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

ISBN-13: 9781118995907 / Angielski / Twarda / 2015 / 272 str.

Jean Brunel

Opis

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.

Spis treści

Acknowledgments xiii

Preface xv

Introduction 1

PART ONE The Integrated Wealth Management Challenge

CHAPTER 1 Many Interrelated Disciplines 11

Multiple Sources of Capital 11

Expanding on the Corporate Analogy 13

Multiple Interactions 16

Educating Future Generations and Wealth Transfers 18

The Make or Buy Decision 20

The Creation of a Wisdom Council 21

Summary and Conclusions 22

CHAPTER 2 An Example of a Crucial Interaction: Tax–Efficiency 23

The Tax Bite and Its Impact on Compound Returns 24

A New Analysis of Capital Losses 25

An Expanded Definition of Active Management 26

Applicability to Both Asset and Security Decisions 27

Abandoning the Murky Middle: The Barbell Portfolio 29

The Potential Role and Limits of Derivative Strategies 31

Summary and Conclusions 33

CHAPTER 3 The Need for a Financial Interpreter 35

What Makes Markets Work? 36

Asset Classes, Sub–Asset Classes, and Strategies 38

Developing Reasonable Expectations 39

Performance Analysis and Reporting 42

Summary and Conclusions 45

PART TWO Investment Policy Formulation: Goals–Based Allocation

CHAPTER 4 A Brief Journey through Institutional Theory 49

Five Important Features of the Typical Institutional Investment Organization 50

A Quick Detour via Asset Liability Management 55

Summary and Conclusions 56

CHAPTER 5 Mapping Institutional and Individual Issues 57

The First Crucial Difference 59

A Second Important Difference 61

A Different Way of Defining Risk 62

The Law of Large Numbers 63

Implications 64

Summary and Conclusions 65

CHAPTER 6 Goals–Based Strategic Asset Allocation 67

The Basic Principle 67

Initial Theoretical Objections 70

An Academic Imprimatur 71

A Few Simple Principles 72

It Changes Everything 74

An Interesting Implication 76

Summary and Conclusions 77

PART THREE Goals–Based Wealth Management Implementation

CHAPTER 7 Dealing with the Implications of the Process 81

Covering a Set Number of Bases 81

Mapping Asset Classes and Strategies to Goals 85

Understanding Limitations 87

Dealing with Client Objections 88

A Three–Phase Process 90

Summary and Conclusions 91

CHAPTER 8 Creating Goals Modules 93

Developing General Capital Market Expectations 93

Describing Sufficiently Generic and Specific Goals 95

Creating Constraints Appropriate to Each Goal 98

Optimizing the Composition of Each Module 103

A Possible Example 107

Summary and Conclusions 109

CHAPTER 9 Working to Understand Client Goals and Goal Allocations 111

Identifying Crucial Initial Client Constraints 111

Determining Whether Any Constraint Is a Show–Stopper 114

Time Horizon and Required Probability of Success 115

Settling on the Appropriate Module 120

Sizing Assets Needed to Meet Each Goal 122

A Possible Example 123

Summary and Conclusions 127

CHAPTER 10 Finalizing a Goals–Based Policy Allocation 129

Two Possible Approaches 129

Working from Assets and Modules to a Whole 131

Description of Deviation Ranges 132

Our Original Example, Modified and Completed 136

Summary and Conclusions 145

CHAPTER 11 Managing the Portfolio Tactically 149

The Complexity in the Absence of a Systematic Tool 150

Introducing the Concept of a Tilt Model 153

Five Possible Variations on the Same Theme 156

A Major Pitfall 159

A Possible Example 161

Summary and Conclusions 169

CHAPTER 12 Portfolio Reporting 173

The Current Challenge 173

A Simple Analogy 178

Adding Taxes Makes Things Even More Complex 180

Summary and Conclusions 181

PART FOUR Managing an Advisory Practice

CHAPTER 13 The Currently Typical Firm Structure 187

Many Chiefs and Few Indians 188

The Root of the Challenge 189

Contrary Examples in the Legal and Medical Fields 191

A Simple Illustration 193

Summary and Conclusions 195

CHAPTER 14 Teams Versus Individuals 197

Too Many Disciplines for Anyone to Master All of Them Fully 197

Specialists, When Left Alone, Lead to Silos 199

The Crucial Role of the Team Coach 200

Only One Individual Can Play That Role 203

Summary and Conclusions 204

CHAPTER 15 An Alternative Structure 205

The Primordial Role of the Advisor 205

The Missions the Advisor Should Not Accept 207

The Difference Between Must and Does Not Need to Be Tailored 209

Imagining a Different Firm and Process Architecture 212

