“I’ve seen my accounts drop 22%.” My financial advisor has generally “done well”, but I now feel like he is not making enough adjustments in this tough market as I am losing “large amounts” of money. What is my move?

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Question: I had a financial advisor with a national firm for over a decade. We did well and his fees are appropriate at 1%. His company’s strategy is to buy a basket of stocks, and there are literally dozens of them in each of my accounts. It generally does about the same as the S&P, beating it in some years and a point or two lower in others. In a few years, including heading into 2022, I’ve risen significantly in the market only to see my paper gains dissolve in a few months or more. I have asked several times if he/the company adjusts the stocks they hold in my account to account for market changes as there are not many trades in any of them. I know not to try to time the market.

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However, should I expect my broker to make adjustments to my accounts during times of significant market change? I saw my accounts drop about 22% this year and erase all paper gains from 2021 and then some. His answer is “we are doing better than the market in general”. OK, but I asked several times this year if they were considering any adjustments (eg energy, anyone?). Should I question or just continue to feed the beast every year with additional investments and worry about downside risk as I approach retirement (five years from now, at least). I don’t need the money and I continue to invest six figures a year, but then again, I also don’t like seeing my earnings disappear in big chunks.

Answer: First, it’s reasonable to expect periodic updates and adjustments to your accounts, anywhere from once a year to once a quarter, says John Piershale, certified financial planner at John Piershale Wealth Management. “Common stock models have objectives such as capital appreciation or income and most stock models have regular updates, some more than others. Keeping your model up to date and rebalanced periodically can allow you to take outsized gains from some areas and apply them to others,” says Piershale. While this doesn’t prevent losses, it can help reduce your overall portfolio risk, adds he.

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That said, you don’t want too much movement in your account as you might incur fees every time you transfer or transact. That’s not to say you should never make adjustments, but experts advise limiting them instead of constantly moving things around, which can cost you.

It also sounds like you and your advisor may not be aligned on your risk tolerance, says Aaron Klein, CEO of Riskalyze, a fintech company that provides software that analyzes investment risk. “If I were you, I would find a fiduciary advisor who could give you a second opinion. If someone else can give you a better way forward with less downside in the future than you are doing now, that might be the right change to make,” Klein says.

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And Michelle Connell, chartered financial analyst at Portia Capital Management, notes that for someone like you who is close to retirement, you may be taking on too much risk. When you’re building wealth, it’s good to ride the waves of market volatility, Connell says. But “if you are approaching retirement or want to protect what you have built, an investor should go into risk management mode. Your job, and that of your advisor, is to protect your investment portfolio and therefore your future standard of living,” says Connell.

If you decide to go with another advisor, you’ll probably want to find one more focused on wealth preservation and risk management. Advisors do this by taking steps such as “determining the amount of money or investments needed to meet your distribution needs, rebalancing your investments when you own too little or too much of an asset class, and evaluating the downside risk of mutual funds that are purchased. How much did the fund lose in a bear market? How does the fund’s downside and upside capture compare to that of its peers? Is the investor willing and able to take that kind of risk,” says Connell.

Do you have a problem with your financial advisor or do you want a new one? Email [email protected]

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