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Questions You Shouldn't Ask a Financial Adviser

When you meet with a financial adviser, you probably have lots of questions on your mind. That’s a good thing. One of the main duties of a financial adviser is to answer your questions in a simple and concise manner so that you feel comfortable about your investment portfolio. However, some questions are undoubtedly better than others, and both you and your financial adviser can have a more productive conversation if you avoid some of these awkward queries.

“Did you see what Jim Cramer said on ‘Mad Money’ last night?”
Investment portfolios should be constructed with a long-term mindset, but this is impossible if you watch every market bump on CNBC or Bloomberg. The markets are going to fluctuate. Reacting to every news tidbit — most of which will be forgotten just as quickly as it was reported — will cost you dearly. Turn off the television and ignore the pundits.

“Will the Dow be up or down next week?”
Never forget that we are just humble financial advisers, not the descendants of Nostradamus. No one can reliably provide you with accurate predictions concerning the direction of the market over the next week, month, or even year. Anyone who tells you otherwise is simply lying.

“Gold is skyrocketing! Can we buy some already?”
There’s a reason financial advisers create detailed investments plans when they meet with you: to avoid the dangers of performance chasing. Without fail, every new market cycle will introduce another hot sector, such as emerging markets, commodities or biotechnology. However, if the asset wasn’t right for your portfolio when you first constructed it, it certainly isn’t right for you after a prolonged market surge.

“Can you create a risk-free portfolio for me?”
Unfortunately, there is no such thing as a risk-free portfolio. CDs and bonds can reduce your market risk, but they consequently expose you to inflation risk. Alternatively, the stock market can preserve your purchasing power, but it also subjects you to the possibility of prolonged downturns. Your portfolio will always be subject to risk; you just have to decide which risks are worth taking.

“My friend’s portfolio returned 20% last year. Why did I only make 5%?”
Your portfolio was created with your unique circumstances in mind, including your age, risk tolerance, current wealth, and retirement expectations. These circumstances vary across individuals, which can lead to widely disparate portfolio allocations. Performance measures are useless without understanding the risks underlying them. You can always attempt to boost your returns by increasing your expose to smaller cap stocks (stocks of small companies), investing internationally, or introducing leverage through derivatives or margin accounts, but that may not be suitable for you.

“But what happens to my portfolio if there is a zombie apocalypse?”
Whether it’s a lost job, serious illness, or a market crash, life always manages to throw a wrench into even the most well-crafted financial plans. Given this reality, it’s important to plan for different contingencies in order to ensure that your financial future is resistant to negative shocks. However, this “disaster planning” can go too far by focusing your attention on risks that are both out of your control and highly unlikely to occur. Besides, if there really is a zombie apocalypse, your retirement portfolio will be the least of your worries!

A qualified financial adviser can help you construct a well-diversified portfolio that’s tailored to your long-term goals, but we aren’t miracle workers. By developing reasonable expectations of financial planners and the financial planning process, you can formulate questions that help you fully understand your investment portfolio, and its role in helping you achieve financial security during your retirement years.


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