Should you dump your adviser? Maybe, but not just because you lost money

Now those same advisers are having a lot less fun, working harder than ever trying to prove their integrity - and justify their fees - to clients who have lost big in the stock market’s two-year slide. The industry says it is changing in response, and the planner of the future may operate very differently than the easy-money adviser of the past.

The question for investors is more immediate: Is your guy (or gal) worth what you’re paying? Should you dump your adviser?

Don’t sever a helpful, good relationship simply because your accounts are worth less than they were two years ago. But there are ways to tell if you should keep the connection:

•Do the numbers. The bottom line remains the bottom line. If you are paying an adviser to invest for you, that adviser should earn more money for you (or lose less) than you could do on your own.

Calculate your average annual return for the past five years, three years, and year-to-date periods, or ask your adviser to calculate those returns for you. Be honest about the guidelines you gave your adviser - were you going for maximum growth, or cautious income? Then compare your returns with the ones you could have gotten in an inexpensive balanced Vanguard Investments fund.

•Analyze his behavior. Was your adviser accessible and calm during the worst of the meltdown? Recent market behavior has been highly unusual - that affords clients a real opportunity to see how their advisers behaved. If you couldn’t get through to your adviser during the worst, that would be grounds for finding another one.

•Check your priority status. Independent fee-only advisers must act as fiduciaries. That means they must put your needs above their own. Brokers don’t have to meet the same standards, and while they are supposed to recommend “suitable’’ investments, they may have a conflict of interest and recommend particular “suitable’’ investments that perform better for them, in terms of commissions, than they do for you.

•Make sure you have your own account. There are certainly talented and honest money managers who pool their clients’ funds and invest them; clients don’t have individual accounts. But that makes it hard to monitor the honesty of your adviser. It’s easier and cleaner to use an adviser who trades through an unaffiliated third-party brokerage, such as Charles Schwab or Fidelity Investments.

•Think about what else you get. Good financial advisers review the whole picture, including your tax and insurance situations. If you’re getting good comprehensive advice, stick with the plan, despite the 2008 and 2009 losses.

Linda Stern is a freelance writer. She can be reached at lindastern@aol.com.