Money Magazine
Money Magazine's undercover financial planner

What your planner should be saying now

Worried about the bear market? Your adviser shouldn't be.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By The Mole, Money Magazine's undercover financial planner

the_mole_illustration.03.jpg
Have future topics for the Mole to address? E-mail him at themole@moneymail.com.
SUBMIT

(Money Magazine) -- I was at a meeting with several financial planners recently where the hot topic was how to manage our clients' pain and anxiety in a bear market. The room was full of long faces. Clearly the popularity that we planners have enjoyed over the past five years has declined faster than our clients' portfolios.

A key aspect of our job as planners is to manage clients' expectations. It appeared to me that some at the meeting had used the recent bull market performance to set unrealistically high expectations. No wonder their clients are so upset.

I heard much discussion among planners about the "unusual behavior" of today's market and what to do during "uncertain times." In reality, what's going on now is pretty common; the recent five-year run of steady gains was the unusual time.

From this meeting it was clear to me that some financial advisers chase performance just as much as individual investors do. They load you up on stocks or funds that are doing well and tell you to sell when the tables start to turn. Often these planners are simply following your emotionally driven pleas.

But a financial planner should rein in your emotions, not react to them, and help you stay the course in both up and down markets.

Right now she should be telling you to stick with your target asset allocation and perhaps even buy equities to rebalance your mix. Had you done so for the past five years, you would have already sold some of your winning stocks and funds and probably wouldn't be feeling as much anxiety as the market goes down.

My advice

Talk to your adviser about how the stock market drop makes you feel. A good adviser will help you gain perspective on your recent losses. She might point out, for example, that only twice in the history of the U.S. stock market has it lost value over a 10-year period - and then only by very little.

Be wary of an adviser who recommends reducing your exposure to the stock market right now. Maybe she put you in a portfolio that took more risk than you needed to take and is now making a hasty correction. Or she might be trying to time the market, a strategy that consistently results in buying high and selling low. Either way, that's a sign that it's probably time to find yourself a new adviser.

The Mole is a certified financial planner and certified public accountant who - in the interest of fairness - thinks you should know what goes on behind the scenes in financial planning. Want to make contact? E-mail themole@moneymail.com. To top of page

Send feedback to Money Magazine
Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
Novelty gifts for people with money to burn For those who've got the cash, these holiday gifts can really make a statement. More
The best stocks of 2014 This year has been very solid for stocks, but these 6 were the best of the S&P 500. More
14 biggest tech fails of 2014 2014 was chock-full of big failures in technology, from security snafus to executive gaffes. Here are the top ... er ... bottom 14. More


Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.