A Financial Advisor Has Got To Know His Limitations

Lots to cover today with a hat tip to Abnormal Returns for these links.

First is an admonition to financial advisors to stay in their lane and not get into life coaching. After reading the article I concluded the article isn’t completely right, but it isn’t completely wrong either. What this really is about is knowing your own limitations and understanding when appropriately generic encouragement crosses the line to something that requires proper training and probably some form of licensure. The article looks at a couple of empty platitudes as being potentially harmful like “be the best you can be.” I would consider some more specific examples of veering out of your lane.


An easy example is something dietary. “It’s usually a good idea to cut back on sugar” is one thing, having no medical training but advising someone start a ketogenic diet and creating a meal plan for them is something else. Another good example is with exercising. I have been on enough medical calls as an EMT to know that everyone has some sort of medical issue(s) and giving bad exercise advice for ot knowing someone’s medical history is very easy to do. Financial advisors aren’t necessarily CPAs, they are certainly two different disciplines. My work as an advisor means I often have a good sense of what question to ask as I imagine would many advisors but getting in too deep risks hurting the client. Sorry about that doesn’t cut it where taxes are concerned.

The Wall Street Journal gave a checklist of things to consider when choosing where to live in retirement. It is a pretty good list but the one that most resonated with me was “What’s wrong with where I live now?” The idea that the grass isn’t always greener is a very important concept for life in general not just retirement. This ties in with a concept crucial to yoga and other things which is being in the moment or phrased differently, life is about the journey, not the destination.


The nature of how under saved Americans are will force some hands in this regard. In this context I have talked about moving at least temporarily as a young retiree to a foreign country. Young and relatively healthy retirees could rent out a paid-off house, take that income and live as expats for their 60’s allowing their portfolio to grow and then come back in their 70’s much better off financially (here’s more from Seeking Alpha). There are plenty of other similar scenarios including being a caretaker of an estate or the like. My former neighbor with a backhoe and his wife did this in their late 50’s and there are websites that offer these opportunities. A more permanent idea would be downsizing into a tiny or small house netting out some capital to increase an investment portfolio.

Finally, a link about withdrawal strategies in retirement; which account to take from in what order for the most efficient tax strategy. The basic building block for this is to take from taxable accounts first, then tax deferred (like traditional IRAs) and finally tax-free accounts (Roth IRAs). Once you understand that building block it becomes easier to explore possible alternatives like the one discussed in the link from CFA. The authors posit that the best strategy, after studying 12 different combinations, is taking from the tax deferred account first but only up to the level of your tax deductions, then take from your taxable accounts, then tax free and finally tax deferred again if necessary.


With nod to staying in my lane, check with a CPA but the bane of many well-funded retirement plans is of course the required minimum distribution, the government’s way of getting their cut. Also woven in to the discussion is trying to defer paying taxes as long as possible so a strategy that accesses tax deferred assets without paying taxes is worth exploring.

Submit a Comment

Your email address will not be published.

WP-SpamFree by Pole Position Marketing