Wealth of Wisdom

CHAPTER 30Constructing an Investment Portfolio to Support Family Goals

Jean Brunel and Voyt Krzychylkiewicz

Traditional finance has trouble dealing with the needs of individuals. Most investment solutions have been developed for the institutional client with the relatively simple objective of maximizing risk-adjusted returns. While institutions typically have this singular goal, individuals and families tend to have multiple goals with different horizons and with multiple different stakeholders in mind (including children and charities among others). Furthermore, not all goals are equally important, nor do they all cost the same amount.

It is typical for families to think through their goals early on, particularly when a liquidity event transforms concentrated single security wealth into more liquid financial assets. However, goals are dynamic, and the passing of time and underlying investment performance may require families to periodically revisit their goals and the resultant financial asset allocation.

As a result, there is often more than one opportunity to consider the following twin questions:

1. What are our financial goals, their time horizons, and the requisite certainty of attaining these goals?
2. Does my current asset allocation align with these goals?

Note that many goals-based discussions focus largely on the first of these questions, but it is important to tackle the approach from both perspectives. Further, when considering how to adjust your current asset allocation ...