Is a Big Loss a Reason to Ditch Your Financial Planner?
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BY ALISA WOLFSON
Question: I recently transferred my retirement benefit and 401(k) to an account managed by a financial planner. But in seven months they seem to have lost $70,000 of my money. How do I know if they are making sound investments? This is all new to me and I feel like I’m taking my first baby steps. Hoping I don’t fall and crash and burn. Help! (Are you looking for a financial advisor? You can use this tool to find a financial advisor that may fit your needs here.)
Answers: First, you should share your concerns with your new financial planner and know this: “We are in a bear market… What is surprising is that your financial planner has not contacted you to discuss your portfolio allocation and risk mitigation measures and how they compare to appropriate benchmarks such as the S&P 500 for equities and the Bloomberg Aggregate US Bond Index,” says certified financial planner Anthony Ogorek of Ogorek Wealth Management. Additionally, “they must have educated you on your investments and helped you with cash flow planning, tax strategy planning, and understanding each account’s expiration date,” says board-certified financial planner Kaleb Paddock of Ten Talents Financial Planning. When these things happen, at least it’s time for a conversation.
While it doesn’t feel reassuring, be aware that both stock and bond markets have fallen in the first six months of 2022 to levels not seen in over 40 years, according to Portal . “The financial planner is probably not doing anything wrong with your investments, but they may need to educate you better, and if you let them know your concerns and your desire to see if you own sound investments, they can help educate you and guide you through the.” down market,” says Paddock. Adds certified financial planner Matt Hylland of Arnold and Mote Wealth Management, “They may be in good investments for the long term, but they’ve seen very significant declines so far this year,” Hylland says.
Do you have a question about your current advisor or are you looking for a new one? Email [email protected].
In addition, you should have completed a risk tolerance questionnaire and reviewed the risk tolerance given by your planner against the portfolio allocation. “The brokerage statements should include ticker symbols for the positions held. You can enter the tickers into sites like Marketwatch to learn more about the funds you hold,” says Ogorek.
During the meeting and hiring of your financial advisor, John Piershale Wealth Management’s Certified Financial Planner, John Piershale, says an investment presentation should have taken place. “This is where the advisor explains to you the proposed investment portfolio, its level of risk and why it’s right for you,” says Piershale.
Depending on your specific asset allocation, you may see a slightly larger drop if you’ve expressed a willingness to take more risk, or a smaller drop if you’re more conservatively invested, Hylland says. “A 60/40 portfolio, or one that’s 60% stocks and 40% bonds, is a very common retirement portfolio and is down about 15% so far this year,” says Hylland.
When the $70,000 loss is about 15% of your previous account balance, you’re seeing declines that many other investors in standard asset allocations are now seeing, Hylland says. “If that $70,000 loss represents a much larger loss, say 25% or more, and you haven’t expressed a willingness to take a large risk, it could be a sign that you need to talk to your financial planner about it.” what investments are being made and why,” says Hylland.
Part of a financial planner’s job is to ensure their clients are making investments that match their risk tolerance. “There’s never one right investment for everyone, so it’s important to have consensus and have your accounts managed to fit your financial plan,” says Hylland. Bottom Line: Research before you invest and if all else fails, take your portfolio to another advisor for a second opinion.
Do you have a question about your current advisor or are you looking for a new one? Email [email protected].
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