We systematically and holistically capture a household's entire capital base, including human capital. A comprehensive plan must account for both financial and nonfinancial assets. Affluent households often have significant nonfinancial assets—like primary residences, nonprimary residences, private businesses, and collectibles—that make up a substantial portion of their wealth.
Total wealth strategies connects all these dots— linking both the financial and nonfinancial parts of a household's capital base to meaningful outcomes. Why does this matter? Focusing solely on stocks, bonds, or retirement accounts misses a big part of the picture. This integrated approach helps identify hidden risks and ensures that all assets work together toward a cohesive strategy, with investment assets acting as a completion portfolio to complement outside holdings and optimize household tax efficiency.
Inflows
Estate distributions, life insurance.
Personal
Primary residence, second homes, vessels, and art
Human Capital
Future wages, social security, and pensions
Illiquid
Private businesses, stock options, and real estate
No portfolio
is an island
Growth Assets
Stocks, REITs, private equity alternatives
Protective Reserve
Liquid fixed income and money market assets
(Liabilities)
Mortgages, lines of credit, and asset-based loans
No portfolio
is an island
1Source: 2019 Survey of Consumer Finances, Federal Reserve Bank. Households in the top decile of net worth had 53.6% in nonfinancial assets compared to 46.4% in financial assets. The nonfinancial assets would be even higher if future wages, bonuses and present value of social security were included.