June 14, 2024
Finance

Here Are 3 Times My Clients Ignored My Advice and Regretted It


FG Trade / iStock.com

FG Trade / iStock.com

Generally, most people who meet with a financial advisor do so to seek counsel for their finances. While the hope of a financial advisor is that the client will follow through on the guidance provided, not everyone takes the advice offered even if it has their best interests in mind.

GOBankingRates spoke to three financial advisors that each remember a time when a client did not listen to their advice and later regretted the consequences. Each moment shares the common thread of occurring during the COVID-19 pandemic when emotions were riding high and jeopardizing wealth and decision-making at the same time. Here are their stories.

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Allowing Emotions To Ruin a Retirement Plan

Adam Puff, financial advisor and founder at Haddonfield Financial Planning, had two clients, a couple, that were about two years away from retirement. The couple had a financial plan that was a bit tight, but workable since they had roughly $1 million in investments.

For many decades, Puff said they had been buy-and-hold, patient investors. Everything changed the moment COVID-19 hit.

Every day for two weeks straight, Puff was on the phone with these clients. He said they wanted to liquidate everything after the market had dropped 30%.

“We went over the retirement plan daily and I explained that at their age swings in the market like this would happen many more times before they passed away,” said Puff. “They were only two years out from retirement so we had time for the market to recover and they were also still saving and contributing to their 401(k). The plan we worked on for years was still on track and would have allowed them to retire on time.”

Ultimately, the couple decided to work alongside a new financial advisor. This advisor, Puff said, agreed to liquidate their portfolio and go completely to cash close to the very market bottom. Puff has since been told the couple stayed there in cash for longer than a year.

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Knowing what we know now about the COVID-19 market dip, which didn’t even last three months, Puff said their investments would have been worth more than where they started three months later and even more a year down the round. Making the decision not to stick to their plan cost them their retirement.

It is now four years post-COVID and two years after the couple should have been able to retire. Instead, Puff said these clients are still working and trying to grow their retirement accounts back to where they were so they’re able to retire.

Following an Impulse To Sell, Despite Being Told Not To

Glen Goland, CFP and senior wealth strategist at Arnerich Massena, previously had a client who wanted to sell all of her equity positions when the market dropped in the first month of COVID-19.

Despite both Goland, and a colleague who was a chief investment officer, encouraging her not to do it and to hold on to her positions, the client didn’t listen. She sold and according to Goland, never invested the cash back into the stock market.

“The decision she made that day had negative repercussions that her children and grandchildren will be feeling long after she is gone,” he said.

No Diversified Portfolio for Me!

Who else remembers when everyone became a stock trader during the pandemic? Bryan Schod, CFP and managing associate of Luttner Financial Group, said a potential client told him they didn’t want to invest in a diversified portfolio.

Their reason for making this decision? The client firmly believed that “Draft Kings was going to the moon.”

Schod said he and the client decided it wasn’t the best fit to work together. Over the next six months, Draft Kings’ stock plummeted.

“He reached back out and admitted he was wrong but said ‘once he makes his money back’ he’ll be ready to start financial planning,” said Schod. “I haven’t heard from him since.”

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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: Here Are 3 Times My Clients Ignored My Advice and Regretted It



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