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The Advicer

My adviser managed to lose $1 million of my money in a year. I have a new adviser at the same company, but no one has provided a reason for my loss. What gives?

Have an issue with your financial adviser or looking for a new one? Email questions or concerns to [email protected].

The investment management company has never acknowledged the reason for my loss. Does this seem strange?

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Question: I have had a large investment management company managing my investments for the last three years, and the first adviser managed to lose $1 million the first year (I had $3 million when I started, and now I only have $2 million). He finally sent me a message saying he decided to try something else. The adviser I have now (from the same company) is doing a very good job and the ups and downs of the market are not causing large swings in my portfolio. The investment management company has never acknowledged the reason for my loss. Does this seem strange? Should I look into this further?

Answer: Losing money is never easy, and you’re right to question what happened and should look into it further — and likely may want to hire a new adviser (you can use this tool from SmartAsset to find an adviser who may meet your needs).

Have an issue with your financial adviser or looking for a new one? Email questions or concerns to [email protected].

First, note that typically no one adviser at a large investment company actually manages the investments singlehandedly. “They will ask you a series of questions to determine your risk tolerance and put you into a predetermined asset allocation based on your goals and the level of risk you are comfortable with,” says certified financial planner Jamie Lima at Woodson Wealth Management. Think of your situation this way: Rather than a single adviser doing the losing or gaining, most likely, “the company itself lost and gained on your behalf,” says Lima.?

The short answer to your question is that you have every right to demand an explanation and get possible restitution, says certified financial planner James Daniel at The Advisory Firm. You mention that your account is down 33% in three years and you haven’t been able to recoup anything — and that is probably not OK.?

“The only way this seems remotely possible is if during the pandemic drop in early 2020, you instructed your adviser to get you out at the March lows and you’ve remained in cash since. There hasn’t been a fund or managed account I’m aware of that had losses anywhere near those levels in the last few years,” says Daniel.

Other advisers say that maybe this kind of loss occurred because you instructed the adviser to take a ton of risk. Sometimes that just doesn’t pan out. In general, one could say that if you’re under 40 and won’t need your assets for retirement within 20 years, your losses may be within a normal expected range. “On the other hand, if you’re over 60 and depending upon your assets for living expenses within the next five years, a one third drop in assets is an indication that you may have been invested too aggressively,” says Nelson.?

Whatever happened, you need these questions answered: “Were you using this company’s wealth management platform? It seems very off that a rogue adviser could cause such a loss as they generally don’t have discretion over accounts. You should have been following a model portfolio designed for your risk tolerance,” says Daniel. And, to gain some insight, investigate what you were invested in and what the company’s corresponding model portfolio performance was. “If things seem off, you have every right to pursue some type of settlement,” Daniel adds.?

Get a second and third opinion from an adviser at another firm about what possibly could have happened before you contact a securities attorney to see if you have a case. “There are a few things here that caught my eye. First, being surprised that you lost 33% of your portfolio is worrisome. I would contact an additional adviser for a review,” says certified financial planner Ryan Townsley at Town Capital in Bel Air, Maryland.

Of course, if you have a legal problem that’s specific to investing, you’ll want to contact a securities lawyer to try and resolve the issue or get your money back. Securities attorneys can be helpful when you’ve lost money on an investment without being informed of the risks, if your adviser has limited your access to funds without informing you, or if your adviser has excessively traded your investments.

How to find a new financial adviser

Before signing on to work with a new adviser, you’ll want to be sure you interview a few candidates and ask them these 8 questions, among other things. When looking for a new adviser, it’s important to compare and contrast qualifications, expertise, fee structures and more.

As for finding specific individuals, experts recommend asking friends, family and coworkers for referrals. You can also use free online search tools to help vet professionals, like the CFP Board’s Let’s Make a Plan site or the National Association of Personal Financial Advisors Find An Advisor tool. And you can use this tool to find an adviser who may meet your needs.

Certified financial planner Brad Nelson at Point Loma Advisors says every adviser should start with a financial plan based upon their client’s financial goals, time horizons, risk capacity and risk tolerance. “A key component of a financial plan is an investment policy statement. It’s not legally required but anyone with a financial plan and an investment statement who is investing in financial markets should be informed that equity and bond markets are subject to substantial losses, without warning, several times over a several decade investment horizon,” says Nelson.

Have an issue with your financial adviser or looking for a new one? Email questions or concerns to [email protected].