In an article from FORTUNE, research was exposed that basically says that financial advisors are yes-men and -women. Having been in the advisor community for over a decade, I can assert that these findings fall in line with my observations throughout my career. While there are many reasons for this that range from advisors simply not knowing their business to advisors wanting to be well liked by their clients by avoiding confrontation, the bottom line is that advisors say 'yes' far too often.
In the most recent decline, many advisors found their clients' portfolios poorly positioned, following a trend of investors without advisor relationships that invested too heavily in equities. Obviously this led to a great deal of turnover for advisors as clients sought out more conservative advisors to hopefully 'avoid making the same mistake twice'. What has actually happened for most of these investors is they've traded one mistake for another.
When the market was moving ever higher, many clients thought their advisors were doing a great job. When the market tanked, their advisors were worthless. Those that have changed advisors are doing nothing more than finding another yes-man or -woman to make them feel comfortable. This is a problem - a big problem.
As the market rebounded, these investors that found another advisor to confirm their beliefs (even if the beliefs are wrong) re-positioned assets into more conservative asset classes. The result was a missed rebound that cost investors a great deal of money.
So, how good is your advisor? If he or she was fighting tooth and nail to keep you invested through the downturn and subsequent rebound, give them credit where credit is due. If he or she had you selling after the market collapse only to miss the rebound, fire your advisor today. The value of an advisor is not in making you feel good about what's going on, it's about helping you make smart decisions along the way.
When the market's hot, a good advisor will call clients and tell them that the market run-up presents an opportunity to rebalance. When the market is in free fall, a good advisor will help you to hang on. The very best advisors are those that educate, communicate, and stand tall in their convictions. A simple yes-man or -woman is nothing more than an expensive anti-depressant - they make you feel good, but ultimately don't work and cost a lot of money.



