicated issue on an ongoing basis, a CPA is often the right choice to stay on top of that.
This includes preparing and filing your taxes. Someone with complicated finances will often benefit from advance tax planning, whether they’re setting up a trust or maximizing deductions. A CPA can help with that.
Tax Preparer Definition
Tax preparer is a formal professional license granted by the IRS. It is awarded to professionals who meet two requirements:
First, they have taken and passed the Special Enrollment Examination of the IRS;
Second, they continue to meet the IRS continuing education requirements. At time of writing this meant taking at least 72 hours of continuing education every three years, with at least 16 hours every year.
A tax preparer is also known as an enrolled agent. They are certified to prepare your taxes and apply the tax code to your specific financial situation. Like a CPA they are also licensed to sign your taxes as a tax preparer and file on your behalf.
However, this is the limit of a tax preparer’s expertise. A tax preparer is not necessarily qualified to advise you on general accounting and financial questions, nor are they necessarily qualified to help you manage your tax situation before it’s time to file. Their expertise is narrow and specific: They can tell you what you owe or are owed on April 15. Although readers should note that many tax preparers are also accountants, investment advisors or financial professionals in their own capacity.
A tax preparer is generally the right choice for you if you have questions specifically about preparing or filing your taxes. If you want to maximize any potential deductions, or generally at your mind at ease come tax time, this may be the right person for you. More likely, if you have complicated finances that you understand most of the time, a tax preparer might be the right choice. They can make sure that you follow the rules and don’t miss anything.
The Bottom Line
A CPA is a full-service financial professional, and is generally the right choice for someone who wants accounting help year-round or who would benefit from making good tax choices in advance of filing. A tax preparer is someone who is licensed to prepare and file taxes, and is generally the right choice for someone who specifically needs help when it comes time to file.
If you have complicated finances you might need a CPA. If you have very complicated finances, you might need a tax attorney. Read on to learn all about the difference.
A financial advisor will help you with taxes and with other financial questions. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Photo credit: ©iStock.com/PeopleImages, ©iStock.com/alfexe, ©iStock.com/fizkes
The post Differences in Hiring a Tax Preparer vs. a CPA appeared first on SmartAsset Blog.
Friday, August 5, 2022
Non-fungible tokens were minted and sold under the radar until a relatively obscure artist sold an NFT for an immense sum. That seminal event invigorated interest in NFTs by artists, sales platforms and collectors. In this column, we undertake to identify and answer, in Q&A format, the top forty legal issues associated with this new medium of artistic expression.
How does copyright law apply to NFT art? NFTs do not change the operation of copyright. The underlying work is protected by copyright, which can be retained by the author or transferred to the holder of the NFT. This is similar to how a copyright in a conventional piece of art may be transferred to a third party. That said, copyright transfers must be in writing, and whether a smart contract is a writing for purposes of the Copyright Act is not a settled legal issue.
If the sales platform mints an NFT of digital art, does the smart contract need to specify who owns the copyright? Yes.
If a platform wanted to display an NFT image for public viewing, would the platform need the permission of the copyright holder, the owner of the NFT, or both? The answer will depend upon the terms associated with the NFT. A typical allocation of rights would be that the platform would need the permission of the copyright holder in the underlying work and not the permission of the owner of the NFT, but that allocation could change with the terms of the NFT. An artist could license the artist’s rights to a work exclusively to the NFT owner, which would require the platform to obtain the owner’s approval in order to display the work.
What are the risks of NFT minting? The answer might depend on who is minting the NFT. The creator could mint the wrong NFT, or could input the wrong content or omit information, and not be able to change any of this afterward. If a platform is transferring an NFT that has already been minted, then there could be risks associated with the transfer (hacking, theft, counterfeiting, etc.). If the platform creates its own blockchain and mints NFTs to that blockchain, then there could be technical or structural risks.
If the platform mints the NFT art, will the art appear as having been generated by the artist, the platform, or both? The answer to this requires scrutiny of the smart contract deployed to mint the NFT. Typically, most marketplaces will require that participants mint only original content or content in which the participant has rights. If minting another’s work, the participant could add information about the artist.
