My Investments Underperformed the Market - Should I Fire My Advisor?

We got a great question from a listener: "My investments didn't do as well in the last 12 months as the overall market has done. Should I be re-evaluating my advisor based on this lack of performance?" It’s a question a lot of people ask at some point in their investing lives. Let’s break it down on today’s episode.

WAYS TO CONNECT:

Website: https://www.johnchoi.net/

Phone: 847-247-0850

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Transcript

SPEAKER_00 0:00

This week on Middle Class Millionaire, we got a great listener question in about my investments not doing so well. What do I do? So let's dive into that conversation with John Choi, certified financial planner here on Middle Class Millionaire.

SPEAKER_01 0:18

Becoming a millionaire isn't just about growing your money, it's also about protecting and preserving your wealth by using the right financial strategies for your situation. Welcome. This is Middle Class Millionaire with John Choi. John has his Masters of Science and Financial Services and is a certified financial planner and the president of Epiphany Capital.

SPEAKER_00 0:42

Everybody, welcome into the podcast. Thanks for hanging out with John and I as we talk investing finance and retirement. John, again, as I said, is a certified financial planner and an instructor for the CFP program. And we got a great email question that came in, John, to your website, johnchoi.net. And it's interesting, right? You know, the market's, you know, been a little rough first quarter of 26 here with a lot of things going on. So uh interesting question here from folks. I'll I'll tee it up for you in just a second. But how are you doing? You doing right this week?

SPEAKER_02 1:09

I'm doing great. Thank you for asking. Absolutely. It's uh tax season, so it's a little uh crazy, but other than that, we're doing good.

SPEAKER_00 1:17

Well, the question basically was my investments hadn't done so great in the past little bit. Um, you know, even though the market's done pretty good over the last 12 months, I feel like my performance could have been better. Should I re-evaluate my advisor based on this? And so I think a lot of people find themselves in that feeling, John, of um, and I I guess probably one of the things we'll have to talk about is is obviously risk tolerance. Sometimes I think people get confused and they're like, hey, the market, uh, let's just say last year, the market ended up, you know, 15% and I only got you know eight. You know, what'd my advisor do wrong? And it's like, well, you know, what's your portfolio? How's your portfolio set? First of all, right? I mean, how much risk are you taking? That's that's like a hundred percent risk to get the entire return. So I guess you got to define what the market means, I suppose, as a first step, and and then benchmark that comparison from there.

SPEAKER_02 2:05

Yeah. Most people think about the Dow Jones. We're we're gonna have people a little bit more these days look at the SP. I'm looking at my phone right now, and it says year to date uh down 3.59%. That's including this morning, as of the uh it's a minute by minute play uh for the year.

SPEAKER_00 2:24

So people think it's been getting killed at the end of the year. It's been a rough right, it's been a rough quarter, but to your point, John, uh we're tight at the time we're taping this just yesterday at the beginning of the day, it was down six percent for the year, right? Year to date, right? So it changes pretty quickly, honestly.

SPEAKER_02 2:39

Yeah. So that's number one. But here's the thing that kind of irks me about the industry in general. Um, and as you know, the podcast is really designed for the general public and for other financial planners. And I'm gonna talk to both today. It's a it's a two-for-one. So for the clients or for the general public, if you're hiring somebody to watch your investments, that's that's great. But the fees that you are paying should not just be for taking care of your investments. That's one-sixth of what they should be of the services they should be providing to you. I've said this before, and I'll say it again here. True financial planning, the reason why we get paid the one percent is we touch general principles, insurance, investments, tax, retirement, and estate. We're supposed to do all this for our clients. Uh, I remember we were at this um uh it was like a cocktail party, I'll just say. And I was just kind of listening in on a conversation, and then you're there's these two other guys talking, and um, I didn't say anything, I was just listening in. It was very interesting. One guy goes, Yeah, I got like two million dollars in the market, my broker charges me one percent. That's 20 grand a year. I don't really see the value of this thing. What is he doing for$20,000? We have one annual review, he tells me how I did, yeah, he makes a couple of tweaks during the year, but it's like I really am not seeing this 20 grand of value. And the other guy goes, Oh my god, I was just thinking the same thing. And I agree, like I don't really see it. Yeah, my the market goes up and you know it's fine when the markets are good, but you know, the market's not good every year. And I'm just listening to this thing, and I didn't interject, I just let it go. But if I was feeling a little salty that day, I would have gone up to him and I would have said, guys, you're missing the point. If your broker, if your guy is charging you 1% and is only doing investment management for you, he's ripping you off. Right. It is that is that's not where we earn the one percent.

SPEAKER_00 4:52

And maybe that's what they were feeling, right? Feeling like because you know, that broker term versus like a financial planner or strategist, right? Maybe that's kind of what they were feeling, like is all I'm getting is investment advice or just kind of recapping what I did. To your point, it's a small portion of what should be being covered.

SPEAKER_02 5:08

Yeah, and it doesn't matter what your title is or what your designation is or whatever. It you can have whatever letter behind your name, but it's the way you act and how you can do business. Yeah. So I have people that don't have their CFPs, but they do uh financial planning. I'd rather take them on my team than somebody that says they're a CFP or a CHFC or whatever other designation you got, but it's business as usual and they only do investing. You're a CFP in name only, to be honest with you, at that point.

SPEAKER_00 5:37

So Gotcha. So in this person's question, John, does the 12-month timeline, I mean it's a year. I get it. A year is a long feels like a long time. Is that a worthwhile snapshot when thinking about a diversified portfolio, a long-term strategy?

SPEAKER_02 5:50

Well, I always say, you know, how long do you need to keep the money in the market? I mean, if you're 55 years old and you're gonna retire at 65, you know, what's what's the point of looking at it? Yeah, yeah. Like you, I mean, your your investment advisor should be looking at it, but you yourself, uh you you just really want to focus on what you can control, right?

