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Goals-Based Wealth Management: An Integrated and Practical Approach to Changing the Structure of Wealth Advisory Practices

Book Description

Take a more active role in strategic asset allocation

Goals-Based Wealth Management is a manual for protecting and growing client wealth in a way that changes both the services and profitability of the firm. Written by a 35-year veteran of international wealth education and analysis, this informative guide explains a new approach to wealth management that allows individuals to take on a more active role in the allocation of their assets. Coverage includes a detailed examination of the goals-based approach, including what works and what needs to be revisited, and a clear, understandable model that allows advisors to help individuals to navigate complex processes. The companion website offers ancillary readings, practice management checklists, and assessments that help readers secure a deep understanding of the key ideas that make goals-based wealth management work.

The goals-based wealth management approach was pioneered in 2002, but has seen a slow evolution and only modest refinements largely due to a lack of wide-scale adoption. This book takes the first steps toward finalizing the approach, by delineating the effective and ineffective aspects of traditional approaches, and proposing changes that could bring better value to practitioners and their clients.

  • Understand the challenges faced by the affluent and wealthy

  • Examine strategic asset allocation and investment policy formulation

  • Learn a model for dealing with the asset allocation process

  • Learn why the structure of the typical advisory firm needs to change

  • High-net-worth individuals face very specific challenges. Goals-Based Wealth Management focuses on how those challenges can be overcome while adhering to their goals, incorporating constraints, and working within the individual's frame of reference to drive strategic allocation of their financial assets.

    Table of Contents

    1. Title Page
    2. Copyright
    3. Dedication
    4. Acknowledgments
    5. Preface
    6. Introduction
    7. Part One: The Integrated Wealth Management Challenge
      1. Chapter 1: Many Interrelated Disciplines
        1. Multiple Sources of Capital
        2. Expanding on the Corporate Analogy
        3. Multiple Interactions
        4. Educating Future Generations and Wealth Transfers
        5. The Make or Buy Decision
        6. The Creation of a Wisdom Council
        7. Summary and Conclusions
      2. Chapter 2: An Example of a Crucial Interaction: Tax-Efficiency
        1. The Tax Bite and Its Impact on Compound Returns
        2. A New Analysis of Capital Losses
        3. An Expanded Definition of Active Management
        4. Applicability to Both Asset and Security Decisions
        5. Abandoning the Murky Middle: The Barbell Portfolio
        6. The Potential Role and Limits of Derivative Strategies
        7. Summary and Conclusions
      3. Chapter 3: The Need for a Financial Interpreter: (Given the Complexity of the Investment Process)
        1. What Makes Markets Work?
        2. Asset Classes, Sub-Asset Classes, and Strategies
        3. Developing Reasonable Expectations
        4. Performance Analysis and Reporting
        5. Summary and Conclusions
    8. Part Two: Investment Policy Formulation: Goals-Based Allocation
      1. Chapter 4: A Brief Journey through Institutional Theory
        1. Five Important Features of the Typical Institutional Investment Organization
        2. A Quick Detour via Asset Liability Management
        3. Summary and Conclusions
      2. Chapter 5: Mapping Institutional and Individual Issues
        1. The First Crucial Difference
        2. A Second Important Difference
        3. A Different Way of Defining Risk
        4. The Law of Large Numbers
        5. Implications
        6. Summary and Conclusions
      3. Chapter 6: Goals-Based Strategic Asset Allocation
        1. The Basic Principle
        2. Initial Theoretical Objections
        3. An Academic Imprimatur
        4. A Few Simple Principles
        5. It Changes Everything
        6. An Interesting Implication
        7. Summary and Conclusions
    9. Part Three: Goals-Based Wealth Management Implementation
      1. Chapter 7: Dealing with the Implications of the Process
        1. Covering a Set Number of Bases
        2. Mapping Asset Classes and Strategies to Goals
        3. Understanding Limitations
        4. Dealing with Client Objections
        5. A Three-Phase Process
        6. Summary and Conclusions
      2. Chapter 8: Creating Goals Modules
        1. Developing General Capital Market Expectations
        2. Describing Sufficiently Generic and Specific Goals
        3. Creating Constraints Appropriate to Each Goal
        4. Optimizing the Composition of Each Module
        5. A Possible Example
        6. Summary and Conclusions
      3. Chapter 9: Working to Understand Client Goals and Goal Allocations
        1. Identifying Crucial Initial Client Constraints
        2. Determining Whether Any Constraint Is a Show-Stopper
        3. Time Horizon and Required Probability of Success
        4. Settling on the Appropriate Module
        5. Sizing Assets Needed to Meet Each Goal
        6. A Possible Example
        7. Summary and Conclusions
      4. Chapter 10: Finalizing a Goals-Based Policy Allocation
        1. Two Possible Approaches
        2. Working from Assets and Modules to a Whole
        3. Description of Deviation Ranges
        4. Our Original Example, Modified and Completed
        5. Summary and Conclusions
      5. Chapter 11: Managing the Portfolio Tactically
        1. The Complexity in the Absence of a Systematic Tool
        2. Introducing the Concept of a Tilt Model
        3. Five Possible Variations on the Same Theme
        4. A Major Pitfall
        5. A Possible Example
        6. Summary and Conclusions
      6. Chapter 12: Portfolio Reporting
        1. The Current Challenge
        2. A Simple Analogy
        3. Adding Taxes Makes Things Even More Complex
        4. Summary and Conclusions
    10. Part Four: Managing an Advisory Practice
      1. Chapter 13: The Currently Typical Firm Structure
        1. Many Chiefs and Few Indians
        2. The Root of the Challenge
        3. Contrary Examples in the Legal and Medical Fields
        4. A Simple Illustration
        5. Summary and Conclusions
      2. Chapter 14: Teams Versus Individuals
        1. Too Many Disciplines for Anyone to Master All of Them Fully
        2. Specialists, When Left Alone, Lead to Silos
        3. The Crucial Role of the Team Coach
        4. Only One Individual Can Play That Role
        5. Summary and Conclusions
      3. Chapter 15: An Alternative Structure
        1. The Primordial Role of the Advisor
        2. The Missions the Advisor Should Not Accept
        3. The Difference Between Must and Does Not Need to Be Tailored
        4. Imagining a Different Firm and Process Architecture
        5. The Kind of Leverage That Can Be Built
        6. Dealing with Objections
        7. A Difficult Decision
        8. Summary and Conclusions
    11. Conclusion
    12. About the Companion Website
    13. About the Author
    14. Index
    15. End User License Agreement