Consider the past 18 months as your future. If your advisor has guided you through these rough times with little damage, you’re in good hands. However, if your feel your retirement has been jeopardized, your stock portfolio is down over 30%, or your balanced portfolio is off more than 10%, it’s time to seriously consider a change and seek out a few other advisors and their clients to see how they’ve done.

The stock and bond markets today face great opportunities and sizable threats. Your current portfolio should look different than it did a year ago. Much has changed and so should you. Has your advisor properly repositioned your portfolio, or are you still holding the same old stuff hoping it will come back?

The market’s roller-coaster ride has not only continued throughout 2001, but has turned into quite an “E” ticket over the past 6 months. Prior to the tragic events of September 11th, it had already been falling consistently for several weeks due to weakening economic conditions and falling corporate profits. As conditions deteriorated even more due to the tragedy, however, the probability of a sharp rebound in stock prices increased dramatically. While stocks were primed for a near-term rally, it was too early to be certain that a new bull phase was about to begin.

Late in the summer, it looked like companies were beginning to spend again and the leading economic indicator signaled a recovery, but the terrorist attacks changed both. In addition, consumers had the rug pulled out from under them by falling stock prices, layoffs, and a mood of uncertainty. This dramatic deterioration of events demanded action. The Federal Reserve and our Government are now both working overtime to stimulate the economy. No government will match the massive reflation effort now underway in the U.S. While the market will remain turbulent, it is only a matter of time before these actions take hold and our economy rebounds.

The past 20 years have witnessed the birth and death of a great bull market for stocks and bonds. Most advisors and their clients did well through 1999, but only a few have been successful since then. Markets will always be volatile, so your advisor must be willing and able to take action. The period from 1995 to 1999 was an exceptionally low volatility, high return stretch of years that made most advisors look smart. Since then, however, many market indexes have fallen 30% or more, and many advisors have severely damaged their clients’ future. This type of market activity will continue so you need to be able to trust your advisor to guide you through the next 20 years. As of today, you know all you need to know about your advisor. It’s time to fish or cut bait!

Published in Westlake Magazine – December 2001