Americans need to prepare for when the booming market days are over, one financial advisor said, as uncertainty in the market grows following signals from the Federal Reserve about pulling back stimulus.
"We're coming off two years of a great market upbeat ... it can't last forever. Eventually we will have a downturn," Octavia Wealth's Luis Strohmeier recently shared with Yahoo Finance Live. "Am I ready for that and what do I need to do if that happens?"
Strohmeier encouraged Americans and their financial advisors to have a "pulse" on their financial plans and to measure that pulse every six months.
"What I would be most concerned is, "Am I able to retiree or carry on the same things I have been planning?'" he said.
Strohmeier also shared advice on finding the right financial advisor, which can be a daunting task with over 400,000 advisors in the U.S. alone.
“I think the most important thing is to classify [advisors] for clients,” Strohmeier said, noting that financial advisors can be categorized by their affiliation: captive, hybrid, and independent.
Captive advisors are professionals who commonly work for big institutions like Merrill Lynch or JPMorgan, while a hybrid advisor is “semi-independent," but also works on behalf of a company. Strohmeier said hybrid advisors have “the freedom to look for services and products outside of the manufacturer.”
Independent advisors like Strohmeier have a “duty to the client versus an employer,” he explained. Instead of representing larger financial institutions, they have an “open architecture” to work with clients as long as transparency is kept above board.
Strohmeier suggests that clients keep a “clear vision of what that relationship entails and what is being covered under that relationship,” before engaging with an independent advisor.
Knowing a prospective advisor’s credentials is paramount regardless of their affiliation. Conduct research into their areas of expertise like estate planning or asset management or who can best help navigate life changes like divorce or retirement.
“Whatever the case may be, you want that advisor to be well-educated having been in that field for many years and be able to understand that client,” he said.