Description
In this issue of The Kitces Report, we look at some of the information that was taught during the 2010 “Life Cycle Investing for Financial Planners” during July 26-28, 2010, in Boston, MA. In doing so, we attempt to understand whether and how some aspects of financial planning might be changed, or improved, by incorporating some of the life cycle finance economics perspectives.
Learning Objectives
- LO #1: Be able to explain what Life Cycle Finance is and why it is important to understand as a financial planner.
- LO #2: Discuss what utility and utility function are. Explain why they are important considerations in financial planning, and why humans tend to exhibit a tendency for diminishing marginal utility of consumption.
- LO #3: Describe how using TIPS as a baseline strategy for optimizing lifetime consumption is an ideal strategy. Explain why someone might consider using the strategy of annuitization, and discuss how the use of options can help mitigate risk.
- LO #4: Illustrate how human capital changes over time. Identify the various factors that impact a client’s human capital. Explain how financial planners can begin integrating human capital into their practices. Define total wealth.
- LO #5: Discuss the implications for the financial planning profession. Identify the caveats and concerns that need to be considered under the life cycle framework.