Will the NFT be held in the platform’s wallet? The answer will likely depend on how the transaction is structured, as well as the smart contract deployed for the transaction. There might be tax consequences associated with temporarily holding an NFT.
What is a smart contract? A smart contract is a computer protocol that digitally facilitates, verifies and/or executes the performance of a “contract” protocol.
Can a sales platform add terms to the NFT that govern how the sale will be conducted on the platform? Yes, it is common and recommended to impose terms applicable to the NFT purchase to affirm the legal enforceability of the protocol in the smart contract.
How does one embed a smart contract into the blockchain? Typically, a smart contract is deployed as a program on the blockchain, which is usually the Ethereum blockchain).
Could one settle a payment in fiat currency (rather than crypto currency) via smart contract? Answering with reference to currently available technology, the answer is probably not, because fiat currently payment settlements are recorded on private ledgers rather than on the blockchain. One could have the smart contract record on a distributed blockchain ledger, and then record that information in a traditional private ledger.
How would a smart contract handle a notyet-determined sales price? Smart contracts define rules and automatically enforce the rules through their deployment. As long as the rules are programmed into the protocol, and the smart contract ingests accurate data, the smart contract deployment will produce a certified output. Smart contracts also can be crafted to communicate with other smart contracts, which may increase the output possibilities. The platform’s product development team should work with commercial lawyers versed in blockchain technology to assure that their smart contracts align with the parties’ legal commitments.
If the platform is paid cash by a buyer, then how can the platform reconcile that payment with the automatic royalty embedded in a smart contract? Most likely the platform would need to include the confirmation cash payment as an input in the data feed to the smart contract in order to trigger payment of the royalty via the smart contract.
What is a sales agent’s role in a smart contract where the platform does not mint the NFT and the smart contract already exists? This would depend on the protocol for the smart contract. One could program a smart contract to deliver the platform the temporary holding of an asset as an intermediate step.
If the sales platform does not mint the NFT or if, after minting, the NFT is not transferred to the platform, how can the platform be sure that title will transfer to the buyer? An NFT will not transfer payment to the seller until title to the NFT is transferred to the buyer on the blockchain.
Does the platform need to take title in order to transfer possession? No. As in the case of physical goods, the platform can conduct the sale process, notify the seller and the winner of the result of that process, and the seller can transfer the NFT to the buyer. The platform does need to have, however, the contractual ability to force the seller to fulfil its obligation to transfer possession.
Can a platform possess an NFT without owning it? While it is possible that an NFT could provide this capability in its terms, that would be highly unusual.
One reason why a sales platform takes possession of physical art is to make sure that the seller doesn’t sell it to someone else. Is there a way to do this without taking title to the NFT? An NFT can have only one owner at a time, so the only way to be sure of avoiding the classic “double spending” risk is to own the NFT. That said, there may be other, better, ways to achieve this goal; e.g., by contract with the seller or the use of escrow accounts to certain transfer by the seller.
Can the platform add to the blockchain that the platform was involved in the sale as agent without taking title to the NFT? Yes. The platform can become part of the NFT’s provenance in this way.
Is there any need for a platform to consider compliance with securities laws, commodity laws or banking laws with respect to its role in the transfer of funds in the sale process? Yes, but, depending on how the transaction is structured, it should be possible for the platform to avoid these issues by involving third parties that possess the correct regulatory qualifications. Because of unmanageable regulatory burdens, the platform will rightly wish to lawfully avoid characterization of its activities as securities brokerage or exchange operation or a money service business.
Are you sure about that? We heard that NFT art is a ‘utility token’ and that the SEC has no jurisdiction over utility tokens. SEC jurisdiction is unclear and the consequences of being secondguessed by the SEC are severe. Calling a token a “utility token” does not make it one. The function rather than the label is what matters. Consult with expert legal counsel.
