‘I lost over 21% in 2022.’ I’m 72, retired, and have worked with my financial adviser for six years. I know markets are down, but this massive loss is worrying. Shouldn’t my adviser have had a plan to manage risk at my age?

Question: I’ve been with a financial adviser for 5-6 years. My average annual return is only 4.7%. I’m down 21% in 2022 through October 21st. I’m 72, and I’ve been retired for 5 years, but have not needed to tap into retirement accounts. My complaint is that there seemed to be no plan or gradual decrease in risk tolerance for the portfolio, so I lost over 21% in 2022. What should I do?

Answer: If you’ve been retired for five years and have not had to take a distribution, then you must be in a pretty solid state, so we’d like to commend you for that. And you are right to raise the red flag about what’s happening with your adviser. (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)

What immediately stands out here seems to be a lack of clear communication between you and your adviser. What’s more, you shouldn’t be afraid to hold your adviser accountable. “The biggest question I have is why was this not part of the retirement plan, or why did it never come up in annual reviews?,” says certified financial planner Ryan Townsley at Town Capital. 

In general, a 20% loss for someone retired may suggest you were invested too aggressively. But it’s also true that this year has been especially hard on investors — something your adviser should have explained to you. (Looking for a new financial adviser? This tool can help match you with an adviser who might meet your needs.)

“Had an investment review taken place this year, your adviser hopefully would’ve explained that 2022 has been one of the worst years for bonds since the 1970s. Aggressive interest rate hikes are putting pressure on bond prices, which [generally] move inversely to changes in rates, so even if your adviser did gradually reduce the risk in the portfolio over time, it wasn’t communicated to you, and the bond index is down more than 15% through the end of October 2022,” says certified financial planner Eric Presogna of One Up Financial. 

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In other words, your adviser may have screwed up with regards to lowering your risk — and they may not have had a plan at all — though they may have also had a plan that was felled by the rough economic climate. “Bonds can sometimes provide stability when stock markets crash, but in 2022, bond prices fell at the same time as stocks which is an unusual occurrence,” says Pritchard. 

“Both the five-year numbers (4.7%) and the year-to-date number (-21%) are reasonably consistent with a broadly-diversified balanced portfolio. This is particularly true if the investor’s portfolio includes a meaningful international component due to the recent strength of the U.S. dollar,” says certified financial planner James Hemphill at TGS Financial.

Something else to consider for perspective is that the Vanguard Target Retirement 2020 fund ticker (VTWNX) has returned 3.14% in the last five years and it is down 16.25% year-to-date, as of the writing of this piece. “This fund was designed for people who were retiring around the same time you did and currently has a 42% exposure to stocks. It sounds like your portfolio would probably be closer to a 60% exposure to stocks, which is fairly typical for someone in your position,” says certified financial planner Terrance Hutchins at Logos Financial Group.

But because your adviser didn’t seem to have discussed what his plan, if any, was for you, you don’t know, and that is a problem. Discuss your concerns with your adviser, and if you feel like the relationship is broken and your adviser doesn’t do the right things for you, move on. “There’s no requirement to hash things out with someone you’ve lost faith in,” says certified financial planner Justin Pritchard at Approach Financial. (Looking for a new financial adviser? This tool can help match you with an adviser who might meet your needs.)

Experts agree that good advisers have been checking in with their clients and educating them on what’s been going on throughout the year. “This year’s market mayhem shouldn’t be a surprise that you find out about on your quarterly statement,” says Pritchard.

In addition to addressing your concerns directly with your adviser, you should ask yourself what your return expectation is. “Did you ask your adviser for a reasonable expectation for the variability of gains and losses for the specific portfolio the adviser is using? Is the return you’ve experienced within the realm of anticipated or expected outcomes?” says Matthew Kelley, certified financial planner at Gold Medal Waters.

Beyond an investment plan, hopefully you can work with an adviser to clearly understand and articulate the outcomes you want in life to determine the amount of money needed. “This will help you build a better framework for an appropriate investment portfolio and then you can focus on things you can control like properly taking your RMDs, proper planning and tax strategies,” says Kelley. (Looking for a new financial adviser? This tool can help match you with an adviser who might meet your needs.)

Have an issue with your financial adviser or looking for a new one? Email [email protected].