Core Asset Conservation
Stay in Control of Your Future: Manage and Preserve Core Assets
Core Assets are defined as the most essential, important and valuable building blocks for an entity or individual. With the destruction or waste of core assets, the entity ceases to exist and the individual will be left struggling to survive.
Living Core Assets
Living Core Assets are the life-accumulated financial assets that you depend on for such things as planned lifestyle changes, starting a new business, future college tuition or guaranteed retirement income. It is recommend that these assets be positioned for secure growth within time frames appropriate to their various needs, and that they have adequate liquidity to protect illiquid, fixed core assets like real estate in the event there is an unexpected interruption in regular income and your immediate cash reserves are insufficient to meet the demands of the situation. The requirements of your Living Core Assets are not static and will change according to age, financial and life circumstances as they evolve.
Legacy Core Assets
In addition to fixed core assets, Legacy Core Assets are the amount of guaranteed funds that would be immediately available in your absence or incapacity to secure the lifestyle needs of family members or any heirs. Establishing a Family Security Plan will, among other things, help to eliminate unnecessary tax consumption as well as multiply the financial benefits you are able to provide for your heirs. In an environment where the rules are changing, having a comprehensive financial plan in place will reduce the stress levels that come with the natural transitions of life.
Financial Conservation Standard
- Living and Legacy Core Assets are placed with major U.S. insurance companies that have top, verifiable ratings due to long-standing track records of stability and fiscal responsibility.
- Any specific financial vehicle chosen would be required to provide the following guarantees: Safety of Principal, Liquidity and Locked-In Gains.
- Maximum Tax Efficiency and the ability to Stay Ahead of Inflation will always be key considerations.
- In order to help manage and preserve your Living and Legacy Core Assets properly, we are always available for consultation and conduct yearly reviews with our clients to stay on top of any events that would require our assistance.
The Aircraft Carriers
One advantage of the financial crisis was that it tested the strength and management of our largest and most important financial institutions. It allow us to see clearly which ones were providing the steady reliability that any economy depends on.
It is important to note that the body of the insurance industry regulated at the state level proved once again its sea worthiness in the face of a major ‘financial hurricane” that hit with a force of impact affecting everyone. Known for its consistently high standards of self-governance, the state-regulated insurance industry offers a wide variety of financial products that meet the long-term requirements of Financial Conservation.
The Wave Pattern
There are two main moving parts to the dynamic of recovering from losses in the financial markets. First, referring back to the S&P 500 chart, you can see how the market moves in a fluctuating wave pattern. Bearing in mind that legs are strongest in the first phase of a foot race, if you have experienced any losses in a down cycle, the strongest phase of a subsequent market recovery or up cycle, by definition, is not devoted to asset growth, but to the recovery or retracement of those previous losses. Of course, this is assuming you didn't panic during the down cycle and sell out, or were forced to for needed liquidity purposes, thus locking in those losses permanently. Secondly, the math of compound loss is now at work. For example, just to get back to breakeven, a loss of 50% would require a recovery gain of 100%.
Keep in mind that once a position is sold out under pressure and losses become permanent, the producing asset is gone forever. Recovering from market losses that impact Living and Legacy Core Assets can be a very slow moving and deceptively long process that will potentially throw you out of step with the life cycles.
The Steps of Financial Conservation
As a clear alternative, the step structure eliminates the dynamics of loss that any type of asset or commodity without guarantees is exposed to in the wave pattern. Furthermore, when you know that your Living and Legacy Core Assets are protected by the step structure, with other non-core assets that are placed at risk in the wave pattern, you are now in a far stronger position -- financially and psychologically -- to ride out any market volatility which may occur and not be forced to lock in losses.
By comparison to the uncertainties of the wave pattern when there are no guarantees in place, the step structure provides the support necessary to keep important life plans and responsibilities on track.
True Asset Allocation
From the perspective of Financial Conservation, true asset allocation begins by first distinguishing and then separating -- with a firewall of safety -- Living and Legacy Core Assets from other non-core financial assets.
Diversification of risks utilizing the well known asset allocation models has its place with non-core asset investments; however, in order to provide a reliable basis from which to manage and preserve the core financial assets necessary to stay in step with the life cycles, risk is risk no matter how you slice it and spreading your bets is not a substitute for actual up front guarantees.