What are the anti-money-laundering laws and related issues that pertain to NFT sales? The Global Financial Action Task Force published guidance in March 2021 that has an impact on decentralized finance markets and NFTs that should be considered. Some of the key AML considerations for a platform relate to enhanced regulations in the US, EU and UK that expand AML requirements to dealers in art and antiquities. In addition, the platform should be considering the application of such regulations to crypto assets, exchange providers and wallet providers. Under these enhanced regulations, activity involving exchange, security, and utility tokens are brought within the AML rules. From a regulatory standpoint, this may include obtaining appropriate registrations and making required disclosures and interfacing with the applicable Financial Intelligence Units. From a compliance standpoint, this may include the development of policies and procedures (including Know-YourTransaction and Know-Your-Customer Procedures), risk assessments, training, suspicious activity investigation and reporting. As noted above, it is possible in some circumstances to avoid these sorts of obligations by partnering with an entity that has all the correct licenses and does all the necessary checking.
What warranties on NFTs should a sales platform provide? Platforms will want to minimize the warranties that they will make. If there is a warranty, it should be procured from the consignor, the creator or other providing party, as applicable.
What warranties related specifically to the NFT should a platform obtain from a seller? Warranties of title, authenticity, and continuing existence of the digital image, as well as non-infringement, and other standard warranties in the sale of goods, especially for art pieces and collectibles, should be procured from the seller.
Can the identity of a buyer of an NFT on the blockchain be kept confidential? There is no reason why a seller or a buyer cannot maintain the confidentiality of her, his or its identity, but so far most NFT marketplaces maintain the right to require an entity to prove its ultimate identity even while permitting the entity to transact business confidentially on the platform.
How should the platform address artist-imposed future resale royalties (to the artist) in its sales agreements and conditions of sale? NFTs that provide for future resale royalties will automatically pay out future resale royalties to their creators when they’re sold. Royalty systems differ for each marketplace, though, such that this issue needs to be reviewed on a marketplaceby-marketplace basis.
Is this part of the NFT software code, such that any future buyer contracts to pay the artist the royalty? A transfers within the same blockchain will trigger a payment from the buyer to the artist.
Does the platform need to get involved in collection of these royalties or enforcement of the terms? No. It’s automatically handled by the blockchain.
How does an artist know when a transfer has occurred and thus a payment is due to the artist? Because the artist is identified in the NFT, notification to the artist (and payment) is automatically handled by the blockchain.
How would the platform handle the royalty if the winning bidder paid in fiat currency rather than crypto currency? Initial sales will not incur a future resale royalty. If the platform brokers a “secondary market” sale within the same blockchain, then payment of the resale royalty should happen automatically, without the need for the platform to get involved. A buyer desiring to use fiat currency to make a purchase would need to deposit that money into a suitable crypto wallet to make the purchase.
If the NFT is transferred to the platform before sale, will that trigger the resale royalty or any other conditions in the NFT? What happens if there is no sale? The answers will depend on the conditions coded into the NFT, but it would be unusual for a transfer not to trigger conditions. Unless a separate agreement with the original NFT holder was negotiated, the platform would incur the condition obligations, even on no sale, if the NFT were transferred to the platform’s wallet.
What commercial laws apply to the sale of an NFT? There are significant uncertainties about what substantive law will govern the sale. UCC Article 2 governs only sales of tangible property. Digital art is not tangible. Courts sometimes apply Article 2 by analogy, but even then most provisions of Article 2 can be overridden by express contract terms. The alternative to Article 2, in the United States, is state common law, which again can largely be overridden by express contract terms. Furthermore, courts applying the UCC and the common law have increasingly applied principles of good faith, fair dealing, conscionability and commercial reasonableness to avoid results that seem (to the particular court) unfair or harsh. This suggests that sale contracts in the NFT art area should be drafted with extraordinary specificity and reasonableness.
Technologically speaking, what could happen that might require an NFT art sale to be unwound? Because the Ethereum blockchain is decentralized, it’s highly unlikely that there will be a total shutdown of the platform. Possible counterfeiting or hacking of smart contracts or wallets are genuine concerns. As with any work of art, we would expect that the principal concerns of a buyer would be that what it purchased was not the authentic, original work, or that multiple originals were or could be created. The usual supposition is that blockchain technology precludes these problems, but we would advise not indulging in that supposition in view of the rapidity of technological developments. We counsel protection against these risks.
