Questions For Financial Advisor

OCEAN CITY – The recession may be over, but the recovery, like the market turbulence that preceded it, continues to surprise investors — and to present opportunities. When you discuss your portfolio with your financial advisor, these five questions can help you assess how to move forward.

1. Am I taking too much risk — or not enough? Recent market volatility has caused many people to lower their appetite for risk and reduce their exposure to riskier assets. Last year their concerns may have been warranted. But now, as the economy strengthens, investors may want to consider whether their conservative stance is really still in line with their feelings about future and current market trends, says Ash Rajan, Director, Investment Management & Guidance for Merrill Lynch Global Wealth Management. Given the improving markets, it may be time to re-evaluate your risk tolerance and asset allocations to avoid missing out on emerging growth opportunities. In times of market volatility, it’s particularly important to review your portfolio with your financial advisor at least twice a year.

2. What can I do to get my retirement savings back on track after the downturn? Asking the question is the first step. "Whether you are transitioning into retirement or already there, you need to discuss exactly how your retirement plan has been affected by today’s extraordinary conditions and to consider how to close any gaps between your projected income and expenses," says Aimee DeCamillo, head of Personal Retirement for Merrill Lynch. Set up the time now and on a regular basis to have an in-depth talk with your financial advisor about where you stand.

3. Is my portfolio truly diversified or should I consider other sectors and asset classes? Asset allocation has long been the hallmark of prudent investing. And that was borne out in the latest downturn, when widely diversified portfolios tended to have relatively lesser downsides than those that held concentrated positions in only a few asset classes or sectors. Review your allocation to help make sure you’re protected in the event of another sudden, high-risk market event.

4. How can I shift my portfolio to be prepared for unexpected cash flow needs? Don’t be caught with your assets tied up in the event of a sudden crisis. "If most investments in your portfolio are illiquid — hedge funds, private equity and the like — and you need the money this year for a major expense or emergency, you may have to sell those investments at the worst possible times," says Rajan. Better to consider your liquidity needs ahead of time and make sure you’re leaving additional room for unanticipated events, such as a family member’s illness or job loss — or a child’s wedding or a business opportunity.

5. Is the timing right to begin planning my philanthropic legacy? Establishing a family legacy may sound daunting, but it can actually begin quite simply: by exploring which charitable organizations you feel most strongly about and discussing your goals with your financial advisor. There are numerous ways to make your portfolio reflect the values you cherish, be they energy conservation, education or the eradication of poverty. Relatively basic donor-advised funds, charitable remainder trusts or more ambitious family foundations can all make a difference. You may also want to work with a tax professional as you devise your philanthropic strategy. 

(A Merrill Lynch Wealth Management Advisor. She can be reached at 410-213-8520.)