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

Chapter 4A Brief Journey through Institutional Theory

You might reasonably ask why we need to worry about institutional investment management theory in a book focused on the affluent. Yet the logic is deceptively simple. The large bulk of academic literature and of what is learned by many students today relates to the classical tax-exempt money management world. The Chartered Financial Analyst (CFA) Institute has made major strides incorporating private wealth management issues in the CFA curriculum, but you will still today find people—advisors, that is—who will argue that other certifications, although admittedly less arduous to earn, are at least as relevant. Often the logic is based on the fact that other certifications provide a deeper understanding of non-asset management dimensions. I do not want to inject myself into the debate as I find it a bit sterile. But the fact is that the moment you start thinking of individuals, you need to be ready to take an almost iconoclastic stance; you simply cannot take what you have learned in one space—the institutional world—and replicate it in the individual world with the hope that this will be sufficient. It is not a total coincidence that the first peer-reviewed article I submitted and had accepted by Trusts and Estates was entitled “The Upside-Down World of Tax-Aware Investing,” as I have already mentioned. You must see the upside-down nature of the new world before you could begin to think of a possible solution; that takes an ...