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Strategically Personalized Framework:
Reasons Why...

City View

1

Income & Distributions

Your money has a risk tolerance too. Traditional money management makes this a secondary concern, but for retirees it's at the forefront of their minds. Your retirement portfolio is supposed to pay bills for the next 20+ years. Money that's paying for bills tomorrow should be invested very differently than money being used a decade from now. A "one portfolio" asset allocation solution isn't well suited for this. Why you ask? Because of their rebalancing process.

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Most of these portfolios rebalance quarterly. Which means they sell & buy investments depending on their target exposure level. This means your monthly income is coming from a little bit of every investment you own. Some that are performing well & some that aren't. Preferred asset classes & out of favor asset classes. Even if the manager sells all of one investment type to send your income from, when the quarterly rebalance occurs they'll be buying it again. It'll just be temporary until each rebalance. If they didn't rebalance then your portfolio's risk would drift. This could result in having too aggressive or too conservative of a portfolio.  

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In a one portfolio asset allocation solution you don't have the flexibility to produce income from the right source at the best time given the economic conditions you're in. And those conditions always change, which means the best place to take income from will change also. 

2

Sequence of Return Risk

Sequence of return risk is the risk that the order in which investment returns occur can impact how long retirement savings last. Here's an example from Schwab's Center for Financial Research: ​

 

 

 

 

 

 

 

 

 

 

When all of your funds are invested in a single portfolio solution you are subject to the whims of market volatility. It's like driving a car without a seatbelt. No one thinks they'll get in a car accident, but we don't always have control over that. If circumstances beyond your control result in an accident...the damage that can occur without a seatbelt could change your family's lives forever. Retirees that use a portfolio solution that doesn't offer some protection against this risk aren't wearing a seatbelt and just hoping for the best. Hope isn't a strategy...​

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3

The Emotional Realities of Investing

Money is emotional. Making decisions about money is intimidating. Retirement is the pinnacle of this anxiety. During 2008 when retirees watched the news and saw headlines from the Wall Street Journal like "Worst Crisis Since '30s, with No End Yet in Sight", it was more than just dollars they saw disappearing. It was time with family. It was freedom. And all that replaced it was fear of the unknown... It's easy for financial talking heads to say, "Just hold on for the long-term" on television while earning millions every year. For the every day investor on main street its a different story. 

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Emotional decisions can lead to financial ruin. The industry's solution for this is to try and take the emotions out of the equation, but it's just not possible. People are emotional. Emotions are necessary for decision making. The solution shouldn't be to get people to stop being people. The solution should be protecting the portion of people's money that they're most immediately concerned about - the money for tomorrow's bills. 

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The 2008 Great Financial Crisis took roughly 48 months from start to finish. It took approximately 18 months from the market bottom to recover to it's starting value during the crisis. Most people remember what that period was like. Now imagine how different the crisis would have been for an individual that had 72 months worth of income strategically accounted for in a lower volatility, or lower risk, portfolio. Would you have panicked if that uncertainty didn't affect tomorrow's lifestyle?

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