People are Realizing They Must Retire on Their Own Money

The client is the team owner and we’re the general manager.

Longer lifespans mean retired people are in greater danger of running out of their money. That’s less of a problem when a financial advisor seeks to plan a client’s retirement to 100 – or more. That’s how Andrew J. Paladino, CPA, MSF, founder and owner of Maryland-based Paladino Financial Group, plans for his clients. First, there’s the accumulation phase, then the financial advisory plan for the second part of life, and finally, the retirement distribution phase. 

The CPA Advantage

After graduating from college, Paladino received his CPA degree, and worked for a large public accounting firm in Baltimore for just over 12 years. After receiving a master’s degree in finance, he decided to go the financial advisory route, eventually launching Paladino Financial Group as an independent advisory firm. As a CPA, he’s good at number crunching, and can look at tax issues with clients and consider how investments and retirement assets will look like from a tax perspective.

Team Owners and General Managers

Using a sports analogy, Paladino says his firm looks to the client as the team owner and they are the general manager. “We look for players for them in financial management or their retirement plan. I’m not at the computer trading, buying and selling every day. We hire professional money managers for that. If someone tells you they are going to manage money directly, how are they going to meet with you?” he says. His firm is always monitoring those money managers. “We look at their track records, and how they’ve done when the markets go bad. We’re not tied to them forever,” he says. That information is shared with clients and utilized to make a good fit. “We make sure the players are playing up to what they should be,” according to Paladino.

The Human Approach vs. Robo-advisors

Paladino finds some financial apps are good for those wanting to get general information and knowledge on investment and finance. They’re also a boon for people making automatic payments. “When you go into more complex areas, like robo-advisors, there’s a place for them but also a disadvantage,” he explains.

“When the market is very volatile, as happened a couple of weeks ago, one or two of them shut down. I’m seeing younger people who just started working. They tell me they look at online things but like to interact with an advisor one on one.”

Asset Cycle Portfolio

For his retirement clients, Paladino uses the Asset Cycle Portfolio program to look for positioning and asset allocation. The program assigns jobs to different parts of the portfolio, with a 10 to 30-year goal. He goes over different withdrawal rates with clients and looks to generate income that’s not subject to the market, interest rates, or inflation. The plan is also designed so if there are health care issues, the client can still have income coming in. Each situation is different. Another variable considers members of the “sandwich generation” who must care for their own parents. How does that affect their retirement monies and the ability to save as much? “We try to structure it in a way that will work,” he says.

The Changes Needed

When asked about changes he’d like to see in the industry, Paladino says the dialog on the retirement side is evolving more. “People are realizing they have to retire on their own money,” he says, adding that clients understand they aren’t going to have much in the way of a pension or Social Security, the way their parents or grandparents did. “They have to find a different way than historically to make it work,” he says.

Paladino is also concerned about ads people see on TV, in the newspaper, or online. “Disclosures should be less hype – if you’re going to promote something, put it in the disclosure and not in the fine print,” he says. Clients come to him about these offers, such as a firm guaranteeing 7 percent. Paladino says clients need to know exactly what that means. “How will [the companies] go about it? Find out the details,” he says, noting it is part of his job to educate clients on how these investment vehicles work.

There’s also fees and fine print. For 401(k) fees in particular, Paladino feels employers should inform employees about the fees, especially if these fees are higher than normal for 401(k) plans and other plans offer lower fees. If there’s a reason the employer is going for a plan with higher fees, that requires explanation. “They should state they know what the fees are and here is the reason we are staying with this company,” says Paladino. “For employees, I’m not really sure they are getting full disclosure about all costs even though they are supposed to. I’ve seen a lot of 401(k) statements from clients, and it will show annual or monthly fees, but I don’t think the internal costs – revenue sharing, provider costs – are clear. People think they’re only paying $35, but when you disclose all those internal costs, it causes more confusion. There’s nothing for free, there are always costs involved, and clients need to understand what the costs are and are you getting value for them.”

A Financial Advisor’s Advice on Financial Advisors

When looking for a financial advisor, Paladino recommends asking about a person’s background, education, and how long they’ve been a financial advisor. It’s also crucial to find out how the advisor is paid, whether through commission or fees. Potential clients need to know whether an advisor is affiliated with just one company or only pursues certain companies’ products or investments. “Are you open to everything out there? Will I have online access to accounts? How often do we meet, and am I meeting with you or a staff member?” are other suggested questions to have answered before making this important decision. 

As for Paladino, his firm doesn’t require an investment minimum. He’s helped out younger people who have just $500 to put in an IRA. “People ask, ‘Why are you helping them?’” he recalls. “You don’t know what happens down the road. They may have a family, or maybe their parents need help.” Paladino says he’s never really turned down a client, but some clients prefer a different approach. “I look at my ability to communicate with them, break it down and educate them. That’s what people are looking for – someone who can communicate with them,” he says. “Sometimes, people don’t understand accounts they already have. I can look it over and make it easier to understand.”

For more information on Paladino Financial Group, visit: paladinofinancialgroup.com