Creating a Goal-Based Wealth Allocation Process

Abstract

The fundamental principle of creating a meaningful wealth strategy for an individual is that it is about achieving their financial goals regardless of the future performance of financial markets. The article offers a process to create such a strategy based on the lessons learned by the authors over the past two decades—what matters are taxes, cash flows, asset location, setting a minimum wealth level, understanding multiple risks, keeping it simple, and factoring in emotions. The integrated framework presented encompasses three objectives: 1) Protect one’s minimum wealth level, 2) Maximize the probability of maintaining one’s standard of living, and 3) Provide an opportunity to reach for “aspirational” goals. The authors conclude with a seven-step process for creating a comprehensive, goal-based wealth allocation designed to balance all three objectives based on an individual’s priorities, assets, and liabilities.

TOPICS: Wealth management, in wealth management, portfolio construction