Mr. James (“Mr. J”) is a single, 58-year-old, hard-working, international corporate lawyer (an
employee of a large multinational company). He earns a salary of RM600,000 annually. He
has residence in both London and New York and generally lives within his annual income net
spends more than his net income, but in other years he saves and
invests. His current portfolio is worth approximately RM3,500,000.
It reached his value
primarily because of some successful high-risk oil and technology investments as well as
stock options granted by his employer.
Mr J has no plans for marriage or children. He had a mild
heart attack last year, but
he has made a full recovery. His primary financial goal is to retire comfortably at age 65 with
a reduced spending level of RM150,000 and to bequeath
any assets remaining at
his death to his alma mater
, Oxford University.
Mr. J’s financial adviser, Mr Palm Mall, has been working with Mr. J for less than a year.
During that time, Mall has proposed a comprehensive financial plan. Despite Mall’s
Mr. J’s asset allocation has remained the same at nearly 80
percent equities, with 40 percent in his employing company’s publicly traded stock.
Still, Mall has developed a good working relationship with Mr. J. Mall believes that Mr. J is a
well-grounded, fairly rational person, but he also believes that Mr. J has some behavioral
issues to address.
In Mall’s view, the most important issue is that Mr. J has not taken action
yet on the new,
more conservative allocation that Mall proposed months ago of 60 percent
stocks, 30 percent bonds, and 10 percent cash. Mall worries about the lack of diversification
in Mr. J’s portfolio.
Mall’s concern us that a severe downward market fluctuation or drop in
Mr. J’s employing company’s stock may cause him to sell assets irrationally, affecting his
long-term financial plan.
Mall’s financial plan
demonstrates that even with a somewhat less aggressive portfolio, Mr. J
could still meet his primary financial objective if he could save just RM25,000 annually
believes that one of the issues is that Mr. J thinks of himself as a very savvy
（ 理 智 ）