My account went down 20% and my advisor couldn’t explain why. What is the correct step?

Should you let go of an advisor who cannot clearly report losses? for you?

Getty Images / istockphoto

A question: I went through a 20% loss with my investments in a big bank. The advisor told me that my portfolio consisted of domestic and foreign investments that were resistant to inflation, but that the advisor was never able to explain the accelerated loss of money. I closed my account. Was this the right move? (Looking for a financial advisor? You can use this tool to match up with a financial advisor who might meet your needs here.)

Answer: The professionals say that your instinct to walk away from this advisor was probably the case. In fact, certified financial analyst Michelle Connell says that your financial advisor’s inability to explain your losses is something you find troubling. The fact that this advisor has been called “anti-inflationary” may also be a warning sign. “There is very little in the market that is completely safe or inflation-proof,” says certified financial planner Jay Zygmont. Bruce Tyson, a wealth advisor at Morton Wealth, adds that on the plus side, you’ll now know “to ask harder questions when an advisor claims that an investment is ‘proof of something’.”

Do you have a problem with your financial advisor or looking to hire one? Email picks@marketwatch.com.

The recent 20% loss is certainly unheard of. As of mid-June, the S&P is down about 20% from its January highs. But having said that, a good advisor would explain it all to you, and clearly explain what you are investing in. What’s more, a good advisor will likely have a better understanding of your risk tolerance – if this kind of loss is unacceptable to you, you may have invested too heavily in growth.

In the future, Tyson says, you should work with a consultant to build a resilient portfolio rather than one focused solely on growth. “Ultimately, your advisor should do more education, more cash flow planning, and more tax planning for you, so you have a complete picture of your finances and less worry about price movements in your account,” says Caleb Paddock, a certified financial planner. Talents Financial Planning. You can use this tool to match up with a financial advisor who might meet your needs here.

But was it the right step to close the investment account? Certified financial planner Jay Zygmont says it’s not the bank account that matters, but what you invest in. You could have left the money where it is and switch to a new advisor or you could have moved the money to a self-directed account if you’d prefer to have more control over your investments.

“The question is, what did you do with the money after you closed the account,” Zygmont says. Closing an investment account can be costly if your profits are higher than your losses and may be subject to tax payments if you sell your property less than a year after you bought it. In addition, many impose Companies do charge an account closing fee, so you’ll need to check the terms and conditions of your account to see what you should expect when you close a brokerage account.

So what should you do next? “It looks like a counselor may not have been right for you, but the challenge is finding a counselor that is right for you,” Zygmont says. In terms of what you look for in a counselor depends on your needs. “A good financial planner can add value beyond portfolio management,” says certified financial planner Ian Rea of ​​Slate Peak Financial Services. This Marketwatch Picks guide can help you craft a list of questions to ask a potential advisor.

Do some research before hiring your next advisor and make sure they have enough investment knowledge to navigate the investment market overdrafts. Then interview qualified candidates and determine if they develop an investment plan that will help you reach your goals within your risk tolerance. Also, make sure you reach out to them when market conditions are tough, and most importantly, you trust them.”

Do you have a problem with your financial advisor or looking to hire one? E-mail picks@marketwatch.com.

Leave a Comment