How an Advisor Can Help You Prepare for the Future
Congratulations, you’ve decided to work with a financial advisor! As a law enforcement officer, you face a unique set of financial challenges, and having the guidance of a trusted professional can make a big impact on your ability to achieve long-term goals. Now that you’ve decided to take the leap, what’s next? Following are three important questions to ask your financial advisor.
Question #1 – Are you a fiduciary advisor?
This is an important question you should ask before working with a financial advisor.
Fiduciary advisors are held to fiduciary duty standards, which means they are legally obligated to act in their clients’ best interests — at all times and in all situations. As part of that fiduciary duty, the advisor has both a duty of care and a duty of loyalty.
- Duty of care means not only is the advice in the best interest of the client, but it is also executed in the best way possible for the client, and it will change over time as the client’s situation and life goals evolve.
- Duty of loyalty means the advisor may not put his or her own interests ahead of the client’s interests.1 Fiduciary advisors are typically fee-based, which means they are paid a percentage fee based on the assets they manage. This helps align the advisor’s interests with those of the client, because the advisor makes more money when the client’s assets grow.
In contrast, some advisors charge a commission and generally provide transaction-specific recommendations (rather than advice that covers the entire client relationship). These advisors are held to a best interest standard, which means that, at the time of the recommendation, the investment is suitable for the client.2
While this type of advisor must “have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer,”3 the advisor has no responsibility to ensure the recommendation makes sense in the client’s overall financial portfolio. Because they’re often paid commissions for the investment products they sell, these advisors may be incentivized to push products and make frequent portfolio transactions that could create a conflict of interest.
Put simply, it’s important to make sure you’re working with the right advisor based on your situation.
Question #2 – Will I have enough savings and income sources to last throughout retirement?
A common mistake made by many law enforcement officers is believing they will be supported throughout retirement by their pension alone. While having a pension is a rare and valuable retirement benefit these days, it may not be enough to support officers and their families throughout 20 to 30 years of retirement.
Your financial advisor will conduct a thorough analysis of your current financial situation, retirement goals, future savings rates and any additional retirement benefits to help determine whether you are on track to achieve your specific retirement objectives.
Using the information gleaned from this analysis, your financial advisor will be able to recommend specific saving and investing strategies to help you toward your retirement goals, lower your tax liabilities and possibly leave a legacy for those who matter most to you.
Question #3 – How can I make sure my family will be okay if I’m injured on the job?
This question is an especially important one to ask given the high-risk nature of your job. Your financial advisor can help you take steps today to protect your loved ones should something unexpected occur in the line of duty.
At a minimum, consider having the following in place to protect your family:
- Disability insurance – Replaces lost earnings in the event you are unable to work due to disability.
- Home/renters’ insurance – Protects your primary residence.
- Auto insurance – Protects you and other drivers in an auto accident.
- An umbrella policy – Protects your savings and investments against personal liability claims.
If you have children, you should also consider:
- Life Insurance – While it can be difficult to face your own mortality, life insurance can play a vital role in protecting those who depend on you for care and financial support. Take time to understand the financial impact your unexpected death would have on your family. It may make sense to protect your loved ones with an appropriate temporary life insurance policy.
- Estate and guardianship documents – You’ll want to make sure that, should anything happen to you, you have made guardianship arrangements for your children. This can be accomplished through your estate planning documents. Your wealth manager will work with a licensed attorney to help ensure all necessary legal protections are in place.
As a retired veteran police officer with 27 years of service, I understand the job and how it impacts us. It’s now time you invest in YOU; you are deserving of it and owe it to yourself, your family, and the legacy you have built.
If you’re ready to work with a financial advisor to plan for your future, Creative Planning Law Enforcement is here to help. A specialty practice of Creative Planning that focuses on helping law enforcement officers achieve financial independence, Creative Planning Law Enforcement understands the challenges you face and takes a team approach to helping you solve them. If you have questions you’d like to ask a qualified fiduciary advisor, please schedule a call.