|
Clarifying Goals and Gathering Information
In order to achieve any worthwhile financial goal one must first clarify the goal, the timeframe, the reason it is important, what they are willing to do to acheive the goal, the risk they are willing to take to acheive that goal, and how their current situation affects the likelihood of acheiving a future goal.
These goals can be simple short-term goals or longer term more complex goals. The most common financial goals are to secure retirement, to provide for college education, to take care of dependents (either older or younger), and to provide for their heirs. Regardless, they need to be written, quantified and given a timeframe. The process necessitates gathering as much information as possible about the current financial situation. Palisade Investments uses a Client Questionnaire to gather both client information and their financial goals as a first step.
Risk Tolerance
Risk Tolerance Assessment is fundamental to both achieving financial goals and developing an asset allocation strategy that will prevent clients from the diminishing returns brought about through dynamic asset allocation or market timing. Clients fill out the Risk Tolerance Questionnaire to understand where they lie on the risk spectrum.
Asset Allocation
Based on goals, current financial conditions, and risk tolerance levels an asset allocation is developed. This starts with where investments should go in the broad categories of asset class. It is further refined with style based allocations such as growth, value, large, small,international, quality, yield, maturity, duration and timeframe.
Specific Recommendations
Based on Palisade Investments' Investment Philosophy, third party rating services are used to evaluate the range of acceptable investments in each category.The metrics used may include but are not limited to performance over market cycles, fees, manager tenure, risk (standard deviation), alpha, beta, style drift, annual performance variation, economic factors, style rating and sector exposure. Once specific recommendations are produced, the strategy is implemented and monitored on a quarterly basis.
Review Goals and Life Changes
Over time goals can change and life situations change requiring the client data is kept up to date and the asset allocation is adjusted accordingly.
|