Searching for a holiday gift idea? Give the gift of knowledge.

Searching for that last minute holiday gift, and you don’t want to give the old standby’s – give the gift of knowledge this holiday season. Give a gift that will make a difference in the years to come – one that is forward-looking and will help you in achieving your goals. 

When I wrote my book Goals-Based Investing: A Visionary Framework for Wealth Management (“GBI”), I thought it was important to challenge advisors to evolve their practices, expand their menu of investment options, and focus on achieving their clients’ goals. In my book, I noted that the wealth management industry is changing at an ever-increasing rate, and those advisors who embraced change would flourish, and those that resisted change would risk becoming commoditized.

As I reflect back on the last couple of years with COVID-19, a contentious election cycle, rising geopolitical risks, and the end of the longest bull market in history, its safe to assume that the next 10 years will be very different than the last 10 years. Notably, the financial markets will present a number of unique challenges for both advisors and investors.

The naïve 60/40 portfolio is on pace to produce its worst returns in nearly 100 years, with both stocks and bonds down double-digits. Inflation is at its highest level in 40 years, and there are legitimate fears of a recession in 2023. As I’ve been saying for quite some time, advisors need an alternative toolbox to effectively navigate the markets in the decades to come.

Fortunately, GBI provides guidance on navigating the challenging environment and can help both advisors and investors in developing an appropriate plan. GBI will provide a framework and tactics for addressing the following themes:

1) The value of becoming a behavioral coach – the value of an advisor is often helping investors from reacting to emotional stimuli (fear, greed, & uncertainty). 

2) Limitations with modern portfolio theory – while MPT teaches us about the merits of diversification, it has certain limitations, including being dependent on the reliability of data used, and it assumes that investors are rational.

3) The role and use of alternative investments – alternative investments broadly, are multi-faceted tools that can provide incremental returns, increase income, dampen volatility, and hedge the impact of inflation.

4) Private markets access and innovation – private equity, private credit, and private real estate have long been elusive investments only available to institutions and family offices. Now through product innovation, and a willingness of institutional-caliber managers to bring products to the wealth management markets, these unique investments are available to a broader group of investors, at lower minimums and more flexible features.

5) Adopting a goals-based investing approach - goals-based investing marries together attributes of modern portfolio theory and behavioral finance, recognizing that high-net-worth families are often solving for multiple goals, with different time horizons simultaneously. Rather than maximizing returns or minimizing risks, goals-based investing changes the utility function to the appropriate combination of asset classes, that provides the highest likelihood of achieving a particular goal. 

Instead of getting your loved one a funny tie, ugly sweater, or something they will never use, this holiday season, consider the gift of knowledge - consider Goals-Based Investing for your family, friends, and clients."