Is your financial adviser missing in action?

August 16 2007 by Ellen Roseman

The stock market has been plunging for a few weeks. In today’s rout Toronto stocks are down almost 5 per cent. It’s a terrible thing to watch, worrisome, scary, heart-wrenching.

So, did you get a call from your financial adviser? I did yesterday and I felt better. My long-time broker said she thought the panic selling was an overreaction and this, too, would pass. I don’t know if she’s right or wrong, but I know that she’s calling all her clients to talk to them this week.

This reminded me of a column I wrote on July 17, 2002, when the stock market was also going through a rough patch.

If you’ve had a recent phone call from your stockbroker, mutual fund dealer, insurance agent or banker, consider yourself lucky. Many people are out there alone, feeling anxious and abandoned by an adviser who’s missing in action.

Your investment representatives should be communicating with you in a crisis. It’s the least you can expect for the fees or commissions you’re paying. If you’re not getting phone calls, letters or personal visits, why aren’t you demanding more?

This week is a good test. If you’ve heard not a peep from those who sold you the stocks or funds you own, it’s time to shop around. Getting a few impersonal emails isn’t enough. One-to-one communication is key.

Abandoned investors, start fighting back. You have nothing to lose but your isolation.

5 comments

  1. brad

    Aug 16 2007

    I’m actually thrilled at the stock market dives, because it creates an opportunity to put money into my RRSPs at bargain prices. I’ve been plunking all my spare cash into my RRSPs this week.

    If you’re years away from retirement and most of your RRSP money is in stocks, dips like this shouldn’t even be on your radar screen. If you’re doing short-term investment in stocks or if you’re approaching retirement then of course it is an entirely different issue.

  2. WhereDoesAllMyMoneyGo.Com

    Aug 16 2007

    Excellent point – I got into the business because I (nor anyone in my family) were getting good advice OR service. I not only called my clients, I also called non-clients – many of whom were happy to talk to someone. I’ll sheepishly admit – I think many of those people will become clients.

    I’ve talked to my clients about the expectation of a correction – and they are more comfortable with it than the average investor I believe – for the few who are qualified and willing – they are calling ME wanting to start a small leverage. Maybe a bit eager at this stage, but it puts a smile on my face when they “get it”.

    BTW, there is no rule you that you HAVE to do your RRSP loan the last week of February if you feel like taking advantage of the “sale”…. 🙂

  3. Brian Poncelet

    Aug 21 2007

    Hello Ellen,

    You have made a good point about financial advisors missing in action to which I plead guilty sometimes. (I was on holidays for a few weeks!)

    Here is the big question your readers and your financial advisor should be asking, “How well can your portfolio stand up during market turmoil”? Make sure you understand just how much risk you’re taking on. Every year advisors have to update the “Know your client form”. Must people think they can handle a lot of risk, but they can’t.

    Rob Carrick who writes for the Globe & Mail had a very interesting topic about mutual funds that had postive calendar returns even when the TSX composite index had some bad returns in 2001 & 2002 (down over 13% each year!) He wrote it in June!

    No surprise that these number of funds have held up well during some tough times. Why? Index funds are like trains they run well until they hit something, like another train. Well managed funds with good track records have cash and bonds, and when the market goes down, sometimes there are deals on stocks and they buy with with the cash on hand. Yes, there are some bad funds, and management fees can be expensive, but if you get less volatility and better long term returns with some excellent funds than with index funds, which is better?

    If you’re a do-it-yourselfer who wants to take allocation matters into your own hands, please get some diversification. If you got hit hard with this market, you need to review your portfolio and get a new one. You may want to talk to at least three advisors…do your homework!

    Regards,

    Brian Poncelet, CFP

  4. Canadianfinancialdiy

    Sep 6 2007

    With respect to buying mutual funds that performed well in the last major downturn, there are several issues to consider:

    – How did they fare overall through the good times too? Did they outperform throughout? If not, one is obliged to predict when and how long downturns will last in order to make the right fund switches at the right time, i.e. timing the market … haven’t we all read over and over that timing the market doesn’t work?

    – The fund company that did well in the past doesn’t necessarily or often do well in the future. Sitting here today, do you know which fund company will do well from here on? Instead of picking stocks, you’re forced to predict fund performance and assess the managers, as difficult if not more so than doing stock analysis. Richard Deaves documents all this in his excellent book, What Kind of Investor Are You?

    That’s why people can’t go wrong to buy and hold a diversified portfolio of low-fee index funds or ETFs. While there are no great returns, just the market average, this is an investment strategy that will yield positive results over the long run (like ten years or more).

    When you do that and you also know that markets will go up and down, but generally up over the long term — otherwise we’re in deep trouble — then these drops become much less stressful. If investors know and expect drops in advance, they need less handholding and reassuring phone calls from their financial advisor, as pointed out at http://www.WhereDoesAllMyMoneyGo.com.

    Like the rollercoaster, it goes up and down but comes back safely in the end… well, maybe not exactly, since the market ends up higher than where it started.