Dr. Paul Kaplan
speaker
479 appearances
1 recordings
1 series
first heard Jul 2026
last heard 9 Jul
Dr. Paul Kaplan’s voice in public audio — every appearance, attributed to the second.
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And so if you have very bond-like human capital, then you have a very high level of risk capacity in your asset allocation of your financial asset.
So the university professor, this all, of course, will depend on what their risk tolerance is, but whatever their risk tolerance is, they have the capacity to hold more stocks than
than a traditional financial planner would say.
Because if a traditional financial planner might say, oh, well, you don't have the risk tolerance, you can't hold too much in stocks.
But from a life cycle theory approach, we'd say that the professor can hold stocks in his financial assets because if you look at his overall asset allocation, he's got all these kind of bond-like assets already built in.
So that's the tenured professor example.
On the other extreme, let's say the stockbroker whose human capital is very much tied to the performance of the stock market.
That person has very little risk capacity because their human capital is so deeply tied in with the market.
Even if they have a high level of risk tolerance and the traditional asset allocation approach would say, oh, they should hold a lot of stocks, taking their human capital into account
would say, no, they really can't afford to hold a lot of stocks.
They really do need to have more of a fixed income orientation.
They're two different things.
It's just conflating two completely different concepts.
So if you conflate them, so you give someone a risk tolerance questionnaire and some questions are getting at their risk tolerance and other questions are getting at their risk capacity.
And then it kind of boils down to one number, which just is a mix of the two.
So that will have certain implications for their recommended asset allocation.
But what is it?
It's just mixing two different things.
Whereas in the net worth optimization framework that we've developed, the two things are kept quite distinct.
And you can definitely then say, you know, if let's suppose your client was the tenured university professor, you can then explain to them why you're recommending a higher stock allocation.
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