Question: “I’m 62 and retired with $1 million in savings and zero debt. My objective is income. When it comes to hiring a financial adviser, is 1.25% worth it? I’ve spoken with a few firms who claim to have a personalized approach, but my concern is they’ll use a cookie-cutter approach and collect a fee off the top, regardless of performance. How do I hold them to their word? Am I going to have to manage them and their fees while they manage my money? What should someone in my position do given the savings I have?”

Answer: While a financial adviser could be helpful to you, this one is likely too expensive. (You can find a financial adviser at CFP Board, NAPFA or by using this free tool to get matched with fiduciary advisers, from our ad partner SmartAsset.) And, you don’t have to accept an assets under management fee structure (in which you do pay regardless of performance) either.

For the size and likely simplicity of your account, 1.25% of assets under management appears very high, says Robert R. Johnson, professor of finance at Heider College of Business at Creighton University. The industry average is around 1%, and plenty of advisers charge less. “If you want ongoing advice and investment management, many firms offer the same services for 1% or less at a $1 million portfolio value,” says Johnson.

“Firms also use flat-fee models for this service, typically ranging from $6,000 to $12,000 per year that may end up being more cost effective,” says Jonathan Vance at Vance Financial Planning.

That said, “it’s important to differentiate price from value. 1.25% can be very expensive if all your adviser is doing is putting you into a premade portfolio that isn’t performing much differently than an index like the S&P 500,” says fiduciary wealth adviser Jordan Mangaliman at GoldLine Wealth Management. 

But it may be worth it if your adviser is doing far more than just investment management. “1.25% is worth it if your adviser is going to help you with your overall retirement planning like lowering your lifetime taxes, advising you on which health insurance options to take, helping you get the most out of Social Security and making sure your estate planning is complete, in addition to managing your investments,” says certified financial planner and chartered financial analyst Jeremy Keil at Keil Financial Partners. 

In other words, it’s essential to understand exactly what services you’re getting for that fee. “To hold an adviser accountable, you must first understand what they’re promising. Many Registered Investment Advisers (RIAs) provide value beyond portfolio management. For retirees, this might include navigating distribution rules, tax planning and maintaining a retirement income plan,” says Vance.

Have an issue with your financial planner or looking for a new one? Email questions or concerns to picks@marketwatch.com.

In an AUM model, you do pay regardless of performance. So you may want to consider advisers who work on an hourly or per-project basis. 

The good news is that you have options. “If you only want a road map without an ongoing relationship, you can engage an adviser for a project-based financial plan, usually $2,500 to $5,000 and implement the recommendations on your own,” says Vance.

Some CFPs also offer hourly services which range from $200 to $500 per hour. These advisers can be retained for as few or as many hours as needed to answer specific questions or create a personalized plan.

How to hold an adviser to their word — and whether you need to manage an adviser

To hold an adviser to their word, make sure there are no long-term contracts in place. “Most advisers bill on a quarterly or monthly basis. You can review your relationship on a quarterly basis and see if you feel you are getting value for what you’re paying. If you feel like you’re being heard, are making progress and the investments are solid, you can choose to stay with the adviser. If you feel you aren’t getting the value you were hoping for, you can choose to end your relationship with them,” says Mangaliman.

Information from your adviser’s website or initial conversations should reveal the frequency at which services are delivered, says Vance. “It’s common to have two to three structured meetings per year along with email and phone support between them,” says Vance.

You shouldn’t have to manage your manager. “Whether it’s rebalancing a portfolio or being aware of new tax laws that impact your plan, you should expect the adviser to be proactive. If you find yourself having to manage things on your own while your adviser simply agrees with you, you aren’t getting what you paid for,” says Vance. You can find a new financial adviser at CFP Board, NAPFA or by using this free tool to get matched with fiduciary advisers, from our ad partner SmartAsset.

What to look for in a new adviser

Interview a few different advisers. “If they ask questions about what you want, instead of pitch how great they are, then you’re on the right track. If they say something like, ‘You don’t pay me, the annuity company pays me,’ then run away. If you get the sense that all they do is focus solely on investments and not your noninvestment financial questions, then 1.25% is too much,” says Keil.

When interviewing prospective advisers, ask them for references from clients who are in similar situations to you. “It sounds like you’d prefer a flat-fee adviser or a DIY retirement planning software and not a full-service financial adviser. Check out Flat Fee Advisors to find an adviser who won’t charge you more just because you have a lot of investments saved up,” says Keil.

For someone age 62 with $1 million in savings and zero debt, Mangaliman says the first thing you should do is write out what you want to accomplish. “This is known as goal-based planning. This can be retirement income goals, travel goals, legacy goals and more. Prioritize your retirement goal and make sure your portfolio reflects stable income first. Whatever you’re not using for income should be allocated to an emergency fund and for more growth,” says Mangaliman. You can find a financial adviser at CFP Board, NAPFA or by using this free tool to get matched with fiduciary advisers, from our ad partner SmartAsset.

Have an issue with your financial planner or looking for a new one? Email questions or concerns to picks@marketwatch.com.

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