For example, can the NFT be corrupted? This is a computer engineering question, not a legal one. The uniqueness of each NFT is said to be incorruptible, but again we counsel caution.
What happens if the platform that possesses the NFT files into bankruptcy? There are multiple risks associated with a platform going bankrupt. For example, a bankruptcy court could find that the NFT is or is not “property of the estate,” depending upon the applicable contract language between artists and the platform, with consequences either way. A court could also face challenges with valuing the NFT to the extent the platform requires debtor-in-possession financing throughout the case, which could put the platform at a disadvantage when negotiating with the DIP lender. The murkiness surrounding valuation can also pose challenges to claims valuation and administration. Finally, given the opacity of the NFT market and the court’s likely unfamiliarity with it in general, it is possible that a bankruptcy filing would subject the platform’s directors, officers and other key principals to greater scrutiny than they would experience in a typical bankruptcy proceeding. Several platforms have gone into bankruptcy. Cred, Inc. is one that is currently in bankruptcy proceedings. Some of these risks can be managed by careful drafting of the sale contract. One bankruptcy risk of grave concern in this situation is that the bankrupt site’s obligations to the buyer could be deemed “executory contracts” that could be rejected in the site’s bankruptcy. Of note, licensees of copyrights are not given the protection against such treatment that the Bankruptcy Code gives to licensees of other types of intellectual property.
What are the mechanics of NFT sale cancellation? To delete an NFT, one would “burn” it to remove it from the blockchain. But this would remove the NFT entirely. If a sale were to be cancelled while preserving the existence of the NFT, then, if the new owner has already been recorded, one would need to execute a “cancellation” on the blockchain (potentially via smart contract) in order to change the record of ownership. This is primarily an issue to be dealt with in the terms of the contract.
If a buyer pays a USD purchase price in ETH, and if the sale is cancelled three years later and if ETH has become worthless, how will participants account for the change in value? We would draft the contracts such that the seller would be obligated to return the sale proceeds in the fiat currency of the relevant sales jurisdiction in an amount determined by using the exchange rate prevailing at the time of sale.
In the event of a dispute over the NFT, does the blockchain nature of NFT art mean that the current owner can pursue the artist rather than the sales platform? If the buyer is given cancellation rights, or warranties, then the contract should state precisely what the remedy will be. But under common law principles there could be questions about whether the remedy provided for is “reasonable,” particularly in these circumstances.
Can a sales platform’s terms and conditions of sale protect the platform from possible involvement in a dispute over the NFT? There are two scenarios to consider here: Either (1) the platform facilitates a transaction over an existing, public blockchain (e.g., Ethereum) or else (2) the platform uses a proprietary blockchain that it has created. In the former case, the platform is only tangentially involved and carefully drafted terms and conditions can limit its liability, likely making it immune from disputes about an NFT. In the second case, it is unlikely that the platform would be able to fully avoid being drawn into a dispute over an NFT minted on the blockchain, since it created the blockchain. Even in the latter case, though, it is likely that the platform’s liability would be limited to structural issues pertaining to the blockchain.
What role does insurance play with respect to the sale of NFTs? Insurance coverage opportunities for NFTs will develop over time, but it will be bespoke coverage or no coverage for the near future.
Should a platform expand its liability insurance for risk of loss to the NFT as it usually would do with conventional art? No. We expect that the platform could eliminate or significantly reduce its liability for loss because there’s no tangible object and because the risk of loss due to custody issues should be minimized or eliminated through the use of blockchain -- or at least we would credibly argue that it is eliminated.
We hope that our answers to these forty legal questions will be useful to artists and to platform developers and operators, but this FAQ is not legal advice to anyone. As is evident from the variety of legal questions arising in the fledgling NFT industry, not one but several fields of law are implicated: copyright law, commercial law, technology transfer, securities, commodities, banking, insurance, tax and other specialties. Artists and platform teams should engage teams of legal counsel who are experts in these fields -- and who also are experienced with crypto assets -- to advise them regarding their particular circumstances and plans.
