Joe Brown

Brown Advisory Group, LLC

Does Your Financial Advisor Have a Safety Net?

Why a Contingency Plan Is Crucial for Your Retirement Security

Regarding retirement planning, your relationship with your financial advisor is pivotal. They are the custodians of your financial security, guiding you through an array of investment options, such as annuities and life insurance, that can offer stability and guaranteed income in your golden years. But what happens if your advisor can no longer be at your service? Do they have a contingency plan to ensure a seamless transition and continued care for your portfolio? Here's why you must pay attention to this critical aspect while selecting or retaining your financial advisor.

Why a Contingency Plan is Non-Negotiable

Statistics indicate that the average financial advisor is in their early fifties, and a substantial proportion plan to retire within the next decade. This presents a significant likelihood that your advisor might step away from their professional responsibilities before you've fully enjoyed your retirement. This is not to mention the unavoidable aspects of life, such as sudden illness, disability, or even death, that can affect anyone, including your financial advisor.

Therefore, a contingency plan is not merely a supplementary feature; it's an essential component of responsible financial planning. Without a plan, you could find yourself scrambling to find a replacement, and during that transition period, your portfolio might suffer. Given the specialized nature of retirement assets like fixed annuities and insurance products, an advisor's sudden absence can lead to costly setbacks.

Factors to Consider

When vetting financial advisors or reviewing your relationship with the current one, the following considerations around contingency planning should be top-of-mind:

  1. Succession Planning: Does your advisor work within a team or have a designated successor who can take over your portfolio in their absence? This ensures continuity in the strategies employed to manage your assets, like annuities and insurance.
  2. Client Involvement: Will you get to have a say in who takes over the management of your account? A good contingency plan should include you in the transition process.
  3. Flexibility: What if the replacement advisor isn't a good fit for you? Will you have the option to take your business elsewhere without incurring penalties?
  4. Implementation Track Record: Don't shy away from asking about any past instances where the contingency plan had to be activated. This will give you an insight into its effectiveness.

How to Safeguard Your Interests

Choose an advisor with a proven track record in contingency planning. It should be an integral part of their responsibility towards you. Regularly review this plan and ask for updates, if any. After all, your peace of mind is contingent on the robustness of this contingency plan.

When There's No Plan in Place

If your financial advisor doesn't have a contingency plan, it's time for a frank discussion. Emphasize the critical nature of having a backup plan to protect your financial assets, especially since retirement plans often involve long-term commitments like annuities and insurance policies. If your current advisor is unwilling to consider this necessity, it may be prudent to explore other options.

An effective contingency plan is a hallmark of an advisor who takes their fiduciary duties seriously. It assures you that your financial strategies, particularly those providing guaranteed income like annuities and insurance policies, will continue to be managed effectively, irrespective of any unforeseen events affecting your advisor.

Additional Tips

  • Store copies of your financial plan and other crucial documents in a secure location.
  • Share essential financial documents and plans with a trusted family member.
  • Maintain regular review meetings with your advisor to ensure your financial strategies align with your evolving needs.

Don't leave your financial future to chance. If you haven't already, schedule a meeting with your financial advisor to discuss their contingency plan. Your peace of mind and financial stability in retirement depend on proactive planning today. Take that step now.

  • Importance of a Contingency Plan: Having a contingency plan in place with your financial advisor is crucial for the stability and growth of your retirement portfolio, particularly when you're invested in products like annuities and life insurance.
  • Advisor's Age and Retirement Plans: Given the average age of financial advisors and their retirement plans, there's a good chance your advisor may retire before you do.
  • Key Considerations: When choosing or sticking with a financial advisor, evaluate their succession planning, how much say you have in selecting a new advisor, and the flexibility to move your account.
  • Regular Reviews: Keep your financial plan updated and periodically review the advisor's contingency plan.
  • Backup Copies and Trusted Contacts: Secure copies of all important financial documents and share them with a trusted family member or friend for extra security.

Many people have learned about the power of using the Safe Money approach to reduce volatility. Our Safe Money Guide is in its 20th edition and is available for free.  

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Joe Brown picture

Joe Brown

Brown Advisory Group, LLC

2445 Darwin Rd.

Suite 105

Madison, Wisconsin 53704

joe.brown@retirevillage.com

(608) 241-4425

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