Really just a matter of timeframe. In the short term, landscaper is right-there will be no issue. In the long term, yes, of course the roots will mess with the wall. If it's the next ten years you're concerned with, probably no big deal. Beyond that, some degree of conflict will most likely occur. Bear in mind, this is only the roughest of approximations I've offered.

How much additional height-beyond the top of that fence-do you need to screen that which you wish to screen? Or is the fence more or less see-through?

+oM

How about something like large growing crepe myrtles, such as Natchez? They have good shape and will give some shade, and don't take up a lot of room for the roots, like some other trees will.

I do really like crepe myrtles so that could be a good option. The fence is not see through, but the houses behind us are on a higher grade so that they can see directly into our backyard-our lots are quite small. I think the bottom line is that she wants to block the other house completely but Perhaps I don't think that's a must. To do want see wants I think we would need a tall skinny evergreen type tree but she wants something that would be more of a focal point. Hmm...

You're best to stick with smaller trees. I've visited 1000's of landscapes and the situation you define calls for as suggested:
Crepe Myrtles
Japanese Maple
smaller varieties of other trees, i.e. a slower-growing crabapple versus a full size crabapple.

and shrubs/perennials/annuals.

Don't plant something that will grow big.

Dax

Yikes, I'd hate to see a Natchez Crape myrtle in such a location. That's one of the largest growing of them all!

Thanks everyone for your helpful thoughts. I really don't mind the height of the tree, I'm really worried about the roots spreading and upsetting the fence and retaining wall ( I have visions of broken up sidewalks). Does that make a difference when considering the Natchez crepe myrtle, rhizo?

How thick is the retaining wall? If it's planted only a couple feet behind the wall, it's only a matter of time before the wall cracks and crumbles. I know around here it happens all to often... retaining walls aren't meant to retain a massive root system. Even dwarf trees, given enough time, will knock it down. It all depends on time. If your 80 years old it doesn't really matter so to speek lol... if your 20 years old and plan to live in the house for some time almost any tree will cause damage.

What about some tall grasses to block out the neighbor. The type of grasses that get 5-6' tall with pink or white flower spikes then some cool stuff like Juniperus horizontalis 'Mother Lode' that drapes over the wall?

retaining walls aren't meant to retain a massive root system

No, they're meant to hold back tons of soil.....and often wet soil at that!! Honestly, a well-engineered retaining wall (and we don't know what kind of retaining wall we are dealing with) can easily withstand the spread of an "average" sized tree's root system. Just as a structurally sound foundation wall will.

Now if we are dealing with the cheesy interlocking concrete block retaining wall as opposed to a properly footed, poured-in-place concrete retaining wall, then plant size and root systems ARE an issue. Perhaps a root barrier installed at planting?

OP again---I'm not sure how thick the retaining wall is but, its definitely poured in place concrete. Who knew that planting a tree could be so complicated?! I'm not sure what a root barrier is.... off to google I go.

We're putting in a root barrier next month, pretty much right on the property line, to keep the neighbor's maple tree's roots, the tree is about 11 feet tall now, and planted one foot off our property line, to keep its roots from coming onto our property, not to mention interfering with the roots of our trees we just planted.

We're hiring a guy down the road who we know to bring his excavator over and make the trenches needed. We've debated back and forth about digging the trenches ourselves but our soil is so rocky that I think it's worth the $100 to pay the guy to come over for 30 minutes and dig it for us. It's the only way I can make peace with that maple tree.