Understanding the Concept

Integrative Wealth Management helps clients make the most of their assets, enhance the quality of their lives and realize their personal and financial goals. Syncing up a client's investment strategy with his or her overall plan and cash flow needs increases the likelihood of success while reducing the risk of surprise.

How does that work? Here are the key aspects of Integrative Wealth Management:

• Leadership. Effective financial strategy involves providing leadership to clients to help integrate and optimize their financial, social and intellectual capital to affect their family and society in a manner consistent with their value system.
• Tax management. Tax considerations should be at the center of the investment process. This requires modification of traditional investment methodologies that often ignore tax consequences, with a focus on long-term, after-tax results. One goal of integrative wealth management is to help client's maximize their after-tax wealth, with full consideration of their risk tolerance, preferences, cash flow and liquidity needs while controlling who receives the ultimate benefit. Such beneficiaries may include the clients themselves, family and/or charity.
• Portfolio coordination. Integrative wealth management requires an advisor to serve as "total portfolio coordinator." This pertains not only to overseeing and integrating all aspects of the client's investment portfolio, but also to coordinating with outside professionals to optimize the client's portfolio structure and trading strategies relative to income and estate tax considerations, philanthropic issues and risk management strategies. Portfolio strategies are optimally developed and managed at the "whole portfolio" level to effectively optimize the investment strategy in light of taxes, cash flow needs, preferences and specific objectives.
• Addressing client needs and concerns. Integrative wealth management considers the specific psychology of each client and the tenets of behavioral finance (psychology of money). As such, it balances an individual's desire to create pools of assets earmarked for various needs with more holistic approaches based on Modern Portfolio Theory that focus on the overall portfolio strategy. Effective investment strategy anticipates common investor mistakes, biases, and errors in judgment and proactively creates systems, policies and processes to modify investor behavior to increase the long-term likelihood of success.
• A structured approach to investing. Markets are generally efficient. As such, passive (as it pertains to security selection) investment strategies (i.e. index, passive, structured, and exchange traded funds) are generally preferred to more speculative actively managed investment strategies. Passive investment vehicles offer lower costs, better diversification, lower taxes and the opportunity to more precisely engineer and rebalance asset allocation strategies.
• Asset allocation. Broad, global strategic asset allocation, based on the tenets of Modern Portfolio Theory, is the most effective method to manage investment risk while enhancing long-term portfolio return.
• Controlling expenses. Expense management is critical to enhancing long-term performance. The only guarantee in investing is that if you spend less (on investment expense), you'll keep more.
• Ongoing education. Ongoing investor education, proactive communication and maintenance of a positive relationship with clients are critical aspects of establishing and maintaining an optimal and disciplined investment strategy.
• Written investment policy statement with benchmarking. Delivering an effective and disciplined investment strategy requires formalizing a written investment policy statement. Effective investment strategy requires benchmarking a client's investment portfolio to both their personal goals and appropriate benchmark indices. Such benchmarking assures ongoing integration and synergy between investment strategy and the client's financial and life plan.

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Understanding the Concept
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