“You Will Let Me Know If I Need To Change My Investments, Right?”

 In Advisers, Agents, Asset Allocation, Expectations, Fees, Forecasts, Future, Goals, Happiness, Health Care Costs, Investments, Motivation, Retirees, Retirement

Have you ever asked an adviser this question?  Or thought an adviser is capable of watching the markets and doing this for you?  This might be the most recurring question that I have heard from investors over the years. People are under the impression that since I am an adviser, I have access to information about the markets that I can use to help them avoid losses or make short term adjustments to their portfolio.  In fact, I have heard it enough to believe that this might be the single largest misconception about how a professional adviser can help their clients.  People ask this question because they believe that their advisers know how to modify their portfolios and react to market changes.

Of course, they get this idea because it is promoted by many practitioners in the financial services industry.  Advisory firms market the notion that they add value by “watching” investors’ portfolios and “changing” them based upon recent or ongoing developments.  After all, what else do they do once they help their clients set up their accounts?  (Actually, this is a question many investors should be asking).  If you are working with an adviser because they have told you that they know enough about the markets to modify your accounts on an ongoing basis, I think you are being duped.

When interacting with their clients, advisers need to rattle of endless statistics, present interesting trends, and quote from esteemed economists to imply that they know what is going on in the investment world.  This is the type of information they include in their inane newsletters and bring up in account reviews.  Other than the fact that it might sound interesting and impressive, much of it is total nonsense and has nothing to do with what will happen next.  Just like you, they have no idea.  The market is full of short term sell offs and growth spurts that don’t indicate anything and certainly don’t justify an investor changing their investments.

So when I get this question, I say:  “No, I won’t be contacting you to change your account.  I wish I new what was going to happen next, but I have no idea.”  I don’t watch the markets or even report on their recent performance to my clients.  If you are invested for the long run,and you understand the markets will have wild swings, what does the last week, month, or even year have to do with your situation? I have been an adviser for 20 years now and I can say, with quite a bit of confidence, that I have never heard of anyone that can predict, with any meaningful consistency, why the markets behave the way they do.

If I am going to have a successful relationship with a client, we need to be on the same page and have the same expectations.  This applies to so many relationships, both personal and professional.  If my client does not understand what I am capable of and what service I provide, then they are working with me for the wrong reason and will ultimately end up unhappy with our relationship.

So here is my advice on what you should expect.  Don’t listen to the b%$#&*@t about how advisers and firms can help you by watching and changing your investments.  Set-up a diversified portfolio using low-cost, broadly diversified index funds from Vanguard and keep in mind that there are only two situations that require a change. First, if you find out you can’t handle the losses when the market tanks, invest more conservatively.  Yes – it is ok to change if you don’t have the stomach for investment losses.  It might be an expensive lesson, but you will have learned more about your real tolerance for risk.   Second, if you go through a significant personal or professional change, reevaluate your portfolio.  These changes might include job loss, new career, going back to school, divorce or marriage, inheritance, new children,  and any other important life changes.

Other than these two circumstances, don’t worry about watching your portfolio or hiring someone else to “watch” it for you.  You will save a lot of money and time and won’t be uncertain about what an adviser can really do to help you reach your goals.

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