Kiplinger Today


Fire My Adviser?

I'm a novice at investing, and I keep begging my financial adviser to give me specific advice during this economic downturn. But it seems as though, with all my research, I'm the one giving him advice. Am I expecting too much? Should I move on to another adviser? Sandy St. John, Forney, Tex.

It's essential that advisers be accessible to clients and explain their plans during times like these. Your adviser seems to be failing, and that's certainly grounds for dismissal. In fact, in a market like this one, in which virtually everyone is losing money, accessibility can be more important than a negative return.

There are other benchmarks to help you determine whether it's time to move on. Find out how your investments have performed compared with relevant indexes or other funds with similar investing strategies. You should generally focus on long-term results, but pay extra attention to how your investments have performed during the bear market. "No client of a financial planner or investment adviser should be doing as poorly as the markets," says Bob Veres, publisher of Inside Information, a newsletter for financial planners. "The best advisers also make sure their clients keep enough cash and ultra-safe bonds on hand so that nobody has to sell stocks for two years into the teeth of a bear market." Not having that kind of diversification, says Veres, "is a reliable sign of incompetence."

Your investments should also match your time frame and goals. Keep your long-term assets primarily in stocks. But short-term investments should be in bank accounts or money-market funds. That way, "the money you need for this year is never exposed to any risk," says Mark Johannessen, a certified financial planner in McLean, Va., and president of the Financial Planning Association.


In addition, ask your adviser about his strategy for meeting your medium-term goals. "Our retired clients have five to eight years' worth of certainty in their portfolios," with investments such as Treasury and municipal bonds, bond exchange-traded funds, and CDs, says Johannessen.

What adjustments is your adviser making during the current market? "You're looking for someone who sees opportunities to offset capital gains with losses, provides good diversification, recommends cautious additions to stocks and counsels against making wholesale changes until the market has regained its stability," says Veres.

Finally, consider how well the adviser prepared you for this situation. "A good adviser will have put a plan in place that expects horrible times in the markets," says Daniel Moisand, a certified financial planner in Melbourne, Fla. "If you were clueless that your portfolio could drop, you have to consider whether you were well prepped by your adviser in the first place."

Is my annuity safe? How concerned should I be about the financial strength of the insurance company that issues my annuity? -- Joyce Rusch,Toledo

It depends on the type of annuity you have. With a variable annuity, money is invested in mutual fund-like accounts that are segregated from the insurer's assets and are unaffected by the insurer's financial situation.

But money in fixed annuities and equity-indexed annuities could be in jeopardy if the insurer were to become insolvent. And if you have a variable annuity with guaranteed minimum benefits, those benefits could also be at risk. Check on your company by going to our Insurance page and clicking on the box for A.M. Best, which rates the financial strength of insurers.

Before it gets to that point, however, you have several layers of protection. Annuities are issued by life-insurance companies, which are strictly regulated to make sure they have enough assets to pay claims. And if the insurer does have financial troubles, policyholders and annuity holders are protected by state guaranty associations.

These associations must provide at least $100,000 in withdrawal and cash-value coverage for annuities, and 16 states have limits as high as $300,000 to $500,000. Payouts on immediate annuities continue without a break, says Peter Gallanis, president of the National Organization of Life and Health Guaranty Associations (see for your state's rules).


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