AARP Tips on Shopping for a Financial Advisor – Herb Weiss

By Herb Weiss, contributing writer on aging issues

As a result of living in times of economic uncertainty resulting from the ongoing COVID-19 pandemic retirees are worried about how they can protect their hard-earned egg nest from the volatility of the stock market.  It is even now more important to be working with a financial planner who is watching your back and not putting their interest first.  

Just days ago, the Washington, DC-based AARP launched “AARP Interview an Advisor™,” free resource to help investors to assist investors in evaluating a financial advisor. This new financial tool enables older investors to better assess and understand the credentials of financial advisors and how they are compensated. 

SEC’s ‘Best Interest Fails to Put the Interests of the Investor First

AARP says this online resource was created in response to a Securities and Exchange Commission’s (SEC) 2019 ruling that stopped a long-standing federal regulation requiring financial advisors to put their clients’ interest above their own.  AARP and other critics of the Final Rule say that it fell short of defining exactly what that term means operationally. “The regulation explicitly states that it does not mean that financial advisors provide a fiduciary standard of care. Despite its name, ‘Regulation Best Interest’ does not require that financial advisors put their client’s interest above their own financial interests,” charges AARP.  The nation’s largest aging advocacy group warns that warns that sound financial advice from Fiduciaries won’t happen without a Code of Standard that requires the best interest of the client.

AARP Interview an Advisor™ guides users through process of researching potential advisors and provides them with this valuable evaluation tools to help them evaluate their financial planner.    

Last year, AARP conducted a national survey to gauge investors’ awareness and views of the SEC’s Regulation Best Interest ruling and also their understanding of the fees and expenses they pay for investment products and financial advice.  The survey findings, detailed in the recently released 27-page report, Should Financial Advisors Put Your Interests First, indicated a need to raise the awareness of the SEC’s new regulation and its impact on investing.  It also became very clear to the study’s researchers that investors require more assistance in vetting current and/or future financial advisors to ensure that their financial advisor puts their interests first and more education is needed requiring investment fees and expenses.

AARP’s survey of 1,577 adults ages 25 and older who have money saved in retirement savings accounts and/or other investment accounts, conducted by NORC at the University of Chicago on behalf of AARP between Aug. 22, 2019 and Aug. 26, 2019 (prior to the COVID-19 pandemic),

found more than 80 percent of American investors were not aware of the SEC ruling.  Upon learning about this regulatory change, four-in-five investors (83 percent) opposed the change.

According to AARP’s survey findings, nearly 70 percent of investors have at least two investment accounts. Among those having multiple accounts, 74 percent do not use the same financial institution to manage all of their accounts. The median amount that investors currently have in savings and investments ranges between $50,000 and $99,999.

Additionally, 90 percent of investors either somewhat (52 precent) or completely (38 percent) trust the financial institutions or advisors who manage their investment accounts.  

Despite 68 percent of investors believing that they are somewhat (54 percent) or very (14 percent) knowledgeable about their investments, 41 percent mistakenly believe that they don’t pay any fees or expenses for their investment accounts.  

Can You Trust Your Financial Planner?

Yet the survey findings note that 58 percent of investors think financial advisors would choose to increase their earnings by selling their clients higher cost investment products even if similar lower cost products are available.

“With millions of American families concerned about the financial uncertainty caused by the pandemic, it is crucial for them to be equipped with the best resources and information when selecting a financial advisor,” said Jean Setzfand, AARP Senior Vice President of Programming, in a Feb. 4, 2020 statement announcing the release of the new Financial Planning tool. “The new SEC regulation states that advisors must act in their client’s ‘best interest,’ but falls short of defining exactly what that term means,” she said.

“AARP Interview an Advisor™” is an online resource that provides guidance and a checklist for investors on how to assess the services and standards of financial advisors. Investors are invited to fill out a short survey that evaluates the potential advisor and compares them on a three-point scale. It also provides investors with advice on how to effectively communicate with a prospective advisor, assess their credentials and better understand how advisors are compensated.

The COVID-19 pandemic has put many seniors off track in reaching their financial goal of building a big enough egg-nest to provide financial security in their later years.  Now it’s even more important for you to have a top-notch financial planner who has your back.

To view AARP’s Survey of retail investors about advisor-client relationships and fees, go to https://www.aarp.org/content/dam/aarp/research/surveys_statistics/econ/2019/retail-investor-survey-report.doi.10.26419-2Fres.00342.001.pdf.

Herb Weiss, LRI’12, is a Pawtucket writer covering aging, health care and medical issues. To purchase Taking Charge: Collected Stories on Aging Boldly, a collection of 79 of his weekly commentaries, go to herbweiss.com.

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Herb Weiss has enjoyed a distinguished 41 year career in journalism, earning a national reputation as an expert on aging, health care and medical issues. Over 780 articles that he has authored or coauthored have appeared in national, state and local publications. Governor Gina Raimondo appointed Him to the Rhode Island Advisory Commission on aging. Today, Herb’s weekly newspaper column appears in the Pawtucket Times and Woonsocket call, two North Rhode Island daily newspapers, and will now run in RINewsToday.com. Herb and his wife, Patty Zacks, reside in Pawtucket, Rhode Island.