There are many ways to make the journey from New York to San Francisco – plane, car, bike, train or boat – and many different stops along the way to consider. How you travel and the path you take depends on your goals for the trip and how you want to experience the journey. No matter how you choose to travel, you want the trip to be cost-effective, you want to avoid unnecessary risk, and you want to reach your destination intact.
The PLANNINGS and the MANAGEMENTS as I call them, are all interrelated and you need to do the same basic study for each. Every investor makes four critical policy decisions that drive their investment experience: The client and the adviser must be in sync on these
Active Risk Policy
Most investors are familiar with these concepts. However, few investors or their advisers make all four explicitly, systematically, and consistently in both their financial plans and their investment portfolios. This creates unintended gaps or disconnections between what they plan and what they do. They may form an ideal plan of action then end up not doing what they planned, reducing clarity and confidence in pursuing their goals.
Our process helps investors to make all four decisions explicit, systematic, and consistent in both their financial plans and their investment strategies. We help investors understand the impact of all four decisions on their life plans, so they can make these decisions explicitly and appropriately for their situations, thereby raising their comfort and confidence in knowing that they will stay on track. In short, through our framework, we help investors to do the right things and to do things right.
We created our goals-based wealth management platform to give a comprehensive platform to build our clients financial lives in a simple comprehensive manner. We don’t measure our success in returns or account values, but in fulfillment — measured one client at a time. Fulfillment means we work to accomplish the defined goals.
Building the Satellite Estate
The satellite part of your estate is the portion of the estate where risk can be assumed at a greater level. This is true because no matter what happens in the satellite portion of the estate the foundation and core parts of the estate are not disrupted.
This does not mean you go outside of your risk boundaries, what it means is you can extend them and if a negative event occurs you can absorb it without financial hardship. This will allow you to weather a storm and make time your ally and not a foe.
For most people the satellite portion of the estate is where they need the most assistance. This is because most people do not have the time to study and implement the tasks necessary to be successful in managing this portion of the estate, and attention needs to be given and a rigorous discipline that most do not posses must be followed to have good results.
Here we have the alternatives, tax free income, and other exotic investments that you can have fun learning about and hope they add to reaching your retirement goals earlier then you may have initially planned.
Here is the list of steps I use and have found to be a good discipline when managing other people’s money in the satellite portion of their estate.
I establish the risk capacity and risk tolerance the client can emotionally handle. I use the Stress test software for this assessment that is similar to that which I use for the portfolio assessment
I update this assessment periodically based on conversations with and life changing events of the client
I do a current risk assessment of the client current portfolio state. I determine if the current state of the portfolio and the risk the client is comfortable match.
I then assess if the current portfolio is in sync with the current business and market cycles. My thoughts are based on the flowing business cycles and Market Rhythms.
Make decisions, re balance current state portfolio
Periodic monitoring, assessment and re balance
The business Cycle has 6 phases
A portfolio can be divided into 13 asset classes. Based on the risk assessment of the individual base weights are assigned to the classes. The classes are: Large Growth Equity, Large Value Equity, Mid Cap Equity, Small Cap Equity, International Equity, Emerging Market Equity, Real Estate, Government Debt Long Term, Government Debt Intermediate term, Government Debt Short Term, Corporate Debt, Corporate High Yield Debt, International Debt
The Equity Market has 11 base sectors and the weighing for each sector in a business cycle is proportion of the overall portfolio