Institutional clients look for the best returns they can get based on a specific level of risk. That’s what MPT is all about.
 
Individual and family clients have other factors to consider. The effect of taxes on their returns, future cash flows emanating from anticipated income sources, trust distributions, the exercise of company options, an IPO, the sale of a business, or a future inheritance, transaction costs and fees.
 
None of this negates the value of MPT. It does change the way you utilize and apply it.
Enter goals-based asset allocation. Jean L.P. Brunel is the father of the goals-based approach. Others, including Ashvin Chhabra, have pioneered their own goals-based models. But all seem to agree on the following:
  • The industry is in a revolutionary, transitional phase.
  • Individual investors and families of wealth are driving this change, aided by accelerating technological advances.
  • Mean-variance should not be abandoned within a goals-based approach.
  • Advisors who do not change and adapt to the new model will be left in the dust.
  • The goals-based  approach puts the needs of the client first without compromising sound investment management philosophies.
  • The objective is to integrate the goals-based approach with the principles of MPT in a way that is optimal for the client.
Once you’ve identified your client’s goals, you have to prioritize them. The next step is to clarify time horizons needed to accomplish each goal. It is at this point that MPT adds significant value by optimizing across the various goal buckets to facilitate optimal integration.
 
Other issues in this conversation need dissecting and require deeper treatment, such as:
  • How to lead clients in a goals-identification conversation
  • Goals-based asset allocation and portfolio optimization
  • Asset location considerations
  • The path dependency of individuals towards multiple goals and multiple types of goals
  • The multiplication of risks that accompany multiple goals
  • Creating a cash outflow and inflow strategy that is simple and straightforward
  • But the following steps must be accomplished first:
  • Recognizing the need to make the shift to a goals-based approach
  • Eliminating or creating a model for managing any biases you might have, either generational, behavioral, or psychological
  • Developing a reliable and yet flexible process by which to introduce these topics in conversation with your clients
  • Completely detaching yourself from standard models which are designed to address the primary needs of most clients within a specific group without sufficiently customizing to meet the specific needs of any one client
Technology has, throughout the history of the industry, enabled smaller asset level clients to adopt investment strategies and opportunities formerly reserved for institutional accounts.
 
What we have to do at this point is to recognize the magnitude of the shift and make a decision to reinvent ourselves to meet the new demand. Basic philosophies—like MPT—cannot and should not be abandoned. But their application should be honed to meet the changing needs of the marketplace.

 

 

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With classes approved for over a decade by the CFP Board, IWI, and NASBA, Advisors4Advisors CE classes are an optimal knowledge stream for CFP®, CIMA®, CPA, CPA/PFS®, CFA®, and other practitioners. It's not a grab bag of speakers willing to sponsor CE content. Nor is it a one-man CE course. It's a group of subject matter experts with amazing communication skills and a history of thought leadership that, together, give advisors a well-rounded knowledge system for running a professional practice ethically and intelligently.

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A4A CE classes for financial professionals began in October 2008, the week Lehman Bros. collapsed. Initially billed as “The Financial Crisis Webinar Series,” A4A connects advisors with authoritative sources on investing, tax, and financial planning, chosen by A4A Editor Andrew Gluck, a veteran financial reporter. A4A members get a stream of CE classes for an advisor who: 

  • holds a CFP®, CIMA®, CPA, CPA/PFS, CFA or other designation requiring CE annually 
  • values monthly CE classes by Fritz Meyer, Craig Israelsen, Bob Keebler, Frank Murtha, or Andrew Gluck
  • diversifies a core of client portfolios in low-expense funds
  • invests based on MPT and economic fundamentals
  • advises on tax and financial planning as well as investing
  • needs financial counseling skills
  • wants the Certified Financial Counselor™ designation 
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  • insists on objective evidenced-based tax and investment planning analysis
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I’ve subscribed to A4A since its inception, and always find it intellectually stimulating and on point. It’s one of the few CE solutions out there that doesn’t waste my time by pushing product or talking down to me.

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Pete Deacon, CPA, CFP®
A4A has had a profound effect on my business. Since 2009, I’ve relied on the consistent messaging and updates to run my business successfully. Being able to present the information from Bob, Fritz, and Craig's ongoing CE webinars has been a significant benefit.

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I’ve been attending A4A many years because the CE classes are outstanding, and my time is valuable. Though I have over 35 years of experience, I’m always learning something new on A4A. I attend fewer conferences now because the CE is generally not advanced. If you want to learn from the best, in a faster, easier, and less expensive way, I highly recommend A4A.

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