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This is a guest post from Doug Nordman the author of The Military Guide to Financial Independence and Retirement.

When Jeff posted 7 Financial Advisors I Would Like to Punch in the Face, I immediately thought of advisors who pretend to understand military pay & benefits.

These professionals may not lie, cheat, or steal– but they can still harm their clients. Instead of admitting ignorance or learning about the issues, these advisors try to shoehorn service members into a generic profile.

They recommend asset allocations and products that may be appropriate for civilians, but those suggestions could be redundant or even harmful to the finances of military veterans & retirees. They give all financial advisors a bad reputation.

Military clients are a challenge.

Advisors have to know at least a little bit about nearly every financial topic, but military clients are a very small percentage of the population. Not only that, but Jeff is one of literally only a handful of financial advisors with military experience.

Servicemembers could manage their own investments, but it’s not easy to find reliable information. When you’re in the military then you’re busy with duty, career, family, and other high-priority concerns– like not getting shot. Your financial future is probably not even in the top ten of your To-Do list.

The Department of Defense wants military and their families to be financially responsible (“Troops, stay out of debt!”), but financial independence isn’t a high priority for them either. You’re unlikely to spend the time & energy learning how to do your own investing, and your chain of command won’t enlighten you either.

Not only are military pay and benefits more complicated for financial advisors, but their military clients may be even more blissfully ignorant than civilians.

These days I manage my own finances, but there were several critical transitions during my career where I would have appreciated the help of a knowledgeable advisor. Even a couple hours of fee-for-service discussion will help you tap-dance through the minefield of choices.

What to look for in an advisor

This is just my personal preference, but I’d want my financial advisor to have hands-on experience with military finances. It’d be great if they were a military retiree or a veteran, but maybe they grew up in a military family or have a spouse/relative in the service. So how do you find these professionals?

I’d be careful about referrals. Your wingmen may know someone who’s using a “great” financial advisor, but do your own due diligence (see below). There’s a huge difference between a financial advisor who encourages you to stay blissfully ignorant, and one who takes the time to teach you how to make your own decisions. You have to be able to detect whether advisors have a clue about your military financial jargon.

If you wander through the neighborhoods around military bases looking for financial advisers, I’m sure you’ll find one or two “specializing” in their local demographic. I wonder whether they really understand military finances or if they’re just one of Jeff’s “notorious seven” preying on ignorant servicemembers. I don’t think legitimate advisers with hundreds of happy clients will set up shop between the used-car dealer and the payday loan office.

(Warning: shameless plug alert!) You could seek out military financial advisors like Jeff. You’re probably going to move around the world during your career, so it might make more sense to start with one who’s comfortable using Internet tech to stay in touch. Better yet, he’s tapped into a network of advisors with similar backgrounds.

I’m no financial expert, but I know how to interview financial experts. Here’s a few questions to start with:

Don’t be overwhelmed by the following questions. (I’ve been retired for a decade and I’m still figuring out how to explain some of these issues.) You don’t need to know these answers, and you don’t even need to know most of the vocabulary. But you have to assess how your financial advisor answers these questions, and whether they really seem to know what they’re talking about. If they teach you then you’re probably going to be fine. If they dismiss these questions, or belittle your concerns, then you might need to keep searching.

Military pay and allowances:

• Do they know the different types of military pay and tax-free allowances?
• Do they understand you’re unlikely to be “laid off”and might not need a big emergency fund?
• Can they explain the military’s Thrift Savings Plan and help choose your asset allocation?
• Can they explain how to use both the Thrift Savings Plan and your IRA?
• Do they understand how to invest tax-free pay from combat duty?
• Do they know how to use the Savings Deposit Program when you’re in a combat zone?
• Do they understand military life insurance and disability benefits?
• Can they discuss the risks of buying a home while you’re on active duty, and how to get a VA loan?

Leaving the service for a bridge career:

• Can they help you figure out how much money you’ll need to save for the job search?
• Can they review your separation benefits and tell you what to expect?
• Can they suggest how to use your military healthcare and insurance during the transition?
• Do they understand disability ratings and benefits?
• Can they help you assess the financial issues of a Reserve/Guard career?
• Can they optimize your GI Bill education benefits for you and your family?

Eligible for a military retirement:

• Do they understand that a military pension has an inflation-fighting cost of living allowance?
• Do they know how your retirement pay is taxed?
• Do they know that your civilian 401(k) or IRA might be able to be rolled into the TSP?
• Do they understand how to build your retirement asset allocation around your military pension? You might not need more “guaranteed income” or a big bond portfolio.
• Can they advise you (and your spouse) how to use the Survivor Benefits Plan?
• Can they advise you about Tricare and other health insurance?
• Can they discuss military and civilian life insurance?
• Can they advise you about the federal long-term care insurance program?

I’ve heard too many sad stories about servicemembers who don’t take advantage of all their military savings programs and benefits. Some might be getting out in a year but they don’t know how to prepare their finances. Others are told they’re going to retire in nine months and get led astray by unscrupulous advisors. A few are paralyzed by indecision and don’t even know who to turn to for help.

What are your next steps?

First, educate yourself. If you’re paying an advisor then learn enough to keep up.

Second, stay in touch. Advisors can only support you when they get regular updates.

And finally, keep pushing yourself for financial independence. Advisors can help you lay out the path, but you have to make the journey!

Doug Nordman is the author of The Military Guide to Financial Independence and Retirement. He and his spouse retired from active duty and the Reserves after more than 20 years of service, and their daughter is starting her own military career. You can read more at The-Military-Guide.com.

Source: goodfinancialcents.com