© 2022 Foley & Lardner LLPNational Law Review, Volume XII, Number 217
I am interested in working with a financial planner who specializes in retirement planning. I'd prefer someone with experience and with the newer retirement planning credentials. How do I narrow down my search to those types of planners?
The hunt for a financial advisor can be overwhelming, so I'm glad to see that you've narrowed down your search parameters to finding someone who specializes in retirement planning subjects and carries relevant credentials.
Interestingly, you're not alone in wanting someone with a retirement focus. In a recent survey, most consumers said that retirement income planning is their top priority when seeking advice from a financial advisor. And advisors are listening to that demand, demonstrating expertise in various retirement subjects through certifications and credentialing.
Here's how to find someone who meets your criteria.
What Is a Retirement Financial Advisor?
Retirement financial advisors typically help clients navigate their finances to and through retirement.
Their offerings may include advice services specific to financial planning, investment management and insurance products such as annuities. An advisor may also specialize– or hire staff who specialize – in Medicare, Social Security, estate planning and tax planning. A retirement advisor may be the person you consult when considering a Roth rollover, when to start taking Social Security or how to navigate required minimum distributions (RMDs).
At the heart of a retirement advisor's expertise will be navigating the drawdown phase – or the period of your life when you're taking money from retirement funds. But a retirement advisor should also be competent at helping you navigate the accumulation – or savings – phase, especially how it will look in the last few years before you retire.
An important point to note is that the title "retirement financial advisor" isn't something controlled by regulation or law. Advisors may use this title at their own discretion, so it's important that you do your due diligence when interviewing a retirement advisor.
Retirement Financial Advisor Credentials
There are some credentials offered from third-party financial education programs that can deliver you insight into whether the advisor has recent training in retirement-adjacent topics, adheres to a code of ethics or professional standards, and takes continuing education courses to maintain her expertise.
Retirement income certified professional (RICP). This certification designates a specialty in retirement income planning, including portfolio drawdown management and Social Security strategies.
Certified financial planner (CFP). While the CFP designation is general in nature, CFP professionals complete coursework in retirement planning, estate planning, investment management and tax planning that homes in on strategies and challenges unique to retirees. CFP professionals adhere to ethical and professional standards and must act as fiduciaries when providing financial advice.
Chartered retirement planning counselor (CRPC). This credential is for experienced advisors who focus on clients' pre- and post-retirement needs. Plus, it deals with issues related to asset management and estate planning. Candidates must follow professional standards.
Certified retirement counselor (CRC). This credential is designed to demonstrate mastery of "the accumulation and distribution retirement counseling concepts," among other topics, according to the International Foundation for Retirement Education. Candidates adhere to a code of ethics.
Retirement management advisor (RMA). This educational program is designed to deliver advisors an in-depth understanding of subjects that help preretirees and current retirees navigate the complexities of their financial situations. Applicants must adhere to a professional code of responsibility.
Bottom line: These credentials are just a sample of what to look out for. Your advisor may hold one, or several, of these marks. But seeing them is shorthand for an advisor who's taken the time to beef up retirement-related skills, knowledge and understanding.
How to Find an Advisor for Retirement
There are numerous ways to find a financial advisor for retirement. On a platform such as SmartAdvisor Match, investors with $25,000 or more in investable assets can pair up with a financial advisor. The platform may link you with prescreened matches with whom you can chat at no obligation to you.
Additionally, professional organizations such as the CFP Board and the National Association of Personal Financial Advisors have databases for finding advisors in their networks.
No matter what service you use to find names, it's important to ask prospective advisors about subjects that are important to you. You'll have to do some legwork to ensure that you and the advisor are good matches for each other.
I'd suggest chatting with at least three advisors before committing to working with one to ensure that the person is the right fit for you, has the expertise you require and is accustomed to working with folks in a similar situation to yours.
