When Should I Change My Asset Allocation?

July 13th, 2016 by B&C Financial Advisors

One of the most important decisions any investor makes is what their asset allocation should be. B&C Financial Advisors works with our clients to arrive at the appropriate asset allocation based on their circumstances and goals. We are often faced with the question from clients of whether to change their asset allocation and, if so, when they should change it. This is a question that seems simple at face value, but in reality is more complex and generally answered with “It depends…” First, we will revisit a brief overview of how B&C Financial Advisors works with our clients to arrive at an initial asset allocation, and then we will review a few common scenarios which may necessitate a change in asset allocation.

In our initial meetings with new clients, B&C asks clients several questions, both qualitative and quantitative. These questions help us understand the client’s mindset with respect to exposure to risk (the stock market), and what level of risk they are currently exposed to. Once we determine the goals, we then work to arrive at an asset allocation that is appropriate for their risk tolerance, risk capacity, and goals. B&C Financial Advisors’ main objective is to help the client “Invest in a good night’s sleep.” The appropriate asset allocation allows the client to remain invested through market volatility and take advantage of the rigor our asset allocation model provides in order to “buy low and sell high.”

However, from time to time one’s life circumstances may change. We will review three such circumstances: receiving a financial windfall, having children, and nearing retirement.

• A financial windfall is when one receives a large sum of money (relative to their net worth) they had not planned on receiving. In most cases this is an inheritance from a relative, but it may also be lottery winnings or an unexpected bonus from work. This increase in investable assets is the perfect time to set a meeting to reevaluate and discuss your financial plan, which may lead to a recommendation to increase or decrease the risk in your portfolio based on your new circumstances.
• The birth of a child is a life-changing event in a family’s life. They present new challenges that new parents may not have ever imagined. Even for parents with children, a new child presents additional challenges. One of the most important things on people’s minds is college education. B&C Financial Advisors works with clients facing this new life circumstance to evaluate their overall goals and work with them to adjust asset allocation if necessary.
• The most significant milestone in most people’s lives is the transition from working to retirement. In our experience, as people approach the last five-to-ten years before retirement, they begin to realize the magnitude of this shift in their life. We work with our clients to proactively approach this change and emphasize the importance of the reduction in risk in preparation for drawing on funds in retirement. This may necessitate a change to asset allocation.

B&C Financial Advisors is committed to high-touch client service, and we pride ourselves on being holistic financial planners. We realize one size does not fit all when it comes to your financial life. We spend a great deal of time understanding our clients and how to best serve them, including how they might approach a change to asset allocation. If you would like to discuss your current asset allocation, please call our office at 904-273-9850, or e-mail us at info@bandcfinancial.com to set up an appointment.