Five Questions You NEED to Ask your Financial Advisor Right Now

Keith Fitz-Gerald Nov 29, 2019

Turning your money into life-changing wealth requires planning… for both success and failure. It also requires competent counsel – meaning somebody who will act in your best interests.

But, finding the right advisor is tough, especially now with the markets at new all time highs.

The Internet is filled with stories of predatory sales practices, manipulative management stories, and just plain incompetence. Chances are good you know somebody who’s had a bad experience, just like I do.

It doesn’t have to be that way, though.

There are great advisors out there if you know how to find them and which questions to ask to make sure you’re on the right track for huge profits rather than devastating losses.

Start with the following – even if you’re already working with somebody you trust.

1) Do My Investments Match My Risk Tolerance and Expectations?

No doubt this will cause pushback from more than a few financial professionals.

But I don’t believe any investor needs to suffer the ravages of a bear market. Not now… not ever.

I don’t care if you have $5,000 or $500,000 to invest – the principles remain the same.

No financial advisor worth his or her salt would let a client liquidate into a bear market.

Moreover, the good ones ensure that their clients have enough cash and ultra-safe investments on hand so they don’t have to. The best ones will help you exploit market weakness and buy.

If your advisor has you leveraged to the eyeballs, or fully invested in such a way that you can’t endure bumpy market conditions or the possibility of a correction much less a protracted downturn, it’s time to find a new advisor.

I don’t care if it’s an up market or a down market, the best advisors will help you pick investments that match your goals within your financial time frame. They’ll also help find a way to make recommendations for your unique situation because they place your interests first.

The problem faced by many investors today is that they’ve always thought in terms of returns rather than risks. That’s backwards, especially at a time when the riskiest investments – bonds, for example – are the ones that were supposed to be the most secure.

This is compounded by the fact that many investors – having lost big twice in the last 20 years – remain underinvested and are faced with playing catch-up in during the longest bull market run in recorded history (which many have missed). They never should have stepped off the court in the first place.

As you know from prior Total Wealth columns, it pays to stay the course – meaning stick to your plan – no matter what the headlines.

In a study of 7.1 million retirement accounts, for example, Fidelity discovered that those who sold their stock mutual funds between October 2008 and March 2009 (the period of greatest volatility we’ve seen yet), more than 50% had not reinvested as of June 30, 2011.

On the other hand, those who stayed in the markets, and in stocks specifically, saw the value of their accounts rise 50% on average. Those who sat on the sidelines saw an average increase in their accounts of… wait for it… just 2%.

I’m sure those numbers haven’t changed very much, even now. I continue to hear from a good number of folks are kicking themselves for having sat out the greatest bull market run in recorded history because they worried about a crash that never happened.

Now, they’re wondering what to do and how to play catch up – both of which ARE possible but subjects for another day and another column!

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2) How Do My Total Returns Stack Up?

Many investors are after the next hot stock or the next sure thing, and focus on the percentage returns of specific choices. Understandably, they love the possibility being up 25%, 50%, 100%, or more. I do, too.

But, you know what I love even more?

The certainty of not losing money in the first place.

That’s why I’d rather invest with the idea of managing my total returns than throwing darts at specific stocks that may hit… or miss. Over time, I know that greater returns are possible that way.

Many investors fail to realize that successful investing is a matter of continuous performance. Not instantaneous performance.

It’s one of the reasons I emphasize income and, in particular, the right Global Growth and Income stocks as part of the Total Wealth approach.

For all the lip service people pay to this, very few realize that dividends and reinvestment can account for 60%-90% of total stock market returns over time. Even more.

In some cases, the dividends are so steady and increase so much that you can actually make more in them over time than you paid to buy the stocks that produce them initially. It’s like having a second salary if you want to think about it that way – especially when it comes to companies like the five I’ve profiled in this special report with the power to pay you year in year out, in good markets and in bad.

Put bluntly, cold hard cash answers the very real question many investors can’t help but ask, “why the hell am I investing in this?”

The same is true with fixed income, where it’s the income itself that has made a graphic difference in total returns despite rates dropping to all-time lows and rising ever so slowly today.

Ask anybody who’s invested in the PIMCO Strategic Income Fund (NYSE:RCS) over the past 20 years. RCS is actually trading at a price that’s a mere $0.36 higher than it was 20 years ago, which represents a 4.05% gain- but investors who have reinvested as I’ve suggested have enjoyed the opportunity to turn $10,000 into more than $75,738. That’s compared to just around $33,703 generated by those investors who didn’t reinvest

No matter which way you cut it, the numbers are impressive and very powerful.

To be fair, people tell me that time is the one thing they don’t have. They “can’t wait 20 years,” goes the litany.