Questions to Ask a Retirement Financial Advisor
You mentioned that you want someone with experience and recent retirement planning credentials. When interviewing advisors, ask these questions:
What's your experience with retirement planning? Don't be afraid to grill them on their experience. How long have they been at this? Why do they specialize in retirement? And have they helped folks in similar situations to yours?
What are your credentials? We've reviewed some more common retirement planning credentials, so ask about them and what those designations have done to help them hone their expertise.
What happens when you retire? Normally, this isn't top of mind when interviewing a prospective financial advisor. But you mentioned that you want someone with a lot of experience, so it's important to note. If the advisor has decades' worth of experience, he is likely at least middle-aged. Ask about succession plans. Who would handle your money if the advisor retired in a decade?
What services do you provide to retirees? Determine what range of retirement-related services this person is able to provide. Does she direct investments? Provide comprehensive financial-planning services? Tackle Social Security and Medicare planning?
What are your areas of specialty? Are they retirement income specialists? Social Security mavericks? Investing wunderkinds? Insurance experts? Do they excel at retirement income planning?
How are you paid? Advisors are paid in a number of ways. Make sure you understand whether you're paying a percentage of assets under management (AUM), an hourly fee, a per-project fee or some other cost.
What custodian do you use? Many experts recommend working with a financial advisor who helps manage your investments but doesn't actually hold them. This can act as a buffer against fraud.
Are you a fiduciary? Fiduciaries have an obligation to act in their clients' best interests.
What do you think are the greatest threats to my retirement? Do they understand what's keeping you up at night when it comes to retirement? How would they address those fears?
What's your investment philosophy for handling retirement portfolios? What does their portfolio management look like and does it differ from how they handle nonretirement portfolios?
What to Do Next
You know what kind of advisor you need, and that's a great first step. Using a platform such as SmartAsset's can help you narrow down your search to a few prospective advisors. Next, it's about looking for the credentials that matter to you and asking questions to ensure the advisor has the expertise, philosophies and ethical frameworks you require.
Investing and Retirement Planning Tips
If you have questions specific to your investing and retirement situation, a financial advisor can help. Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
As you plan for income in retirement, keep an eye on Social Security. Use SmartAsset's Social Security calculator to get an idea of what your benefits could look like in retirement.
Susannah Snider, CFP® is SmartAsset's financial planning columnist, and answers reader questions on personal finance topics. Got a question you'd like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Please note that Susannah is not a participant in the SmartAdvisor Match platform.
Photo credit: ©Jen Barker Worley, ©iStock.com/Mladen Zivkovic, ©iStock.com/AscentXmedia
The post Ask An Advisor: How Do I Find a Retirement Financial Advisor? appeared first on SmartAsset Blog.
"I have stayed awake worrying about our son’s future every night for the past 15 years. Who will care for him once we’re gone? If he’s not able to be financially independent, how much do we need to have saved for him?"
These are the comments and questions from one of my clients during our first conversation about her son with special needs, and they are not unique to her. I hear these common themes from most parents of children with special needs that I meet.
The daily demands of doctor’s appointments, therapy sessions, school meetings to review their Individual Education Program, and the myriad other responsibilities consume all a parent’s mental energy and focus. There is not much time left to plan for the future. It can be overwhelming to say the least.
But help is available. As someone certified as a Chartered Special Needs Consultant®, I worked with this family for several months to chart a financial path. It addresses four fundamental financial steps to build a comprehensive financial plan for a child with special needs that can apply to other families.
Every parent needs to have a current will in place. Wills direct where assets will go after one’s death, but for parents of minor and/or dependent children they are so much more important.
Your will names the person(s) you choose to be your child’s guardian if you pass away prematurely. For your child with special needs, it is important to think about the amount of time your child may need a guardian since it could include their adult life. For this reason, you should choose successor guardians who can step into that role after the primary guardian is no longer capable of serving in that capacity.
One of my clients has named his mother as the guardian of his daughter, but given her advanced age, has also named two of his siblings as successors. And they can step in and provide care when needed.
You may choose to have a different family member serve in the role of trustee to oversee the financial aspects of your child’s life as those two duties can be divided. Naming a guardian should be reviewed at least every five years, or more often as life events affect the guardian’s ability to take this responsibility. A legal document naming your child’s guardian should be your first priority in your financial planning journey.
