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Q&A: When Should I Call My Financial Advisor?

There are a number of good reasons to call.

Question: You often advise people who are invested for the long term not to be anxious about market volatility, and yet you say that many clients still call you in a panic when the market drops. This causes me to wonder: Just when should anyone call his or her financial advisor? I thought of a few reasons, including winning the lottery, getting an inheritance and, of course, scheduling the annual review. I wouldn’t want to make a pest of myself by calling my advisor needlessly, so when is it reasonable to call?

Ric: First of all, no client is a pest! Call as often as you want!

To answer your question, “When should I call?,” I can think of three good reasons.

You’ve cited the most common reason that people — clients and non-clients alike — call us: A life-changing event has occurred. You mentioned winning the lottery or an inheritance. We have a few lottery winners among our clients, but inheritances are far more common. And there are many more life events that cause people to call us. Here are some of them:

  • Change in marital status. Getting married is a reason to call, but so is divorce (or even just marital problems that might lead to separation or divorce).
  • Change in job status. Few transitions have more financial implications. Whether or not the transition is planned, you must be able to continue paying your bills, maintain health insurance and handle retirement accounts. We can also help you evaluate new job offers, including bonuses and stock option plans.
  • Issues involving kids. We help clients establish college savings accounts, save and pay for weddings, and decide when to start allowances.
  • Births and deaths. Both have huge financial implications, and we can provide objective guidance during these intensely emotional events.
  • Relocation. We get calls when people are planning to buy or sell real estate — not only primary residences but also second homes and investment properties.
  • Starting, selling or closing businesses. We can help entrepreneurs and business owners, whose business interests and personal finances are often inextricably linked.

These are just some of the life events that prompt people to call us. Another good reason, which you referenced in your question, is to get advice if you’re nervous about the financial markets. While we all know that you shouldn’t panic while stock prices are falling or get greedy when they’re rising, that advice can be hard to apply when you’re driving home from work and hearing on the radio that the Dow just fell 300 points or that the euro has tumbled, interest rates have spiked or a terrorist attack has occurred.

Staying calm is hard to do because we are all emotional creatures. Thus, if you’re frightened, concerned or confused — or if you’re feeling greedy, opportunistic and excited — it’s time to call us. Let us verify that your gut reaction to whatever is happening is in your best interests. Should you sell? Should you buy? Should you diverge from your long-term investment strategy just this once?

We’d much rather have clients call us at such times than make emotional or rash decisions that don’t serve them well and might later be hard or impossible to turn around.

The value of the hand-holding we provide can be tremendous. So we welcome calls anytime you feel the need.

And here’s the third reason: You should call anytime you have any issue involving a dollar sign. For example, are you thinking about buying a car? We can tell you whether you should buy it or lease it and whether to finance it and how. Ditto for any other financial issue.

You don’t need to be an expert in personal finance; that’s our job. You just need to be an expert in you. Bring your expertise about yourself to us, and we’ll offer you the strategies that can help you achieve your dreams and goals.

Ric: All investors fear two things: watching the price rise after they sell and watching the price fall after they buy. We are uncomfortable with the idea of your owning individual stocks — especially when the stock is your employer.

There have been many horror stories involving people who had their life savings in the stock of the company where they worked.

At Enron, Tyco and other companies, workers had most or all of their 401(k) accounts invested in company stock — and they lost all their money (and their jobs) when the companies went broke.

Of course, there are legitimate reasons for workers to own some company stock. In your case, you have stock options — virtually free money. Also, some employers offer their stock to employees at a large discount.

Our advice, of course, is to consult with an independent, objective financial advisor.

I don’t know which company you work for and, therefore, don’t know what the prospects are for its stock performance. But this isn’t a conversation about security analysis; it’s a conversation about asset allocation, portfolio modeling and risk management.

Without more information about your situation, I can only advise you to consider the following approach: Invest no more than 3 percent of your assets into a given security. You’re already at 5 percent, and you might go to 10 percent. That may prove unwise.

Now, should you decide to sell the stock, I’m going to give you a second piece of advice. It’s just as important — and very hard to do. Ready?

After you sell the stock, don’t ever look at the price again.

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