10 Questions Baby Boomers should ask their Financial Advisors Now!

If you are a Baby Boomer AND in or near retirement your Financial Advisor should be advising you on how to protect your Nest Egg in Retirement. If they are not actively working with you to control your Nest Egg you could be in serious trouble.

With the financial markets in turmoil and the stock markets tumbling, if your your Nest Egg is in the Stock Market it is likely to be down 20% or more. Do you understand that if you are drawing a pension from your Nest Egg, then being down 20% or more is critical to the long term survivability of your Nest Egg.

Craig L. Israelsen, Ph.D. is an associate professor at Brigham Young University. In his article The Math of Recovery in Retirement Portfolios he states “The Primary Goal of a Retirement Portfolio is very simple; avoid large losses.” If your financial advisor isn’t telling you this, there is a problem. If you suffer large losses just as you start taking a pension from your Nest Egg you could be in serious trouble. This article shows you just how much trouble. I recommend you read the article in full.

10 Questions you should ask your financial advisor:

  1. Did your financial advisor talk to you about your retirement and help you plan how to protect your Nest Egg against large losses or is your Nest Egg sitting there with “paper losses” of 20% or more?
  2. Did your financial advisor sit you down and lay out a detailed plan for your income needs for the next 5 years that would enable you to draw money from your Nest Egg without having to sell assets at fire sale prices, if this down-turn continues?
  3. Did your financial advisor tell you to take money from your Funds in good times prior to retirement, and put it in a safe place so you can live off it when your Nest Egg is down, like now?
  4. Did your financial advisor take the time to explain to you how your Nest Egg could last you 10, 20 or 30 years or more depending on how well you manage it.
  5. Did your financial advisor explain the effect of Fees, Inflation, Taxes and drawing a pension on your Nest Egg over time?
  6. Did your financial advisor talk to you about how you can protect yourself against large losses by using investment strategies that make money when markets go down?
  7. Did your financial advisor discuss with you a stop loss strategy so that you move all or part of your Nest Egg into cash when that stop loss is reached? Did he tell you it is okay to be in cash sometimes?
  8. Did your financial advisor discuss with you ways to reduce the fees and taxes you pay now you are in retirement?
  9. Did your financial advisor explain to you the difference between risk based assets and non-risk based assets and why you should not mix the two?
  10. Did your financial planner call you and talk to you late last year when the stock market turmoil began and the sub-prime debacle surfaced and suggest you put plans in place to minimise potential losses?

If the answers are no, then why are you still with them? They have failed to protect your Nest Egg or at least minimise the losses. Have you asked them what they have done to protect their assets? Either answer should make you walk. If they did nothing to protect their own assets, what chance have you got of them protecting yours? If they did protect their assets and didn’t bother with protecting yours, is there a case to answer here?

If your financial advisor does not give you advice when you really need it there is a real problem, and it is your problem. The only way to overcome this now is to take action yourself. You don’t need high level financial knowledge to set limits on the losses you are prepared to take. You don’t need that knowledge either to put your Nest Egg into a bank account until the stock market improves. Get over the fear of missing the next bull market and concentrate on minimising your losses. Get that under control first. Then look at how you can invest a small percentage of your Nest Egg to get better returns.

This Post was shown on the 148th Carnival of Personal Finance which was hosted by Gather Little by Little.

4 Responses to “10 Questions Baby Boomers should ask their Financial Advisors Now!”

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