“Not so fast” is something that I often say to those clients who are ‘raring to go’ before they fully understand what the investment option really is. I had one such client four years ago. We met a few times, and I talked about diversification and rebalancing. I discussed the woes of market timing and stock picking. It seemed as though the client was tracking with me the entire time. Until 2008.

These folks had been to one seminar, but after that we did not follow up to make sure they had read our take-home material. I did not interview them using our investor inventory questions. I never really dug deep to determine if these folks were on truly board with the philosophy prior to allowing them to sign the documents and move their retirement funds over.

When the market started to drop and their statements began to reflect the decline, our investment policy dictated that we rebalance the fund, and our education efforts doubled. We reminded folks that market declines happen and that in the short run rebalancing is the wisest course of action. Rebalancing is the task of selling the portion of the portfolio that has grown and buying the portion that has shrunk relative to the other portions. In 2008 and early 2009, that meant selling fixed income and buying more stocks. Today, after our funds have fully rebounded, it’s easy to “feel” like buying stocks was a good idea. But back then, while stocks were dropping in price with no end in sight, it “felt” to many like they were doing the wrong thing.

Well, these folks were feeling exactly that way, like buying stocks was not what they should have been doing. We had several meetings over the rest of 2009. They wanted me to track the volatility index and make decisions based on predictions about the next few months and years. They did not believe that free markets work to set prices. Ultimately they did not believe that capitalism creates wealth for those who own their piece. What we did agree on was that we needed to part ways. They moved their accounts, sold and went to an annuity where they would have some guarantees (watch for a post on those guarantees).

So here is my take home message: Being a successful investor does include trusting and liking your advisor/coach. I think these components are vital to having the very best investor experience possible. But more important than liking or even trusting your advisor is sharing the same investment philosophy. In essence, why do I trust him? Do we believe the same things?

My commitment to you, my clients and those who are considering our firm, is that we will make sure of the philosophy match BEFORE we move forward, rather than finding out the contrary afterwards.

If you are unsure if our philosophy matches up with yours or if you are frustrated with your current advisor, give us a call. Our system can help you evaluate your investment philosophy and determine if you are on the right track. Financial Planning is not about selling and buying products, it’s about building wealth. The best known wealth generation tool known to mankind is the stock market—but only if you use it on its terms. Don’t let it or its marketing machine use you.