The Kind of Leverage That Can Be Built 217

Dealing with Objections 218

A Difficult Decision 222

Summary and Conclusions 225

Conclusion 227

About the Companion Website 233

About the Author 235

Index 237

O autorze

JEAN BRUNEL, CFA, is the managing principal of Brunel Associates, a firm that serves ultra–high–networth individuals and their advisors. Formerly he was the chief investment officer of J.P. Morgan′s global private bank and a director and member of the Executive Committee of J.P. Morgan Investment Management, Inc. He has been the editor of the Journal of Wealth Management since 1998 and the author of Integrated Wealth Management: The New Direction for Portfolio Managers, as well as many peer–reviewed articles. He received the C. Stewart Shepard award from the CFA Institute in 2011 and the Multi–Family Family Office CIO of the Year award from the Family Office Review in 2012.

Blurb

Praise for Goals–Based Wealth Management

"When in 2002 I wrote the foreword to Jean Brunel′s groundbreaking first book, Integrated Wealth Management, I noted how Jean ′was known for telling it like it is but shouldn′t be... [and] inventing the way it could be.′ In Goals–Based Wealth Management, Jean is once again ′ahead of the pack,′ incorporating the best of the past decade′s lessons by devoting his laser–like intellect to capture new and innovative ways to manage wealth and wealth management firms! This book will be a valuable reference for professionals for many decades to come."
Charlotte B. Beyer, Founder, Institute for Private Investors and author, Wealth Management Unwrapped

"Already one of the deans of the private wealth field, Jean Brunel has written the definitive book on goals–based wealth management. He clearly outlines the rationale for this highly sensible and effective approach to investing and then takes great pains to show how it can actually be implemented in the real world. It is a brilliant and muchneeded piece of work which should be required reading for all true wealth advisors and, I dare say, many wealth owners themselves."
Tom McCullough, Chairman and CEO, Northwood Family Office; Adjunct Professor, Rotman School of Management; and co–author, Family Wealth Management

"Good financial advisors are competent, conscientious, and compassionate guides. They guide clients to their goals as no robo–advisor can. Jean Brunel has been such a guide for decades. In this wonderful book, founded on behavioral portfolio theory, he helps fellow advisors do the same."
Meir Statman, Glenn Klimek Professor of Finance, Leavey School of Business

"The uniqueness of the book is that it marries deep investment process knowledge with the experience of dealing with family clients for decades. Brunel′s wisdom is particularly insightful in the role of the advisor."
Maria Elena Lagomasino, Managing Partner and CEO, WE Family Offices

"You′d be forgiven if you thought Jean Brunel′s most significant contributions to the profession were behind him, but in this tome he has drawn on his wisdom accumulated over 40 years in practice to synthesize his work and others′ to develop a definitive goals–based practice management framework for those serving the wealthy. Rather than replicate and rehash technical details, he draws on unassailable principles of wealth management, such as wealth being a responsibility for both the wealth manager and the wealth owner as well as the government sharing in both returns and risk with the taxable investor, to guide the wealth manager′s practice. In doing so, he humbly defines an operating framework for the practitioner."
Stephen M. Horan, PhD, Managing Director and Co–Lead, Education, CFA Institute

"Goals–Based Wealth Management is a provocative concept and a must read for individual wealth holders and their professional service providers. Wealth owners view their wealth individually and this concept gives a platform to achieve financial and non–financial goals. I recommend Jean Brunel′s latest book to creators of wealth and the beneficiaries of that wealth creation. It is a responsible way to look at financial wealth in the context of individual and family integrated goals. We have been clients of Jean for more than a decade and have benefited from his ability to truly understand the objectives of his clients. I am so glad other families and professionals will now be exposed to this proactive approach."
Jesse Fink, Managing Member, Marshall Street Management