Respectfully, I disagree. It doesn’t matter whether you’re talking about 5 years or 50 years; the principles are the same.  Apple Inc. (NasdaqGS:AAPL) is up 66% this year alone as I type and up approximately 135% over the past three. More than 100 large cap stocks have already doubled and more are on the way in the past 12 months.

The markets are near all-time highs. That’s how they work, considering they have a powerful upward trend over the long term.

As usual, I want to make a point – that even the lows of 2003 and 2008 were “all-time highs” compared to the markets in 1990. So was the gut-wrenching fall off last December.

Young or old, rich or poor, you want to learn to work with time instead of trying to cheat it at every opportunity. Having right advisor can help you do that effectively and profitably.

For instance, if you’re a few years into retirement, you probably want to consider having some bonds running around so that you can rebalance if and when the markets give you a chance and head south. If you’re concerned about leaving a legacy, perhaps a strategic move to preserve principal is more in order under the same market scenario.

A good advisor will listen carefully and help you plan accordingly for life’s events, not just big returns.

3) Under What Conditions Will You Sell?

You’d think that market professionals would have this wired but, sadly, most don’t.

Many advisors I’ve met over the years don’t have a sell discipline – meaning they haven’t got a clue about how to protect your profits, let alone your capital. Worse, quite a few don’t want you to sell.

It’s one of Wall Street’s dirty little secrets.

Think about it.

Selling is not in their best interest. Wall Street makes their money from your money. They want you in the game, so they will do everything they can to keep you playing.

This includes creating all kinds of fancy dashboards and gee-whiz programs as a means of drawing you in. You’ve seen the commercials. You know what I’m talking about.

At times, they’ll shift gears and highlight some sort of total care package as in “we care for your money.” But trust me, benevolence is not in their vocabulary.

If your financial advisor can’t lay out very specific reasons for when and what you would sell, move on. Knowing when to cut losses – and explaining clearly when to do so – is the hallmark of a worthwhile financial advisor. This can be an elaborate plan, but also something as simple as a 25% trailing stop.

It really doesn’t matter, as long as they have a plan based on your specific needs and can clearly articulate it to you without any hemming and hawing when you ask.

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4) When Will We Buy?

This is very closely related to “when do we sell?”

And again, most advisors don’t have a clue. You’d think at least they would have this one covered, but most don’t.

That’s unfortunate because there are two broad considerations to deal with here. Both have a direct impact on your money.

First, timing the market is a bad idea. According to Barron’s research, 85% of all buy/sell decisions are incorrect. That’s because emotional bias drives bad decisions, particularly when it comes to attempts to time the markets.

The latest DALBAR data shows that the return of an average investor trying to time the market was a meager 7% per year, versus the double-digit S&P 500 return of nearly 12% over the same time period. Over time, that’s millions of dollars in lost opportunity and profits that could have been in your pocket but which is now in somebody else’s if you’re not “in to win.”

Second, the markets have a decidedly upward bias over time. That means that outstanding performance is a matter of identifying relative weakness and wading into it, rather than running the other way. Sir John Templeton who was one of the world’s greatest investors called this investing at the point of “maximum pessimism.”

For instance, take a look at this chart.

When the data is laid out like this, you can see just as easily as I can that there are clearly periods that favor buying over selling and vice versa. So you adjust your tactics accordingly rather than trying to be a one-trick pony which is what most investors do unwittingly. What I want you to understand is that investors who buy into the markets without understanding the big picture get hammered trying to chase returns. Yet, investors who buy when things are gloomiest tend to build legendary wealth.

Investors – especially older investors – tell me frequently that this is something they’ll never see in their lifetime. They’re dead wrong. History shows that most investors will see 2-5 specific periods in their investing lives where the relative valuations favor more buying than selling.

That’s why I’d fire any advisor who does not recommend cautious additions to your portfolio when everyone else is running for the hills. At the very least, they should ask you to consider rebalancing periodically to capitalize on prices that would otherwise not be so low.

5) Finally, How Are You Being Compensated?

I don’t believe in paying people for performance they don’t deliver nor am I a fan of paying ginormous account management fees if I’m not getting good results. You shouldn’t be, either.

Over time, the typical 1%-2% management fees charged by many big investment houses and managers can really be a drag on performance that bleeds your retirement of much-needed momentum and future results.

I think fee-only advisors are a much better choice because they sit on your side of the table and have your vested interests in mind. Further, because they are independent, they disclose all conflicts of interest in advance (or at least they should) and are not beholden to investment banking, ratings, or other nonsense that lurks unbeknownst to most investors. They don’t have a financial stake in your investments.

