What does your client’s profession have to do with your investment advice to them? Plenty, according to Moshe Milevsky, finance professor and author of "Are You a Stock or a Bond?"
It’s a matter of considering what your clients do for a living as part of their human capital. The risk involved in your clients’ professions should be factored into their asset allocation design.
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In fact, for anyone who is not born into wealth, their careers are their most important assets. A 25-year-old’s human capital makes up about 99% of his or her personal balance sheet.
Only by around age 55 does an investment portfolio become of equal value.
Quantifying a person’s human capital is difficult. A good initial tool is the US Department of Labor’s salary ranges and unemployment levels for various careers.
Using this information, you can calculate a reasonable projection of the present value of current cash flows, just as you would with a stock or bond.
Most financial planners and advisors do not spend time on these aspects of their clients’ lives because it is not a revenue source for them.
Combining an asset-based fee arrangement with an hourly rate may be a solution. Offering career advice, job prospects, debt levels, savings plans, and whether a professional or graduate degree is advisable.
None of that advice currently fits within the traditional financial planning model.
Looking at a person’s investments in their careers or businesses and how those investments factor into a client’s personal financial picture should also be part of your service model.