Should I Change Advisors During a Down Market?

Before you make your final decision to change advisors there are a few questions you should ask yourself:

•Is this an emotion-backed decision because you are concerned about continuing losses in a down market?

•Did you give the advisor credit for your results during a rising market and now you are blaming the advisor for your results in the down market?

•Have you given the advisor enough time to fairly evaluate his or her results?

•If you terminate your relationship with this professional, who will advise you in the future?

If you replace your advisor you should expect your new advisor to recommend changing up to 100% of your current holdings for the following reasons:

•Improve your future results.

•The new advisor's research and portfolio strategy will be different than your previous advisor

•The new advisor won't want the responsibility or liability for retaining investments that were recommended by your previous advisor.

•The new advisor can't be held responsible for improving results if you require him or her to retain a significant portion of your current investments.

If you are convinced that replacing your advisor is the right decision, then completing this process in a down market has several significant benefits. On the premise the new advisor recommends selling all or most of your current holdings to improve future results:

•It's better to make these changes in down market when you pay a smaller amount of tax on any gains that may remain in your portfolio (if applicable).

•New assets that are purchased during the restructuring period are acquired at a lower cost basis.

•You have the option of holding a larger than normal cash position and phase your way back into the market.

•You have eliminated the risk of further losses due to bad financial advice

When you change advisors you want to make sure you don't replace your current advisor with a new one that isn't any better than the one you just fired. To make sure this doesn't happen, you will need a new selection process. The new process should emphasize objective criteria that include credentials, ethics, business practices, services, independence, and potential conflicts of interest. Plus, you should require written documentation for all of the information that you receive from advisors.

Authored by Jack Waymire

•Co-founder of PaladinRegistry.com

•32 Years of financial service industry experience

•CEO and Chief Investment Officer of a financial advisory firm

•Author of the best-selling book, "Who's Watching Your Money?"

This editorial is for information purposes only and is not intended to be financial, tax, or legal advice. We strongly recommend you use the services of a qualified professional for these types of advice and services. Please view the Terms of Use documentation at www.paladinregistry.com for additional conditions that apply to this editorial.