“If you take a step back and really think about what we’re in this business for, it’s helping the individual investor,” said Peng Chen, president of Morningstar Ibbotson, in Chicago on Monday in his keynote address at the Center for Due Diligence 2011 conference.
The key to helping your clients, he continued, is understanding their balance sheet. A “total balance sheet perspective” must include an investor’s human capital, or the present value of the investor’s future ability to work.
Chen spoke to a packed room about how to incorporate clients’ human capital when planning for retirement to account for some of the risks they’ll encounter.
In their earning years, clients face expense risk and mortality risk. In their retirement years, they face longevity risk.