Later in this section, Robert Gordon and Thomas Boczar of Twenty-First Securities Inc. expand upon the foundation Kochis sets, offering a more comprehensive examination of tax strategies, along with comparisons of the tax consequences of competing strategies in various situations.

One question with which advisors grapple each and every day is, "Which assets go in the taxable accounts and which assets go in the tax deferred accounts?" As Gobind Daryanani points out, there is considerable debate among experts on this very issue.

Daryanani, a CFP licensee with a doctorate in engineering who invented the Beyond Monte Carlo simulation methodology that is used in a number of financial planning applications, offers an analytical framework for determining the optimal asset location of assets that will result in the greatest after-tax wealth for the client. In essence, the methodology ranks each asset class with regard to the benefit derived from including it in one account (the tax-deferred account) or the other (the taxable account). Those asset classes deriving the most benefit from moving to one "bucket" or the other are placed within those buckets first, according to rank, until all of the assets are allocated.

Daryanani's research suggests that optimizing the location of assets can add 15-25 basis points per year to total portfolio returns when compared to a pro rata strategy. "That may sound like much" says Daryanani, "but remember, unlike tax-loss harvesting, which only pertains to the taxable portion of the portfolio, the location strategy applies to the total portfolio." In addition, says Daryanani, "tax harvesting can actually hurt a portfolio in a down market; advisors may be selling fundamentally sound assets at a low price. There is no potential downside to an asset location strategy."

The investments section includes writings on both the theoretical and the practical. On the practical side, Mark Hurley offers a concise yet informative overview of the major "alternative investment" strategies that are likely to be of interest to advisors. Ben Baldwin, an expert in the fields of financial planning and insurance, offers his analysis of the costs and consequences of insurance wrappers. On the theoretical side, Gary Gastineau and Craig Lazzara present their case for the creation of a new product that does not yet exist: the self-indexing fund (SIF). The idea is to create a new investment vehicle that captures the advantages of a low-cost mutual fund or ETF, while further reducing costs and protecting the investment manager's research information.

The practice and theory section includes a thought-provoking piece by Moshe Milevsky on the concept of human capital. Milevsky suggests that some of your clients have jobs with bond-like characteristics, while others have jobs with stock-like characteristics. Making the case for diversification, Milevsky says that if your client's human capital has equity-like characteristics, their financial portfolio should hold fewer equities and more bonds. If their human capital has bond-like characteristics, they should hold more equities in their financial portfolio. Milevsky offers the following example:

"For a tenured university professor such as myself, for example, human capital-and the subsequent pension I'm entitled to-has the properties of a fixed-income bond fund that entitles me to monthly coupons. I like to think of myself as a walking, inflation-adjusted real return bond."

If this is the case, Milevsky reasons, he has little need for other fixed-income investments, and in order to be properly diversified, his investments should be heavily weighted towards equities, which they are.
John Brynjolfsson of PIMCO states, "One factor many managers overlook is the impact monetary policy has on the markets." His well-written, nontechnical essay presents a framework for determining when to purchase (and when to avoid) both traditional and inflation linked bonds.

Financial gerontology: If you've never heard the term before, remember it. My guess is that you will be hearing it more in the future. As America ages, clients will be facing new challenges. For example, Neal Cutler discusses "job lock," a situation where an employee decides not to change jobs because of health benefits. He also discusses the concept of family aging, and its implications for long- term care.

While at first glance The Investment Think Tank may appear to be an eclectic collection of individual articles, it is much more than that. Imagine attending a good professional conference where you could hear some of the best in the business lecture you on their latest thinking. The Investment Think Tank represents this sort of experience in a written, or "virtual," context.