Today’s chosen theme: ‘How to Evaluate a Financial Consultant’s Performance’. This friendly guide helps you see beyond flashy returns, understand true value, and confidently decide whether your consultant is helping you reach the goals that matter most.
Define Success Before You Measure It
Translate dreams into numbers: down payment in three years, retirement income of a specific amount, or college savings targets. Ask your consultant to convert each goal into time-bound milestones and progress percentages, so every review shows tangible movement, not vague optimism.
Choose the Right Yardsticks, Not Just Big Numbers
A diversified portfolio deserves a blended benchmark, not a single index. If you hold 60% stocks and 40% bonds, compare against a 60/40 benchmark, not the S&P 500 alone. Ask your consultant to document benchmark choices and what they reveal each quarter.
Judge the Plan, Not Only the Portfolio
Ask how often assumptions are updated—inflation, income, healthcare costs, education projections. A plan should evolve as life unfolds. Look for scenario analysis and clear action steps, not generic boilerplate. Tell us one planning question you want answered in your next review.
Performance Across Cycles: How Resilience Shows Up
Downturn playbook and drawdown control
Ask for a written downturn protocol: thresholds for rebalancing, opportunistic buys, and risk cuts. Review maximum drawdown versus the benchmark and your risk budget. A smaller, faster-recovering drawdown can indicate thoughtful risk management worth far more than headline returns.
Liquidity and the retirement bucket
For retirees, a cash and short-term bond buffer can prevent selling stocks at lows. Evaluate whether your consultant maintained spending reserves through volatility. One couple told us this alone helped them sleep during 2022’s rate shock—priceless performance in real life.
Stress-testing for what-ifs
Request scenario tests for inflation spikes, rate jumps, job loss, and healthcare surprises. Evaluate whether your plan stays viable under tough assumptions. Comment with a scenario you want modeled next—we’ll share a reader-sourced list of the most useful stress tests.
Value Beyond Returns: Taxes, Coordination, and Confidence
Tax-aware decisions that compound quietly
Evaluate asset location, tax-loss harvesting discipline, and charitable strategies like donor-advised funds or QCDs. Ask for year-by-year estimates of tax impact versus a passive baseline. If you want a tax-savings checklist, subscribe and tell us which topics matter most.
Coordination with your wider life
Great advice bridges silos—estate planning, insurance coverage, equity compensation, mortgages, and benefits. Ask how your consultant collaborates with your CPA and attorney. Share a quick story about a coordinated decision that saved you money or reduced stress this year.
Education that builds confidence
You should finish meetings clearer and calmer than you started. Evaluate whether your consultant explains tradeoffs, documents decisions, and equips you for the next choice. Tell us one concept you want demystified, and we’ll create a reader-friendly explainer next week.