I hired a financial planner, but they’ve already lost $70K. What should I do?

Is a big loss a reason to ditch your financial planner?


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By ALISA WOLFSON

Question: I recently rolled my retirement pension and 401(k) into one 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’re 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! (Looking for a financial adviser? You can use this tool to get matched with a financial adviser who might meet your needs here.)

Answer: First, you’ll want to share your concerns with your new financial planner, and know this: “We’re in a bear market …What’s surprising is that your financial planner has not contacted you to discuss your portfolio allocation, what they’re doing to mitigate risk and how they’re performing relative to appropriate benchmarks such as the S&P 500 for stocks and the Bloomberg Aggregate US bond index,” says certified financial planner Anthony Ogorek of Ogorek Wealth Management. What’s more, “they should have educated you on your investments and helped you perform cash-flow planning, tax strategy planning and understanding each account’s use-by date,” says certified financial planner Kaleb Paddock of Ten Talents Financial Planning. If these things happen, it’s time for a conversation, at the least.

While it may not feel comforting, realize that both stock and bond markets have declined during the first 6 months of 2022 at levels never seen in over 40 years, according to Reuters. “The financial planner is likely doing nothing wrong with your investments but they may need to do a better job educating you and if you let them know your concerns and desire for knowing whether you own sound investments, they can help educate you and hold your hand through the market decline,” says Paddock. Adds certified financial planner Matt Hylland at Arnold and Mote Wealth Management: “You may very well be in good investments for the long term, but seeing very significant declines so far this year,” says Hylland. 

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What’s more, you should have taken a risk tolerance questionnaire and checked out your planner’s stated risk tolerance versus how the portfolio is allocated. “The brokerage statements should include ticker symbols for the positions held. You can type the tickers into web sites such as Marketwatch to learn more about the funds you hold,” says Ogorek.

During the process of meeting and hiring your financial adviser, certified financial planner John Piershale of John Piershale Wealth Management says there should have been an investment presentation. “This is where the adviser explains to you the proposed investment portfolio, its risk level and reasons why it’s appropriate for you,” says Piershale. 

Depending on your specific asset allocation, you may see a slightly larger decline if you have expressed the willingness to take more risk, or smaller decline if you are more conservatively invested, says Hylland. “A 60/40 portfolio, or one made up of 60% stocks and 40% bonds is a very common retirement portfolio and is down about 15% so far this year,” says Hylland. 

If the $70,000 loss represents about 15% of your previous account balance, you’re seeing declines that a lot of other investors in standard asset allocations are experiencing now, says Hylland. “If that $70,000 loss represents a loss much higher, say 25% or more and you didn’t express a willingness to take a lot of risk, that might be a sign that you need to talk with your financial planner about what investments are being used and why,” says Hylland. 

Part of a financial planner’s job is to make sure their clients are in investments that suit their risk tolerance. “There is never any right investment for everyone so it’s important that you’re on the same page and that your accounts are managed in a way that is appropriate for your financial plan,” says Hylland. Bottom line, investigate before you invest and if all else fails, take your portfolio to another adviser for a second opinion. 

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