The aspirations of some financial advice tell one story. Linda’s retirement tells another.
Have you ever looked back on a financial decision and wondered:
“If I had known then what I know now, would I have made the same choice?”
I think at some point most people have asked this question. The question itself hints at the likely answer. It suggests doubt – perhaps even dissatisfaction – with the outcome of a decision.
This brings us to our topic: When it comes to considering financial advisors:
“How do I know if I’m getting advice that’s actually right for me?”
It’s a question we hear often.
After all, most people aren’t financial experts. They simply want to make good decisions and avoid costly mistakes.
That’s why we’d like to introduce you to Linda.
Her story illustrates how two advisors looking at the same person, with the same goals and the same resources, can arrive at very different recommendations—and how those recommendations can affect one’s peace of mind years down the road.
Meet “Linda”: A Real-World Case Study
Linda is intelligent, responsible, and financially disciplined. Linda did many things right.
She worked for the school system for nearly thirty years. She saved consistently. She planned ahead. Like many people nearing retirement, she wanted something simple:
Peace of mind.
But underneath that hope was a quiet fear many people carry:
“What if I run out of money?”
When her advisor recommended a variable annuity inside her 403(b) retirement savings plan, the recommendation sounded comforting. The annuity contract offered growth potential along with an option for guaranteed lifetime income.
Safe. Secure. Responsible.
Reasonable advice? Perhaps.
But great retirement planning isn’t about finding a reasonable product.
It’s about matching the right resources to the right goals.
And years later, Linda suddenly understood that realization.
Let’s dig into her case to see how.
The Part Many People Don’t Know
Many people assume financial advice is financial advice.
But that’s not always true.
There are different approaches and motivations for giving financial advice.
Some advisors focus primarily on recommending financial products. Others focus primarily on building comprehensive retirement plans.
The important thing is understanding which approach matches the type of service you’re actually looking for. Both services are called “financial advice”. Confusing? Yes.
Essentially, it boils down to whether you want product advice or planning advice.
How to Tell the Difference
For many people, the easiest way to recognize the type of advice they are receiving is not by focusing on an advisor’s title, but by paying attention to their process.
Comprehensive financial planning advice typically follows a sequence of steps:
- Discussing Your Goals & Priorities
- Fact-Finding
- Analysis & Evaluation of Alternatives
- Recommendations & Action Plan
- Implementation of the Plan
- Continuous Monitoring of Results
Any discussion of financial products should come towards the end of the process (Step 5 – Implementation), not at the beginning.
That’s because a product should be the result of a planning process, not the starting point.
If an advisor devotes time discussing a product before spending considerable time understanding your goals, resources, concerns, tax situation, income sources, and future plans, it may signal you are getting product advice not planning advice.
In short, if you hear product discussion in the first hour of your “planning” session, your retirement planning efforts may be sabotaged from outset.
Consider Linda’s situation. It’s a case study illustrating what can happen when a product recommendation solves one problem while creating another.
Linda’s Case
As Linda got closer to retirement, she eventually sat down with another advisor for a second opinion and discovered her overall financial picture told a very different story than the one her annuity was designed to solve.
She already had:
- A strong state pension
- Future Social Security income
- Subsidized retiree health insurance
- An emergency fund
- A modest mortgage
In other words, the thing she feared most — not having dependable retirement income — was already largely solved.
Her pension and Social Security were expected to comfortably cover her core living expenses.
Which meant the variable annuity inside her 403(b) may have been solving a problem she didn’t actually have.
Meanwhile, the annuity contract came with:
- High internal fees
- Surrender charges
- Withdrawal restrictions
- Reduced flexibility
One of Linda’s major goals for retirement was to add an extra bedroom to her home so friends and family could visit frequently and comfortably.
Now suddenly much of her retirement savings felt trapped inside the annuity contract. Accessing the money for the bedroom addition would trigger substantial surrender charges — a major disappointment.
Here is the point.
The annuity wasn’t necessarily a bad product.
In fact, for many people, it may be entirely appropriate.
The issue wasn’t the product.
The issue was whether the recommendation fit Linda’s complete financial picture and the life she wanted her money to support.
Reasonable advice? Yes. But the best advice? Hardly.
In fact, the extra income the annuity would provide was not actually needed.
You may be asking, “Chip, what’s so bad about a little extra income?”
That extra income begins prematurely depleting an asset that should be reserved for… well… adding a bedroom, replacing a roof, paying for long-term care, taking a big trip, funding a grandchild’s education, donating to a favorite charity, etc., etc.
Extra income would also automatically increase her taxable income, potentially change her income tax bracket, possibly increase the amount of her taxable Social Security income, and her Medicare Part B and Part D premiums.
Alternatively, had Linda initially invested in lower-cost mutual funds or ETFs, her 403(b) retirement savings account likely could have grown more efficiently —without the insurance wrapper, the high fees, the surrender charges, and the withdrawal restrictions of the annuity contract.
But more importantly for Linda, this approach would have allowed her to get her hands on her money when she actually needed it to complete the bedroom addition.
Had she known then what she knows now, she would have made a different choice.
Why This Difference Matters
Retirement planning isn’t ultimately about financial products.
It’s about putting people before products.
It’s about making sure your money supports the life you’ve worked so hard to build.
And that’s a difference worth understanding before you sign the paperwork.
Questions Worth Asking
Before making major retirement decisions, it is perfectly reasonable to ask your advisor:
- Are you acting as a fiduciary 100%of the time?
- How are you compensated if we do not buy any financial products from you?
- Tell me about your process for giving financial advice.
These are not confrontational questions.
They are thoughtful questions.
And good advisors will respect you for asking them.
Disclaimer: This content is provided for informational purposes only. It is always best to counsel with your financial advisor or your tax professional to ensure that you make the best decision for your circumstances.
Let’s Talk
We’d be honored to help you reclaim peace of mind and build a retirement plan that makes sense for you.
