You opened the statement and it is down. Again. The first thought comes fast: I am paying someone for this?
Fair question. Sometimes the answer is “yes, and they are doing their job.” Sometimes it is not. Here is how to tell the two apart.
Check 1: Compared to what?
“Down 12%” means nothing by itself.
Say stocks fell 20% and your account holds 60% stocks and 40% bonds. A drop of around 12% is roughly what that mix was always going to do. The plan did not fail. It behaved.
So ask your advisor for one thing in writing: “What mix do I hold, and what did a plain index version of that mix do over the same period?”
If your result is close to that, minus fees, you are looking at the market. If you are well behind it, keep reading.
Check 2: Over what period?
One year tells you almost nothing. Markets swing far more from year to year than most people expect, and I wrote a whole piece on how ugly normal looks.
Look at three to five years, after fees. One bad stretch is weather. Trailing a simple benchmark year after year is something else.
Check 3: What do they actually control?
Your advisor does not control the market. Judging them on it is like blaming the pilot for the wind.
They do control four things:
Cost. Their fee plus the expenses inside the funds they picked.
Taxes. Whether the investing is done with your tax bill in mind.
Fit. Whether the mix matches when you need the money and how much of a drop you can live through.
Behavior. Whether they kept you from selling at the worst moment.
Grade them on those four. That is the job you are paying for.
Check 4: The real red flags
These are on the advisor, not the market.
Big bets you never agreed to. A handful of stocks, or one sector, carrying most of the account.
Constant trading. Activity can look like work. Often it is cost.
Products with the firm’s name on them. Ask why that one, and how they are paid on it.
They cannot explain it simply. If they cannot say in plain words why you own what you own, that is a problem in any market.
The story keeps changing. A new reason every meeting.
They only call when it is up. Bad years are when the phone should ring.
One of these may have an explanation. Several of them is a pattern.
Do not grade an advisor on the weather. Grade them on what they did in it.
The part about you
Here is the uncomfortable piece. If a plan needs you to hold through deep drops and you cannot sleep, the plan is wrong for you, even if it is right on paper.
Say so. A good advisor will change the mix to one you can live with, because a plan you abandon at the bottom is worse than a cautious one you keep. Fear in a falling market is not a defect. It is information, and The Weather Rule is the system for reading it without letting it steer.
And if the four checks leave you unsure whether the help is worth what it costs, the 19-question quiz puts both sides in dollars.
Related questions: is my advisor doing a good job, is my 401(k) safe in a crash, whether to leave your advisor and do financial advisors actually help.
One question for this week: when your account dropped, did your advisor call you, or did you have to call them?
As always, if you want to talk any of this through, the door is open. Genti