This is the introduction to a Kiplinger article titled, Does Your Advisor Make the Grade?
Until last fall, Pam Nintrup thought the financial adviser she had hired two and a half years before was doing a good job. He’d consolidated her and her husband’s scattered accounts onto one statement and run computer scenarios to determine whether her goal of retirement by age 60 was achievable. It was, he said. He then suggested a stock-heavy mix of investments to help Nintrup, 57, meet that goal.
But with her portfolio down more than 40% since last December, Nintrup’s early-retirement plans are out the window, and doubts about her counselor are mounting. Why wasn’t her money invested more conservatively given her imminent retirement? Is the adviser’s explanation — that bonds didn’t cushion the stock losses as well as anticipated — good enough? Why should she stick with the same plan, as he recommends, when it has done so poorly?
The article doesn’t tell us how this woman’s portfolio was allocated. Regardless, it’s easy to look back and say stuff like, “Why didn’t my advisor see this coming?” What if the money had been invested more conservatively and the market had gone way up and she missed out on the gains? You think she would have been pleased? Hindsight is 20/20.
Think back to the late 90s when some advisors weren’t jumping on the tech bandwagon and their clients were upset with them because their dentist was making money hand-over-fist by daytrading tech stocks. These advisors were losing clients because they weren’t making money fast enough.
Then the tech bubble burst and people were upset because their advisors were investing too heavily in tech stocks.
Bottom line: unless you have a crystal ball or some other magical power, it’s impossible to protect yourself from the market. The only thing you can do is make sure you have a decent asset allocation plan invested in low-cost funds. Stick with your plan but be willing to make changes if necessary. The woman in the example may want to work longer or maybe work part time once she turns 60. Or, she may want to save more towards her retirement now. Or, perhaps a combination of both.