SPEAKER_00 6:11

Yeah, you're stressing yourself, yeah.

SPEAKER_02 6:13

Yeah. And you know, us being in our 50s, we've we've heard that enough uh to say from our parents and from our peers to be like, you know, maybe they're right. Right. Yeah, no, for sure. And and here's the thing, here's the other thing. Look, you're not paying me for performance, okay? Uh I cannot guarantee my performance. Uh, I'm not Bertie Madoff, I'm not like any of these scam artists that said I could make you a profit in every year. Markets uh returns come from markets, not managers. And that's what people have to realize. So, my job for you to pay me 1% is to have a coordinated plan, which includes investments and it's very important. Sure. But that's not the only thing that we should be providing for that for that fee that you pay.

SPEAKER_00 6:57

Yeah, I mean, there's a lot of other pieces to it. I mean, we're focused on this person's question today, and we've talked about some of those other pieces before, but you're asking the wrong question. That's what I'm trying to say. Yeah, okay. I was gonna say, so so when is underperformance a red flag then? If this isn't it, when would that be? Or or how do we know?

SPEAKER_02 7:15

So at heart, I'm uh mostly a passive investor. I like low-cost passive investment. Okay. So uh, I mean, there's some good, nice strategies out there where you you're selling covered calls and and there's a couple of uh ETFs out there that have that. I think those are interesting to look at. I think it's good for income. But for the most part, I I I like the you know, just regular old diversified, get rich, slow, boring type of portfolios. You know what I mean? Right. So and you alluded to the fact uh of this before is if you're in a 50-50 portfolio, 50% bonds, 50% um fixed income, I I would want to be uh if the SP went up 10%, I'd want 5% from my uh equity port portion, and then whatever the bond market went up, let's say went up 4%, I'd want 2% from there, which is half of that. I'd want an overall 7%. I'd want to keep up with the markets, right? The only time you're gonna really underperform the market is if you're having active investing. And so that doesn't fit my philosophy. So I and I don't I don't invest that way, I don't take any clients that way. So that's not really a conversation that we have.

SPEAKER_00 8:25

But I think that's where people get tripped up, though, right? To my point earlier. So we see the last three years, John, the market's been, you know, 15, 17, 18, 20, you know, we've had really good years. And so somebody's like, hey, why am I not getting more? And again, it's like your your tolerance, your risk portfolio, how you structured it, you know, all those theses. If you feel like you need to change that, then you need to be having a conversation with your advisor. But don't just assume that's the advisor's fault, I guess was my point.

SPEAKER_02 8:49

Well, if you're a hundred percent in D S P 500, then yes, those are getting, but you're not. Right. You're not. So you should be you look, I want market returns for market risk. If I take half the market risk, I want half the market performance. Seems pretty simple to think about it that way, right? Yeah. So, but again, there might be some trouble is if you're doing some active management, if you're just stock picking, market timing, you're doing you know, just off the reservation stuff, then who knows? You could crush the market or you could really underperform the market. But again, I prefer the I'll take market returns for market risk type of scenario because the market's really gotten over the last 100 years about 10% a year total return. Right.

SPEAKER_00 9:35

Yeah, and I'm okay with that. And don't forget timeline in this, right? We don't know how old this person is, but I mean, obviously, John, you and I are over 50, so our mindsets are starting to change. If you see, you know, at 65, how much risk you're taking is totally different than how much you want to take at 40 or 45, right? So that plays into it too. Oh, yeah, absolutely.

SPEAKER_02 9:56

And and you know, in the next podcast, I think we're gonna talk about sources of income for retirement. So I don't know if that's a good segue into next week's podcast. Yeah, yeah.

SPEAKER_00 10:05

So but at the end of the day, right? Yeah, I mean, at the end of the day, you you kind of said it earlier, the market shouldn't be your benchmark, right? The strategy, the plan should be the benchmark.

SPEAKER_02 10:13

Yeah, and your risk tolerance is your benchmark, and and again, it's percentage of market that you're in should be your benchmark.

SPEAKER_00 10:20

Yeah, if your portfolio is doing what it was designed to do, then the scorecard, I guess for lack of a better term, that's the one that should matter, right? So, you know, get a strategy, right? That's the whole point, is to your point, you know, it's not sexy. Uh, you know, get rich slow, but it's worked for a long time, right? Uh so if you got some questions, need some help, you know, again, this is middle class millionaire, reach out to John. Whether you're a CFP and wanting to figure out how to, you know, better communicate with your clients, or you know, you're an end user, a client, and you need some help or you got some questions, reach out to John, of course, at johnchoy.net. That's johnchoi.net. You can book a call online, check the show descriptions, we'll have stuff in there, or you can call 847-247-0850, and we'll have all that information in there. But again, don't forget to subscribe to us on Apple or Spotify or whatever app you enjoy using. And with John's Segway, we'll be back with a c in a couple of weeks. And uh, yeah, I think we're talking about the the hard part of retirement people don't warn you about, so which is probably depending. So we'll get into that on the next episode. Thanks for hanging out, John. Thank you, Mark. Take care. Guys, have a great week. We'll see you next time here on Middle Class Millionaire.

SPEAKER_01 11:28

Epiphany Capital is a registered investment advisor, RIA, located in the state of Illinois. Epiphany Capital provides investment advisory and related services for clients nationally. Epiphany Capital will maintain all applicable registration and licenses as required by various states in which Epiphany Capital conducts business. That's applicable. Epiphany Capital renders individualized responses to persons in a particular state only after complying with all regulatory requirements or pursuant to an applicable state exemption or exclusion.