Talking to Your Financial Advisor During Market Volatility
Benjamin Bender, CFP, CEPA, Partner and Wealth Advisor, with insights from Julie
Ragatz, PHD, CFP, Vice President, Financial Planning and Advisor Growth.
When market volatility occurs, it’s natural to feel anxious about your finances. Remember
market volatility is nothing new. If you’re working with a financial advisor, your financial plan is
most likely set up to weather any volatility, but you may want to touch base during any ups and
downs in the market. Here’s a list of questions that can help get the conversation started and it
begins with something you should be asking yourself.
Ask Yourself: How much risk am I comfortable with?
Times like these can make us want to pull back on the reigns and take a more conservative
approach with our money. But are you reacting to current volatility or have you experienced a
life change such as marriage/divorce or bought a new home? In the latter case, it may be time
to adjust. One great way to gauge your risk tolerance is to take a Risk Tolerance Quiz. If your
risk tolerance has changed, it’s time to reach out to your advisor. That way, they can adjust your
plans to align with your current outlook.
Ask Your Advisor: What is the current state of my plan?
Your advisor may start the conversation by sharing a report detailing how the market decline
has affected your portfolio and your plan. This is the time to dig in and really look at what’s going
on with your finances. Clarify how the situation could affect your plan in the near-term and
further in the future. Will you need to adjust your budget for living expenses? Or put off
retirement for a little while? Also, look for assets you’ve held for tax reasons that may have
imbalanced your portfolio. These assets could have declined enough where you can sell, or
losses may be available in other securities to help offset those gains.
Ask Your Advisor: How is my portfolio designed to get me through markets like
this one?
Diversification is important even when the markets are performing well, but it’s even more vital
in times of volatility. Your advisor can walk you through how your portfolio has been
built—ideally with a healthy mix of investment types that can help you weather the inherent ups
and downs of the market. Rebalancing your portfolio can also be helpful. By moving back to the
target allocation, you’re naturally buying assets that have gone down the most and selling those
that have done well. Keep in mind that sometimes your tax situation may make rebalancing less
desirable.
Ask Your Advisor: How do markets with rising interest rates and inflation differ
from other difficult markets?
Be sure to ask your advisor what they’ve included to help during rising rate environments and
times of inflation. Interest rate cycles are measured in decades, not in weeks or months, so it’s
important that your portfolio goes beyond just stocks and bonds. Some asset classes may
perform well during inflation. But there are pros and cons to hedging for inflation. When interest
rates increase, the difference between yields from different investments can widen. Moving
assets out of your checking or savings account and into an investing account may be a good
way to take advantage of higher rates.
Your Financial Advisor Is Here for You.
If you’re not working with an advisor, let us help you build a financial plan tailored to your current
needs and long-term goals.
Stroll magazine is not affiliated with CWM, LLC. Opinions expressed in the magazine may not
be representative of CWM, LLC. Investment advisory services offered through CWM, LLC, an
SEC Registered Investment Advisor. Carson Partners, a division of CWM, LLC, is a nationwide
partnership of advisors.