Any assets left to your child with special needs should be placed in a special needs trust. These trusts serve a variety of purposes, including providing financial oversight, protecting your child from those who may take advantage of them and preventing disqualification from certain public benefits, such as Medicaid and Supplemental Security Income (SSI).
When meeting with an estate planning attorney to draft your wills, you should also request that they draft language to leave any assets to your child with special needs in a special needs trust. This allows you to name a trustee to oversee the management of any funds left to your child. It is also important to communicate with other family members or close friends who may plan to leave money to your child in their wills. Doing so will help avoid potential disqualification from these crucial public benefits by a sudden infusion of assets into your child’s estate. Without a special needs trust, having more than $2,000 in cash and/or investment assets can disqualify an individual from receiving certain public benefits.
Once the special needs trust is created, it needs to be funded with enough assets to provide for your child for the rest of their life. If you do not have enough savings and other assets, life insurance can be an excellent tool and is used by many parents to create instant liquidity if needed. A financial planner or life care planner can estimate the amount of money needed to care for your child for their lifetime. From there, you can determine how much life insurance is needed once you have that estimate.
For married couples, a survivorship policy is most commonly used to fund a special needs trust. This is because the death benefit does not pay out until the second spouse passes away, which is when the funds are needed to provide for the child. Premiums for a survivorship policy may also be lower than an individual life insurance policy on each parent. The ownership and policy mechanics can be complex, so work with a knowledgeable financial adviser to guide the process of acquiring this coverage.
If you have money set aside for your child today, you should consider opening an ABLE (Achieving a Better Life Experience) account. This account can be set up online through a state-sponsored program and allows you to save and invest after-tax dollars. Any growth from these funds can be accessed tax-free for the benefit of your child with special needs. The list of qualified disability expenses is extensive, but be sure to follow your plan's guidelines on expenses to avoid paying taxes and a 10% penalty on the distributions.
Annual funding is capped at the annual gift tax exclusion ($16,000 for 2022) per year per beneficiary. If you child works, they may be able to contribute additional money to the account beyond the cap. However, as the value of an ABLE account grows if it is valued at $100,000 or more, it can disqualify a person from receiving some Social Security Income benefits. For that reason, many families manage the distribution and addition of funds to this account to keep the balance below that threshold.
Once completing these four steps with the client I mentioned earlier, she let me know some of her most overwhelming worries had been addressed. Now, she has a plan for her son’s future. By taking these four steps, parents can be well on their way to providing a financial future for their child. And it will help provide some peace of mind that some of the biggest planning objectives have been covered.
Associate Wealth Adviser, CI Brightworth
Josh Monroe is a CERTIFIED FINANCIAL PLANNER™ practitioner and a Chartered Financial Consultant designee who listens actively and plans thoughtfully to help clients achieve their goals. He joined the CI Brightworth team in 2019 as a Financial Planner. Before CI Brightworth, Josh spent eight years at a leading insurance and investment firm in a variety of roles, including compliance and supervision. Josh is passionate about financial planning and making complex concepts easy to understand.
Can financial wellness change the mindset of working-class Americans who are conditioned to live paycheck to paycheck?
Our society and the financial institutions teach us to have a certain way of thinking about our finances, through the pleasure of things that cost money.
How did it get like this? Part of the reason is because we have been trained by our society and financial institutions to think the way they want us to. They hide the chinks in their armor, we don’t see what they don’t want us to see and consumers we don’t ask the important questions.
Most of us don’t:
If we play the game on the financial institutions’ playing field and by their rules, then we are playing their game. Most of us think these financial institutions are the only game in town; we think settlement, consolidation, modification and refinancing are our only viable alternatives.
A bank would never borrow money under the same terms and conditions as they provide us. So how do they borrow money, undertake financial projects or save money?
As individuals, when we begin to think outside of that box financially, and we find a potential solution, our friends tell us what we’re thinking is not possible. If it is outside the banking realm, then it's probably too good to be true, so we immediately start to doubt the possibility. Then we see a billboard, watch a commercial or our bank sends us a meaningless promotion and we begin to feel safer in their arms again.
