Question No. 1: “As we get older and into retirement, should our investments get more conservative?”

History tells us that retirees cannot afford not to keep some portion of their portfolio in equities – unless a retiree has over-funded their retirement assets and has more than sufficient assets to provide enough income to last throughout retirement. A typical retirement period for most retirees will be a minimum of 30 years (and this will be longer the younger you were when your retired). Inflation is the No. 1 risk retirees face. Inflation is the cancer that will erode one’s ability to maintain his or her current lifestyle.

If a retiree ever moves to a 100 percent no-risk-of-principal investment portfolio, they will most likely be investing in bank or insurance products such as CDs, money markets, savings accounts, fixed annuities or other fixed instruments such as individual bonds (think T-bills). Fixed investments over time generally receive returns equal to inflation or just slightly above, and once you subtract taxes, a retiree will slowly but consistently lose the ability to maintain their lifestyle each and every year in retirement.

Over a short 15-year period, assuming only a modest 3 percent inflation rate, an investor will lose 47 percent of their ability to purchase the exact same goods and services they enjoy today.

If this does not sound like an urgent concern, could you live on less than 47 percent of your current income at any time? Remember, becoming more conservative does not mean abandoning equities; it could be as simple as trading in those small-cap stocks for high quality, dividend-paying large-cap stocks.

Question No. 2: “Will the stock market stay flat for years or go down once all the baby boomers enter retirement?”

I do not believe this will be the case. Even if a baby boomer does not need to invest in equities to maintain his or her lifestyle, many will choose to continue owning equities for many reasons. Some of the more common reasons for those who already have secure retirement incomes will be a desire to avoid paying taxes on capital gains previously earned on equities, a desire to leave the next generation a larger inheritance, or a desire to leave more money to their favorite charity. There will always be a reason for baby boomers to own equities. And, being part of a global economy, our financial futures will always depend on more than the actions of a single demographic.

– Mark La Spisa, Vermillion Financial Advisors

Your first part relates to how advisers seem to communicate more with their clients when markets goes up versus down. Personally, I do not know a true professional who hasn’t reached out to their clients on a regular and consistent basis over the last 20 years, throughout many different times, and especially when financial markets were in turmoil. Additionally, I have heard from several of my colleagues asking for feedback on many of the communications they were preparing to send to their clients, and restating the importance of existing communication in these challenging times.

Yes, there are bad apples in every industry, but rest assured, clients who are not served well when times are difficult will vote with their feet (and pocketbook). They will change professional advisers in the future. This in turn actually helps true professionals by getting rid of those in our industry that simply do not have the same commitment to clients or care to provide quality service.

I don’t know the nature of your relationship with your adviser. However, if you are correct in your experience, I would bet your relationship it is one based on a transaction here or there and not one based on a mutually beneficial relationship. Many clients’ No. 1 complaint is that they have given an adviser their money to invest and once invested they never heard from the adviser again. What clients fail to do is have a conversation about ongoing service and what one can expect in the future. When times are good, many clients have no desire to speak to their adviser, feeling that things are great and there is no need to change anything – better to leave it alone. When times are difficult or challenging, advisers tend to receive many more calls from their clients asking for reviews, advice or to simply be reassured. (Logistically, when a good adviser responds to an abundance of calls, he may or may not be left with enough time to prepare extra communication as well.)

In your second part, I sense you are frustrated and feel that all professional advisers take all the credit when financial times are good, but assume no blame when financial times are bad. Investing is not a blame or let-me-take-all-thecredit game. It is about solid financial solutions that meet a client’s long-term needs. Clients ask us all the time, “How can I invest my money to be able to retire with dignity throughout retirement?” In the last 20 years I have not taken on a single client that asked me to get them the largest return possible. The reason is most clients do not want to take that kind of risk; they want quality solutions for long-term planning and they want a high probability to meet these goals. If you are selecting your adviser based on the promise they will outperform the market or all other professionals, sooner or later you will be greatly disappointed. My recommendation is to find a new adviser or adjust your expectations.

– Mark La Spisa, Vermillion Financial Advisors