5 Biggest Mistakes to Avoid When Hiring a Financial Advisor for Railroad Retirement

Five Mistakes Railroaders Might Make When Hiring a Financial Advisor

Welcome everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name is John McNamara from Highball Advisors. Today, we'll discuss common mistakes railroaders might make when hiring a financial advisor and what to look for to ensure you get the best advice.

Mistake #1: Not Ensuring the Advisor Understands Railroad Retirement

As a railroader, it's crucial that your financial advisor understands the specifics of railroad retirement. This system is unique, much like Social Security, and your advisor needs to be well-versed in its intricacies to provide you with accurate advice.

Mistake #2: Confusing Fee-Only and Fee-Based Advisors

The financial industry can be confusing with its terminology. It's essential to know the difference between fee-only and fee-based advisors:

• Fee-Only Advisors: The client pays the advisor directly for advice. This creates a fiduciary relationship, where the advisor is obligated to act in the client's best interests at all times.
• Fee-Based Advisors: The client pays for advice, but the advisor may also earn commissions from selling certain products like insurance policies or mutual funds. This can create conflicts of interest.

Mistake #3: Hiring an Advisor Who Isn't a Fiduciary 100% of the Time

Ensure that your advisor is a fiduciary at all times. This means they should always act in your best interest, without any conflicts of interest. Fee-only advisors are generally fiduciaries, eliminating potential biases in their recommendations.

Mistake #4: Choosing a Firm Based on Name Recognition

Big-name firms might seem attractive, but they often come with high fees and overhead costs. These fees can eat into your investment returns without guaranteeing better outcomes. Additionally, large firms may not always act as fiduciaries, as they need to generate fees and commissions to cover their expenses.

Mistake #5: Believing Advisors Who Claim They Can Consistently Beat the Market

No advisor can consistently beat the market. Statistics show that 80% of active fund managers fail to outperform index funds. If an advisor claims they can consistently beat the market, it's likely too good to be true.

Key Factors to Consider When Hiring a Financial Advisor

• Fees: Understand the fee structure and ensure it's transparent.
• Fiduciary Status: Confirm the advisor is a fiduciary.
• Tax Planning: Ensure the advisor includes tax planning in their services.
• Railroad Retirement and Social Security Knowledge: Your advisor should understand how these systems work, especially if you or your spouse will rely on Social Security.
• Estate Planning: Ensure your money goes where you want after you pass away.
• Risk Management: Your advisor should help you find the right balance of risk in your portfolio.
• Healthcare and Medicare Planning: These are critical areas, especially as you approach retirement.

Consider this a roadmap when searching for a financial advisor. Hiring the right advisor can provide immense satisfaction and help secure your financial future. If you choose to go through this process, ensure the advisor adds real value to your financial planning.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved from Highball Advisors, and all rights are reserved.