“I lost more than 21% in 2022.” I am 72 years old, retired and have worked with my financial advisor for six years. I know the markets are down, but this massive loss is worrying. Shouldn’t my advisor have had a plan to manage risk at my age?

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Question: I have been with a financial advisor for 5-6 years. My average annual return is only 4.7%. I’m down 21% in 2022 through October 21. I’m 72 and retired for 5 years, but I haven’t had to dip into retirement accounts. My complaint is that there seemed to be no plan or gradual decrease in risk tolerance for the portfolio, so I lost over 21% in 2022. What should I do?

Answer: If you’ve been retired for five years and haven’t had to take a distribution, then you must be in pretty solid shape, so we’d like to congratulate you on that. And you’re right to raise the red flag about what’s going on with your advisor. (Also looking for a new financial advisor? This tool can help you find an advisor who might meet your needs.)

What immediately stands out here seems to be a lack of clear communication between you and your advisor. Plus, you shouldn’t be afraid to hold your advisor to account. “The biggest question I have is why wasn’t this part of the retirement plan or why was it never mentioned in the annual reviews?” says Certified Financial Planner Ryan Townsley of Town Capital.

In general, a 20% loss for a retiree may suggest that you have invested too aggressively. But it is also true that this year has been particularly difficult for investors, which your adviser should have explained to you. (Looking for a new financial advisor? This tool can help you find an advisor who might meet your needs.)

“If an investment review had taken place this year, your adviser would have hopefully explained that 2022 has been one of the worst years for bonds since the 1970s. on bond prices, which [generally] move inversely to changes in interest rates, so even though your advisor gradually reduced the risk of the portfolio over time, this was not communicated to you and the bond index fell by more than 15% until the end October 2022,” says Certified Financial Planner Eric Presogna of One Up Financial.

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In other words, your adviser may have messed up on reducing your risk – and he may not have had a plan at all – although he may also have had a plan that been beaten down by the difficult economic climate. “Bonds can sometimes provide stability when stock markets crash, but in 2022 bond prices fell along with stocks, which is an unusual event,” Pritchard says.

“The five-year numbers (4.7%) and year-to-date (-21%) are reasonably consistent with a broadly diversified balanced portfolio. This is especially true if the investor’s portfolio includes a significant international component due to recent US dollar strength,” says Certified Financial Planner James Hemphill of TGS Financial.

Another thing to consider for perspective is that the Vanguard Target Retirement 2020 (VTWNX) fund ticker has returned 3.14% over the past five years and is down 16.25% since the start of the market. year, at the time of writing this article. “This fund was designed for people who were retiring around the same time as you and currently has a 42% exposure to equities. It looks like your portfolio would probably be closer to a 60% equity exposure, which is pretty typical for someone in your position,” says Terrance Hutchins, Certified Financial Planner at Logos Financial Group.

But because your advisor doesn’t seem to have discussed what, if any, his plan was for you, you don’t know, and that’s a problem. Discuss your concerns with your advisor, and if you feel the relationship is broken and your advisor isn’t doing the right thing for you, move on. “There’s no obligation to chat with someone you’ve lost trust,” says Certified Financial Planner Justin Pritchard at Approach Financial. (Looking for a new financial advisor? This tool can help you find an advisor who might meet your needs.)

Experts agree that good advisors check in with their clients and educate them on what happened throughout the year. “This year’s market chaos should come as no surprise to you on your quarterly statement,” says Pritchard.

In addition to discussing your concerns directly with your advisor, you should ask yourself what your performance expectations are. “Have you asked your advisor for a reasonable forecast of the variability of gains and losses for the specific portfolio they are using?” Is the performance you have experienced in the area of ​​anticipated or expected results? says Matthew Kelley, Certified Financial Planner at Gold Medal Waters.

Beyond an investment plan, hopefully you can work with an advisor to understand and clearly articulate the outcomes you want in life to determine the amount of money needed. “It will help you build a better framework for a proper investment portfolio and then you can focus on things you can control like taking your RMDs right, planning and tax strategies,” says Kelley. (Looking for a new financial advisor? This tool can help you find an advisor who might meet your needs.)

Do you have a problem with your financial advisor or are you looking for a new one? Email picks@marketwatch.com.

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