To Change or Not to Change? That is the Question.

Jim Worden |

Recently, our family was at a holiday event, and we bumped into some old friends from many years ago. After some minutes of catching up, the economy and the markets somehow became the topic of choice. Either due to their portfolio returns or due to the wide dispersion of returns experienced by different investors, my friend expressed displeasure about where he was with his current advisor and openly expressed the idea of looking for another advisor.

Many investors look to make changes around the new year. Some of this is strategic. There could be tax management, rebalancing, changes in circumstances, etc. But often when people are making new resolutions for a new year, investors may feel like they must change something in their portfolio or replace their advisor, like my upset friend.

Depending on how their money is being managed and whether they are moving toward their investment goals, they may need to make some changes. However, there may be times when everything is functioning just as it should behind the scenes and no changes are necessary – asset managers and advisors doing necessary trading to minimize taxes or rebalance positions or making adjustments based on economic, market, or earnings data.

So how is an investor to know when a change is necessary or not?

As one who has managed several different types of investment strategies in good and bad markets on behalf of thousands of clients for many years, here are some thoughts on when an investor should or should not make changes.


Performance can be a slippery slope. Not all investment styles or strategies work at the same time. Investors who are invested only in “growth” stocks or only in “value” stocks will inevitably be disappointed at some point as styles come in and out of favor based on economic and market cycles. One solution to this is investing in a diversified portfolio that includes different asset classes and different investment styles. Another solution is to invest in such a way that adapts to markets and economic conditions. A covered call strategy investing in a handful of tech stocks may not be a great recipe for competitive returns over a long period. A strategy investing in very long dated Treasuries when rates are near all-times lows is also a bad idea for most investors.

Another misconception on performance is that all active management is bad because it is more expensive than passive management. Or all passive management is bad because one can only match, not beat, the market. There is some truth that many active managers underperform their benchmark, but this is not true of all asset classes or styles over all time frames. As one who regularly screens through and scores more than 25,000 mutual funds and ETFs, I can tell you that often combining active and passive funds can work very well for portfolios.

Investors should be looking at year to year performance and not day to day performance and see if they are consistently coming up short relative to an appropriate benchmark through both up and down markets. If investors are trailing their goal by more than 4-5% per year for multiple years, this is a good indication that something is not right and a meeting with their advisor is in order. It’s possible that risk tolerance, financial planning goals, and return expectations are not in sync. It’s also possible that the investor is not in the right strategy.


Another reason why an investor may want to make changes is if there is little or unclear communication with their advisor. Investors should always know what their advisor or asset manager is doing for them. Over the many years that I have reviewed portfolios, I have seen some portfolios that made absolutely no sense based on economic or market conditions or that could not possibly provide sustainable risk-adjusted returns for their time horizon. I have often wondered if some investors knew what they were invested in and what the risks were. 

Regular communications between the investor and the advisor can ensure they are both on the same page and allow the investor’s best interest to be aligned with the advisor’s compensation. Discussions during both good and bad market environments can greatly help investors when emotions may be running high or if there is some distress or discomfort. Everything should point to the investor’s financial plan or investment goals. If the investor has circumstances or events that would change their financial plan or investment goals, this could directly impact their investments and their overall asset allocation.


To change or not to change a portfolio or an advisor can largely be traced back to the relationship with the advisor and what types of communication is or is not happening. Performance and strategy can most often be easily corrected and adjusted. If an advisor is not trustworthy, not transparent, or not wishing to make any contact with the investor, the investor may wish to look to change the advisor, even if the performance has recently been good.

If performance has been bad, it’s quite possible that the performance has been similar to an appropriate benchmark and may need no changing. This certainly doesn’t feel good, and it is a hard pill to swallow emotionally, but it’s important to remember that this is most often temporary. Bad markets don’t last forever and, over long time horizons, happen less often than good markets. If performance is consistently below an appropriate benchmark, there may be a disconnect between the investor and the advisor. Regardless of the reason, a meeting and a renewed communication plan with the advisor will most likely be able to resolve the performance issue.

We wish each of you a safe and very happy holiday season!









Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through WCG Wealth Advisors, a registered investment advisor. WCG Wealth Advisors and The Wealth Consulting Group are separate entities from LPL Financial.

Jim Worden offers investment advice through WCG Wealth Advisors, LLC a Registered Investment Advisor doing business as The Wealth Consulting Group. Jim is not affiliated with LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All performance referenced is historical and is no guarantee for future results. All indices are unmanaged and may not be invested into directly.