Hiring a Financial Advisor That Specializes in Your Life Cycle Phase

Suppose you are an older adult who has just relocated to a new post-retirement home hundreds or even thousands of miles away from your old life. Even if you had a good relationship with your previous financial advisor, you might want to know the options for working with someone locally who you can talk with face to face. You might also simply be wondering if you are getting the right kind of support from your current financial advisor.

In financial services, as in medicine, it pays to look for providers who specialize in your specific situation. Selecting someone you feel personally comfortable with is especially important when it comes to financial planning. Merrill Lynch emphasizes that you will be talking to this individual about highly personal things: “…your family, your money, your hopes for your future.” Forbes actually recommends looking at potential candidates’ websites to see if the pictures and stories of the people they feature in their marketing match your demographic group.

Does the Financial Advisor You Are Considering Specialize in Your Phase of the Investment Life Cycle?

There are at least three life cycle phases of activity as you prepare for retirement: acquisition, preservation, and distribution. The investment strategy you want to pursue at each phase differs, and potentially, so should the experience of your financial advisor.

Preservation Phase

Preservation PhaseThe preservation phase is easy. It’s exactly what it sounds like. You have accumulated enough funds to retire and now you want to make sure that your assets will be there when you need them. You have a detailed plan for retirement. You keep investing so that you offset inflation, but your number one priority is not to do anything that would harm your retirement nest egg. “The real challenges are in the acquisition and distribution phases,” says Thomas Fross of Fross and Fross Wealth Management.1

Acquisition Phase

Acquisition PhaseWhen you are young and still working, you are willing to take higher levels of risk in order to get higher returns. You don’t need the money from your investments right away, so you can tolerate fluctuations in the value of your investments. In fact, in some cases fluctuations in the value of investments can actually work for you.

For example, if you are investing $100/month in a reputable stock that costs $100/share and its short-term value drops to $50/share, should you continue to buy it? If you believe that the stock’s price will return to and eventually be worth much more than $100/share, then you should. When the price of a stock you believe in drops and you continue to buy it, you are essentially buying that stock at a discounted price. This technique is called dollar cost averaging.

Distribution Phase

Distribution PhaseWhen you are cashing in investments to fund your retirement, downturns in the price of the assets you are redeeming hurt you. For example, suppose at retirement, you plan to redeem $1,000/month worth of stock in order to fund your expenses. If each share of stock you redeem is worth $100, then you only need to redeem 10 shares per month to meet your needs. However, if your $100/share stock drops to a value of $50/share, then you need to redeem 20 shares per month to fund $1000/month retirement needs. Because you are redeeming twice as many assets as you originally planned to, you may risk outliving your nest egg – running out of retirement assets before you run out of retirement income needs.

The Bottom Line: Pick a Financial Advisor That Specializes in Your Life Situation

You need to honestly and objectively assess how much experience the person you are depending on for financial advice has in servicing people at your phase of the investment life cycle. The devil is often in the details when it comes to financial planning for older adults.

David Blackston of Blackston Financial Advisory Group emphasizes that even things like beneficiary strategies are important for older adults. Blackston says that during financial reviews, clients often find they have out-of-date beneficiary designations on their life insurance policies and other assets that incorrectly assign death benefits to deceased individuals or even ex-spouses. Also, a lot of people have not addressed their death tax liability.2

If older adults like yourself make up only a very small proportion of your previous financial advisor’s clientele, it might very well be time to switch to a financial advisor who really understands the challenges and best strategies to advise you in the retirement phase of your life.

1. Interview with Thomas Fross, co-founder Fross and Fross Wealth Management, The Villages, FL; December 5, 2016.
2. Interview with David Blackston, founder Blackston Financial Advisory Group, The Villages, FL; December 15, 2016.

Last updated: 04.14.2018

Disclaimer: This content is for informational purposes only and it is not meant to be relied on as medical advice, diagnosis, or treatment. Consult your physician before starting any exercise or dietary program, or taking any other action respecting your health. In case of a medical emergency, call 911.

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