Our friends and relatives, in most cases, are not financial professionals. Financial institutions, large corporations, media and the rich influence us into looking in the wrong places for solutions to our problems.
So we live paycheck to paycheck like it is normal. We're in debt and we accept it. We have trouble with credit cards, but we keep buying. We don't know how to manage our finances and we think there is no real way to change our situation except through the bank.
We know that people buy things they don’t need, with money they don’t have, to impress people they don’t know. I am not trying to blame the situation solely on the banks; we all are to blame.
In either case, traditional financial institutions -- even some that provide financial wellness benefits -- are working hard to pull consumers further and further into debt. This adds to a vicious cycle for the economy and for millions of American families. This is an economy built on the snowball effect that credit card interest, student loans and mortgages create. Financial wellness must address personal finance first and then retirement.
The profit in our income goes to the financial institutions as interest, and debt is why we can’t save!
The problems we have with banking, the credit card industry, mortgages and student debt are all because most of us don't know how these mechanisms work. We don’t use all the resources at our disposal. We don’t even understand how we can use financial tools like asset-based life insurance to bank like the banks do, while the people who do so prosper.
We would know if we had been taught in school, taught by the institutions that created these instruments, or by the agents who sell them. Unfortunately, their main purpose is to make money for the financial institutions that created these products.
Money is constantly occupying our minds. From policymakers to businesses to the media - there always are forces influencing us. Americans are hurting financially and need to change their mindset to break out of this cycle and take control of their money. This takes more than financial literacy; this is what financial wellness must do.
We live in one of the most advanced societies in the world with all the technological, social and medical advances we have made; yet many people cannot manage their money effectively. Many people have no idea how to make the most of their money. With all the noise out there, we are paralyzed; in fact, we wouldn’t recognize or trust a good financial solution if it fell in our laps.
The banks, advisors, media and the government tell us things like we must have a 401(k) in our retirement plans. But a 401(k) with deferred interest will most likely run out of money earlier than we think.
In Investopedia, November 2021, financial experts discuss the realities of the 401(k): “The cost of living increases constantly. Most of us underestimate the effects of inflation over long periods. Many retirees believe that they have plenty of money for retirement in their 401(k) accounts and that they are financially sound, only to find that they must downgrade their lifestyle and may still struggle financially to make ends meet.”
How many American families are really prepared to spend five years of retirement living on $1,000 per month? Think about it! In the future, do you think interest rates will go down, stay the same or go up? If we can’t take care of our personal finances today, how do we deal with inflation tomorrow?
It's time to find out how we can help employees access all the tools available, and demand our elected officials require financial institutions to explain and teach us what we need to know, not just take our money. We have a right to understand how our finances work.
Don’t hold your breath waiting for that to happen. You know how it goes. An employee's life gets stressful. Bills pile up on the table. They feel like they’re barely making ends meet each month.
But there are real solutions out there. Workers really can get out of debt. Their mortgages can be paid in as little as five years, and they can cancel as much as 70% of their interest. Employers can help them accomplish these goals and can help workers retire with dignity and build generational wealth.
Employers can initiate a real-world financial wellness program and help their employees learn new ways to make their money work for them!
A financial wellness program must fit our current economy and it should integrate financial services with the latest technology. It must bridge the financial knowledge gap, uncover the financial pitfalls and remove the financial obstacles. The solution must be easy to access, personalized, private, digitally interactive and resource rich.
It should guide, reinforce, and have an immediate impact. The program must expose working-class Americans to the proven techniques used for years by the rich, corporations and financial institutions.
If financial wellness programs showed people how to stop using credit cards and how to pay off their mortgages quicker, our economy would ease itself from its slow rot of infinite debt and perpetual economic crisis.
Like the old saying, it takes a village, but in this situation the village is an organization.
Ron Harris, MBA, MBE, is a Certified Financial Educator, author, insurance professional and CEO of Financial Literacy Group. Ron may be contacted at [email protected].
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