‘I have watched my accounts drop by 22%.’ My financial adviser has usually ‘done well’ but now it feels like he’s not making enough adjustments in this tough market given that I’m losing ‘large chunks’ of money. What’s my move?

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 Question: I have had a financial advisor with a national firm for more than a decade. We have done well and his fees are appropriate at 1%. His firm’s strategy is to buy a basket of stocks, and there are literally dozens in each of my accounts. He generally does about the same as the S&P, beats it some years and a point or two lower in others. In a couple of years, including heading into 2022, I have been up significantly in the market only to watch my paper gains dissolve over a few months or longer. I have asked on several occasions as to whether he/the firm adjusts the stocks they hold in my account to take into account market changes, as there is not much trading occurring in any of them. I know one should not 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 changes?  I have watched my accounts drop by 22% or so this year and wipe out all paper gain from 2021 and then some. His response is “we are doing better than the broader market.”  OK, but I have asked several times this year if they were contemplating adjustments (e.g., energy, anyone?). Should I question or simply keep feeding the beast every year with additional investments and worry about downside risk when I am nearing retirement (five years away, at least).  I don’t need the money and continue to invest six figures a year, but then again, I don’t like to see my gains disappear in large chunks, either.

Answer: First of all, it is reasonable to expect updates and adjustments to your accounts periodically, 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 updated and rebalanced periodically can allow you to take outsized gains from some sectors and apply them to others,” says Piershale. While this doesn’t prevent loss, it can help reduce overall risk in your portfolio, he adds. 

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That said, you don’t want too much movement in your account as you may incur fees each time you make a transfer or transaction. That’s not to say you shouldn’t ever make adjustments, but experts advise limiting them instead of constantly moving things around, which can cost you.

It also sounds like you and your adviser might 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 adviser who could give you a second opinion. If someone else can give you a better path forward with less downside going forward than you’re carrying right now, it might be the right change to make,” says Klein.

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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 fine to ride the volatility waves of the market, says Connell. But “if you’re near retirement or you want to protect what you have built, an investor should shift into risk management mode. Your job, and your adviser’s is to protect your investment portfolio and therefore, your future standard of living,” says Connell.

If you decide to go with another adviser, you’ll likely want to find one more focused on wealth preservation and risk management. Advisers accomplish this by taking actions like “determining how much money or investments are needed to meet your distribution requirements, rebalancing your investments when you own too little or too much of an asset class and evaluating the downside risk of the mutual funds that are purchased. How much has the fund lost during any bear market? How do the fund’s downside and upside capture compare to its peers? Is the investor willing and able to take this kind of risk,” says Connell.

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