I think that’s especially important at the moment for one simple reason – many of the conflicts that are inherent in today’s investment world are directly the result of conflicted choices. They are presented under the guise of comprehensive planning by brokerage firms that would like you to believe they perform the same functions as investment advisors. They don’t.

What if you don’t work with an advisor right now?

Hire one… and don’t delay.

I know that may seem expensive, but it’s a matter of perspective.

Putting $50,000 into a mutual fund charging a 3% load works out to 10 hours of professional, fee-only investment advisor’s time – and that’s at an hourly rate of $150!

Given the risks in today’s markets and the inherent problems with Wall Street – not the least of which are pronounced conflicts of interest – I think that is money well-spent.

Your profits will thank you!

Until next time,


11 Responses to Five Questions You NEED to Ask your Financial Advisor Right Now

  1. Matt Perry says:

    Some really good information here on financial advisers. My position is that you must be very leery of all of them. Too many self-serving interests at work here. I follow my own CONTRARIAN tendencies, and buy when things look really bad and most folks say they will never buy any stock ever again. THIS IS THE TIME TO START THINKING about getting in. On the other hand, when everybody is GLEEFUL and think and say the market is just going to keep going UP AND UP, my tendency has been to get out in an orderly fashion. So I buy low and sell high…..heard that before? And right now, the market is vastly overvalued and most everyone is GLEEFUL. LOOK OUT! The VIX is very low, and FEAR is unheard of. And the market has been JUICED by stock buy backs and the Fed and most every investment house. And please remember that during the first decade of the 2000s, STOCKS WENT NOWHERE……ZILCH! In my opinion, we are about to see this re-occur in the coming decade. So I have most of my money now in GOLD, SILVER, CDs, AND other CASH instruments. I AM A DIED IN THE WOOL CONTRARIAN, AND IT HAS BEEN A VERY GOOD STRATEGY. I am 79 years old, and cannot afford to have a ZERO-RETURN decade of performance in the stock market……except gold and silver mining shares, which will continue to be stellar performers. And I own a LOT of physical (REAL) gold and silver, and will continue to do so.

    • Keith says:

      Hello Matt and thanks for such a great comment!

      You are obviously very successful with your approach and that speaks volumes about the kind of person you are. I sense great discipline, savvy perspective and judgement are all fundamental elements of your character.

      Congratulations on your success!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  2. Big Al says:

    As always good advice. However, if I use an advisor, won’t he probably not let me buy stocks or options per your advice? Also, the Capta keeps on giving me a math quiz. I get the feeling I’m failing…lol

    • Keith says:

      Howdy Al!

      Thank you for the kind words. If I may be so bold, if he or she is pushing back based on age or risk tolerance, that’s good. However, if the push back is without explanation or – worse – in their interest rather than yours, that’s not.

      As for the math quiz, I share your thoughts. I get outsmarted by a lot of technology these days myself!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  3. John Virgi says:

    You mentioned that a 1-2% management fee is a drag on performance. What fee is acceptable? I have a broker that charges 1% of the portfolio with no trade fees. What structure are you suggesting?

    • Keith says:

      Hello John.

      That’s an excellent question and there is no single correct answer. Generally speaking management fees are on the decline in today’s day and age. That said, 1% is pretty reasonable if you are getting solid perspective and your adviser can answer the questions I’ve penned with integrity. Trust, sadly, is hard to come by on Wall Street these days.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  4. joseph danon says:

    On Wesd. November 27 I heard your presentation about your hew service ADG,I wanted to sign in but your system did not allow me,I could not call to order I could not because of the holiday,I am very interested in this service,please help me to get in

    • Rachel Pfeffer says:

      Hi Joseph!

      Thanks for your feedback. If you want to sign up for the ADG service, called Straight Line Profits, call our Member Concierge at 888-384-8339 — they’ll help you set up your account right away.

      Thanks for being a loyal reader!
      – The Total Wealth Research Team

      • Keith says:

        Hello Joseph and thanks for letting me know what you ran into.

        Please contact our teams using the number Rachel just provided and, by all means, keep me posted!

        Welcome to the Family!

        Best regards, Keith 🙂

  5. Rachel Pfeffer says:

    Hi Randy!

    Give our Member Concierge a call, and they’ll make sure you’re all set up to continue your subscription to the Money Map Report!

    Thanks for following along!
    – The Total Wealth Research Team

  6. Keith says:

    Hello Randy.

    Please check with our customer service teams as Rachel suggest and, of course, let us know if you run into any problems whatsoever. The markets are complicated enough without having to worry about your subscription!

    Best regards and thanks for being part of the Total Wealth AND Money Map Report Families, Keith 🙂

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