Wealth Allocation Framework
As part of our planning process, we put things in context to understand and determine a thoughtful and effective wealth strategy. The Wealth Allocation Framework considers three dimensions of risk that exist and the blend affects your ability to achieve your life goals. The blend of resources in each category is unique for your unique circumstances and appetite for risk.
Have you protected your basic standard of living?
- Typical Strategy: Preserve lifestyle, liquidity & safety. Reduce downside risk, willing to accept below-market returns in return for less volatility. High safety or risk transfer strategies.
- Typical Risks: Inflation risk, loss of earning power (loss of job, disability, death), healthcare risk (potential human and financial costs as a result of catastrophic illness), tax risk, litigation risk
Have you adequately diversified to maintain/achieve your lifestyle?
- Typical Strategy: Balance risk and return through asset allocation from a broadly diversified portfolio (stock, bond, cash, low correlating assets)
- Typical Risks: Portfolio volatility, shocks to the financial markets and economy, geopolitical conditions, interest rate fluctuations, Currency volatility (in the case of foreign investments), tax risks (due to changes in tax laws)
Are you exposed to high-risk, high-reward aspirational assets?
- Typical Strategy: Business ownership concentration, stock concentration and stock options, real estate concentration, speculative hedge fund and private equity concentration
- Typical Risks: Increased volatility due to asset concentration, loss of principal, loss of liquidity