Author: Matt Bell / Source: Wise Bread
The decision to work with a financial adviser is not a one-and-done type of deal. You need to stay engaged and informed. While you probably covered most of your key financial questions in your first meeting or two, you should continue to meet at least on an annual basis.
Here are some important questions to explore when you do.Is my investment mix still appropriate?
When your adviser first put your financial plan together, he or she probably had you fill out a risk tolerance questionnaire or asked you questions directly. That information, coupled with your investment time frame, helped determine your portfolio’s optimal asset allocation — the mix of stocks and bonds that’s generally best for someone in your situation.
But your situation is ever changing. You’re getting older, which could spell the need to make your portfolio a bit more conservative. Or changing market conditions might reveal something about your risk tolerance that the questionnaire couldn’t catch. There’s nothing like a real market downturn to find out just how risk-tolerant you really are.
So, one key question to keep on the table is whether your portfolio is allocated appropriately. (See also: The Basics of Asset Allocation)
How will you help me navigate the next bear market?
This question could just as easily be, “How will you help me navigate the next bull market?” It depends on where we are in the market cycle. At the moment, we’re still in the midst of a very long-running bull. But just as surely as night follows day, bear markets follow bull markets. President Kennedy once said, “The time to repair the roof is when the sun is shining.” Right now is a good time to talk about your adviser’s plan for the bear market to come.
When the market changes direction, are you expected to grit your teeth and ride out the storm? Or does your adviser plan to make changes to your investment holdings? If so, what changes will be made and what will trigger the need to make them? If your adviser plans to make adjustments, hopefully he or she will base them on clear, objective criteria. Make sure you understand them.
This is all about expectations management. The better you prepare yourself…
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