Our insurance agent diagnosed our financial situation free of charge. Should I trust her?

Financial Planners


question: My husband and I retired in 2019 and 2020 respectively. We opted to have our financial advisors manage our accounts and took a somewhat conservative approach with a plan to replace the worst performing stocks in each portfolio. We each have a traditional IRA and a Roth IRA. In October, we converted $108,000 and $125,000 from conventional to Roth IRAs.

We recently agreed to have a financially licensed home/auto insurance agent assess our financial situation free of charge. I know I am paying a lot of money every month. Instead of constantly trying to improve underperforming stocks, she thinks a buy-and-hold plan that makes adjustments once a year might work better. Should we get an outside opinion from a neutral party financial adviser rather than someone trying to sell us something?

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answer: Simply put, yes. You should have an independent financial advisor to see what’s going on for a number of reasons. First, insurance agents often work on a commission basis and may not be able to recommend the best financial product for you. In fact, experts say insurance salespeople may be selling expensive products with high hidden fees.

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And “financial license” sounds important, but just because she has it doesn’t mean she’s right for you. Her one of the most popular financial securities licenses, Series 7, allows financial advisors to sell many investment products. However, without knowing exactly what license the insurance agent has, it is difficult to determine whether the insurance agent should advise her on her IRA. To check whether the people you work with are registered investment professionals, the Financial Industry Regulatory Authority (FINRA) has launched BrokerCheck, a free tool that examines individuals, companies and their backgrounds in the financial industry. It offers.

Second, as the agent alluded to, your current advisor may be charging you high and not doing as much work as you’d like. A 1% fee is fairly standard when charged under a managed assets model that charges a percentage of the assets managed by an advisor. And for that money, advisors must also “review not only portfolio management, retirement cash flow, tax planning, estate planning and insurance.” [be] I’m a money manager,” says Bruce Primor, certified financial planner at Summit Wealth Advocates. As an hourly planner he charges between $150 and $500 per hour, depending on experience level and location, while as a project-based advisor he charges $1,000 depending on the scope of work. From he may be charged $3,000.

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Additionally, there may be some potential red flags. When it comes to Roth IRA conversions, experts say a $233,000 conversion in one year may be too much, unless there are net operating losses or other losses to offset that income. “Converting that amount means that you will be subject to at least 24% federal and other state taxes. We need to prepare tax forecasts before the conversion to understand the

Advisors’ strategies for disposing of underperforming stocks may not be for everyone, either. Note that just because it performed poorly recently doesn’t mean it will perform poorly in the future. “Usually the opposite is true: Assets are things you want to acquire when they’re no longer popular,” says Joe Favorito, certified financial planner at Landmark Wealth Management.

Instead of actively managed portfolios, which can be expensive and require more attention, Primeau recommends choosing a low-cost, tax-efficient passive approach to portfolios. “Advisors should rebalance their portfolios as needed and avoid outright emotional adjustments. We recommend only holding mutual funds and ETFs,” says Primor.

Looking for a new financial advisor? Use this tool to match you with an advisor that fits your needs.

How to Find a Qualified Financial Advisor

If you’re looking for a new financial advisor, many offer a free initial consultation so you can find out what their advice is like and if the relationship works. It’s a good idea to have a few free consultations to find an advisor you like. Here are 15 questions to ask before hiring an advisor.

“I stick to fee-based advisors, preferably fee-only advisors, with a flat annual fee, or even an hourly planning fee, paid based on the value of your account. Fee-only advisors. will no longer receive compensation for trading or selling certain products, which is usually the closest to an impartial opinion,” said Favorito.

To get you started on your search for a second opinion, the National Association of Personal Financial Advisors (NAPFA) offers a free online “Find an Advisor” tool, as do the XY Planning Network and the Board of Certified Financial Planners. “The search tools provided by these organizations allow you to filter your search results by several criteria, such as location, services offered, and minimum requirements,” said Sentinel He Mark Humphries, Certified Financial Planner at Financial Planning. said Mr. (Looking for a new financial advisor? Use this tool to find one that meets your needs.)

Having trouble with your financial advisor or looking for a new advisor? Email your questions to picks@marketwatch.com.



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