Should We Switch to S&P Before Hiring a Financial Advisor?

Next up, we‘ve got a question from Braden. He says, “The wife and I are 20 plus years from retirement. We are close to where we could hire a financial advisor, maybe within 2 years. All 250k is in the same Target Index Fund. It has underperformed the SNP. Why not switch to the S&P before hiring a financial advisor?”

So, the way that question is framed, the thing that immediately popped in my head is like, do you know these people, and they‘re like, “Hey, I really want to go to the doctor and get my health assessed, but before I go to the doctor, I’m going to change everything about what I do. I’m going to work out, eat healthy, and do all this stuff.” I know somebody who resembles this, and then I’m going to go see the doctor. It’s like, no, the reason you’re going to see a professional is to get a state of the union. Here’s something I think is a State of the Union to get a state of where you are. I want to bring it back from a little different angle that I think Braden is getting at too. When I hear somebody talk about index Target retirement funds and it didn‘t beat the S&P 500, was its goal actually to beat the S&P 500? Because when you’re making the decision, you said there are two choices you have to make when you do an index Target retirement fund, how much can you save, and when do you need the money? If you told us you’re 20 plus years, I would be curious to know the index Target retirement year that you chose. Now, he had put in here that they‘re 20 plus years so they can be aggressive, but I would first challenge you to go look at the year you chose. If the market made, what did it make last year, 25-26% somewhere in there, and if your target retirement fund didn’t get 18%, 20%, because I guarantee you most are recommending index Target retirement funds, so that means probably 60-65%, maybe even 70% of the portfolio is likely the S&P 500, so you did have a large, probably the majority of your portfolio did get that 25%. If you are considering hiring a financial advisor, let me give you a great tool you can use. Go to moneyguy.com/resources, and we have, I think it‘s eight questions that you should ask your financial advisor. These will be great questions that you can use to determine, “Okay, is the person that I’m hiring going to provide the service that I’m actually looking for?” In your situation, maybe portfolio construction is a piece of what you’re looking for, but maybe you also need tax planning, some insurance analysis, or you need to be thinking about your employer incentives and the way that your compensation is structured or any of a myriad of things that may be on your financial plate. Make sure the financial advisor you’re talking with can actually speak to those things. So moneyguy.com/resources is a great tool for you to use to see if that makes sense.