If Your Financial Advisor Is Not Doing These 3 Things, It’s Time for a Change

It’s more important than ever to have a financial advisor who is truly working in your best interest. It’s tough to watch your nest egg fluctuate and wonder whether your advisor is doing everything they can to help you. Here are three things your advisor should be doing right now. If they aren’t, it might be time to consider finding a new advisor.

1) Communicating With You

When markets are volatile, silence from your advisor is not golden. A good advisor should be reaching out to you, not just when you call them. This communication can take various forms: personalized emails, phone calls, or even video updates.

They should be providing context about what’s happening in the markets, explaining how these events might affect your specific portfolio, and outlining the strategies they are employing to manage the situation.

Most importantly, they should be offering reassurance and guidance, answering your questions, and addressing your concerns. This isn’t about predicting the future—it’s about providing clarity, transparency, and a steady hand during a potentially stressful time. A lack of communication can leave you feeling lost and uncertain, which is unacceptable.

2) Rebalance Your Portfolio

Big changes in the market inevitably throw your portfolio’s asset allocation out of whack. For example, if the stock market declines significantly, your portfolio might suddenly hold a much larger percentage of bonds than you originally intended. If it goes up substantially, you might be holding too much in stocks. Rebalancing is the process of bringing your portfolio back to its target allocation. This typically involves selling some of the assets that have performed relatively well and buying those that have underperformed.

Rebalancing is crucial for several reasons. It helps to control risk by ensuring you don’t become overexposed to any single asset class. It also forces you to “buy low” and “sell high,” which can enhance your long-term returns. Any advisor worth their fee should be actively rebalancing client portfolios during periods of volatility.

3) Tax-Loss Harvesting

Market downturns present an opportunity to make lemonade out of lemons. Declining values, while painful, can present a valuable opportunity for tax-loss harvesting. This is a strategy that involves selling losing investments to generate capital losses, which can then be used to offset capital gains (and up to $3,000 of ordinary income) and reduce your tax bill.

For example, if you have a stock that you bought for $10,000 and it’s now worth $4,000, you can sell it and realize a $6,000 loss. You can use this loss to offset up to $6,000 of capital gains. If you don’t have enough gains to absorb all the loss, then you can use the excess to offset up to 3,000 of ordinary income per year. And if you still have extra losses? They carry forward to be used in a future year.

Tax-loss harvesting is a sophisticated strategy, with complex rules, that can improve your aftertax returns. If your advisor isn’t discussing this with you and implementing it when appropriate, they are missing a major opportunity for you.

Don’t Be Afraid to Make a Change

If you’re not seeing these three things from your advisor, don’t hesitate to explore other options. Your financial well-being is too important to leave in the hands of someone who isn’t proactive, attentive, and skilled.

I strongly recommend seeking out a qualified, fee-only advisor. Fee-only advisors are held to a fiduciary standard, meaning they are legally obligated to act in your best interest. You can find qualified advisors through the National Association of Personal Financial Advisors.

Remember, you deserve an advisor who is proactive, knowledgeable, and committed to helping you achieve your financial goals, especially in challenging times.