Buena Vista, Colorado (PressExposure) October 11, 2009 -- Peopleâs Financial Advisor (PFA) [http://www.peoplesfinancialadvisor.com] , a leading provider of online fiduciary financial planning services, today unveiled the use of the Cambridge Functional Asset Allocation in its online advice services.
Functional Asset Allocation (FAA) is a model developed for use by personal financial advisors who work with âreal peopleâ as opposed to pensions, foundations, and the very wealthy. It includes Real Estate as a legitimate asset category as well as Interest Earning (bonds and cash) and Equities. The model is tax-driven and stresses âasset locationâ (i.e. qualified or non-qualified accounts).
Mr. Robert Schumann, Chief Advice Officer at Peopleâs Financial Advisor explains: âWe call our strategy "Functional Asset Allocation" because, when working with families and individuals, each category serves an important function, or purpose, beyond simple diversification. For example, while Real Estate is recognized as a separate asset class by most money managers, the value of your personal residence is more than a financial calculation. A great deal of your home's value is in your own enjoyment. Likewise, Functional Asset Allocation takes into account the reality that taxes are a driving force in Middle America.â
Functional Asset Allocation is portrayed on a Pyramid instead of a Pie Graph. The multi-dimensional Pyramid has three advantages over a pie graph: 1. Illustrates how individuals build wealth as measured by Net Worth. 2. Portrays ALL assets including home and personal property. 3. Categorizes ALL assets by two additional factors of function and lifestyle risk.
Functional Asset Allocation focuses on the annual growth of a clientâs âtotal marketable net worth,â rather than quarterly investment portfolio returns. Each asset category (Interest Earning, Real Estate, and Equities) has specific, distinct functions in a portfolio. When properly balanced, a functional portfolio should protect a client from deflation as well as inflation, and yet enable the portfolio to achieve higher market returns from equities.
Mr. David Ron, Co-Founder & CEO of Peopleâs Financial Advisor said: âTraditional asset allocation models take into account only money that can be invested in the stock market. An integrated financial plan must include peopleâs home which is most often the largest single financial asset families have.â
Mr. Ron added: âThe Functional Asset Allocation model is a great tool that helps people visualize their financial assets in a logical way. The Pyramid illustrates and stresses the need to establish solid âfoundationsâ and build other types of financial assets thereafter.â