You pay your adviser, so he should follow your orders, right? But is that really in your best interests? If he says 'Yes!' to every order you give him, he's not doing you any favours, or really earning his keep. 'Yes' may be what you want to hear, but not what you need.
Remember the soaring tech market in early 2000? And you with your dull index trackers. Why can't your adviser pick something really good for a change, like internet stuff?
Finally, you get tired of paying the guy to just sit there twiddling his thumbs while charging a fee, so you tell him to dump your tracker and switch into a dotcom fund instead.
It would be easy for him to just say yes and do what you tell him. Or he could try a different tack and suggest gearing up in some other hot sector. Why settle for plain vanilla when you can jump on the New Economy bandwagon instead?
THE MADNESS OF MARKETS
Either way, you're probably doomed. Sure, he could simply roll over and do what you tell him. But if he actually cared about your long-term future, he should dig in his heels instead of just following your orders.
Why? Because, as the saying goes (and it's really true!), past performance won't be the same as the future, and hot stocks can freeze ice-cold at any moment.
So instead of following your orders, he should tell you about tulips and the madness of markets. That you should relax, keep cool and stay diversified. That won't be what you want to hear, and you'll hate him for saying it, but it would be the right thing for him to do for your future prosperity.
Of course, if you had switched to tech when the market crashed, you'd be feeling mighty sick, knowing it was the end of the stock market's world. You'd desperately want to protect yourself from further losses, so would probably order your adviser to dump the lot.
Again, the easy thing for him would be to agree and sell all your stocks (and, if he's a stockbroker, to pocket the commission).
Or he might take it one step further and suggest buying into a 'safe haven' like gold - or worse still, shorting the market to make a quick killing to make up for your losses.
Or he could annoy you again, refuse to take your orders and suggest what's really the right thing to do - which is to grin and bear it. Bear markets are painful, especially big ones. But the stock market's average returns include all the bear markets, too.
Of course, if you think a bear market is coming, then investing in cash and bonds may make sense. But if you're already invested in the stock market when one happens - staying calm and disciplined is the key to success.
DON'T WISH FOR A YES-MAN
When a share price plunges, it remains as just a 'paper loss' if you continue to hold it: you only make a real loss if you actually sell, and doing so at the bottom of a bear market spells disaster (and going short just makes it worse).
If you buy gold, you're investing in a volatile commodity that's subject to wild price gyrations and lags stocks badly over time. And in either case, you miss the big bounce when the market recovers.
So don't wish for a yes-man who takes your money, panders to your wishes and just follows your orders.
Fear and greed are the main market motivators and, notwithstanding the famous saying, the customer isn't always right (I often call the stock market 'The Great Humiliator', because the customer is usually wrong).
Good advice should focus on your long-term goals. Once you've agreed on your objectives, time horizons and needs for the future, your adviser should build you a diversified portfolio with the mix of assets most likely to achieve your goals.
And unless your goals change, the adviser's advice shouldn't drastically change from the initial recommendation either.
A good adviser shouldn't just follow your orders. He or she should help you stay disciplined to stick to the plan, not chase heat on the way up or allow you to panic when markets crash.
If your plans are, quite rightly, based on your long-term goals, then your asset allocation should only change if your goals do, or if a bear market is forming.
If you react emotionally to market movements, you need someone who will sometimes tell you 'no', not just follow your orders.
Ken Fisher is founder and chairman of Fisher Investments.
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