Advisors Questioning Their Own Advice

One of the central “value adds” a trusted advisor brings to the table is a calm perspective during periods of market turmoil. That can mean not getting carried away and doubling down on stocks during a bull market, nor abandoning stocks in a down market. In a sense, a crucial role for an advisor is to be our better selves; making sure we don’t sabotage ourselves with emotional reactions to market volatility.

But it turns out even financial advisors are finding it hard to stick to their long-term strategies in the wake of the severe bear market. A recent survey conducted by GDC Research and Practical Perspectives found that 36 percent of financial advisor are less confident about how they are managing retirees’assets compared to a year ago. And 77 percent have altered their asset allocation strategy in reaction to the market sell-off.

In an interview with Investment News, Howard Schneider, president of Practical Perspectives, said advisors are “…changing their asset allocation. They're shifting their clients' assets to more conservative accounts, and they're raising the use of cash and raising fixed-income securities.”

That sounds like a lot more than tactical rebalancing. And I can’t help thinking that getting more conservative after a huge bear sell off wasn’t exactly great timing.

Schneider also told Investment News that the advisors surveyed are responding to the need to make sure their clients are able to “meet basic living expenses, such as shelter, food, energy and healthcare, [and this] has never been more of a challenge for advisers.”

Okay, but if folks were retired and needed preservation of principal, how come their advisors didn’t have them properly allocated long before the bear hit? And that raises the more important question: For those of you who work with an advisor, how would you rate their strategy now that you and your portfolio have lived through this big market sell-off?

-- Carla Fried