JANUARY 2026
One thing I do constantly is think about risk exposure and uncertainty. I try to actively think ahead on behalf of clients. What do they want and need? IN doing that, I aim to be realistic in how I assess options, accepting that no one can be truly certain about anything. In addition, I know that many investors seek relief from decision fatigue, volatility anxiety, and the burden of constant monitoring. I set out to address those challenges. Coming to a working framework has taken a while.
In fact, it took until a few years ago for the regulatory framework in Canada to truly make sense. Until then, client suitability revolves around the concept of strategic asset allocation. How much money was in cash, how much in bonds, and how much in stocks? It has only been in the past few years that the way regulators think about portfolio construction has been brought in line with the way most people intuitively think about market instability and investment suitability. The goal is to get people the return they need while experiencing risk they can handle, but no more than absolutely necessary.
Until recently, portfolio managers were obligated to write investment policy statements that spell out a client’s strategic asset allocation based on discrete asset classes. Now, regulators assess suitability through the dual lens of risk tolerance in risk capacity. Tolerance is a matter of psycho graphic disposition. Capacity is a matter of investable asset levels and cash flows through income. Portfolios need to be constructed to reflect the more conservative of those two tests. Accordingly, products that are rated as low, medium, or high risk can be combined to create portfolios that correspond to a client’s risk appetite. Regulators have even added two intermediate risk profiles: low to medium and medium to high. Think of all products rated on a scale of 1 to 5, with low risk as a one and high risk as a 5. Investors canal mix and match based on risk return characteristics rather than clumsy asset class depictions.
Using 2022 as a case study, we can all see how this more contemporary approach is of great value to retail investors. Under the old model, a traditional balanced portfolio (60% stocks; 40% bonds) would have been forced to lose money when considering rate hikes that everyone knew were on the horizon. Being forced to have a 40% allocation to bonds in what was almost certain to be a short-term bond bear market is simply inconsistent with the principle of responsible risk management. The system was failing people, but mercifully, those days are over.
Over the course of 2026, I will be putting the final touches on what will come to be known as STANDUP portfolios, a proprietary framework for portfolio construction that takes a more contemporary, pension style approach to wealth management. It aims to remove the failure points that were part of the old paradigm.
There will be two distinct models: a growth model, used predominately by those who are still in the workforce, and a balanced model used primarily by retirees. Both will have an identical core of nine mostly medium risk products. All product allocations will aim for a 7.5% product weighting, with a minimum allocation of 5% and a maximum allocation of 10%. All will feature 9 products as core holdings. The growth portfolios will have four additional products that are more aggressive, whereas the balanced portfolios will have four different products that are more conservative. When switching from the growth model to the balanced model (typically at or near retirement), there will be relatively little portfolio turn over, because only 4 products out of the total13 will need to be switched.
It’s especially notable that there are several products that have come on to the market recently that are not only medium risk, but also weakly or negatively correlated with one another. Combining these products (i.e., diversifying the diversifiers) can lead to an extremely stable glide path where it is highly unlikely that investors (especially retirees) will experience draw downs.
I’m looking forward to having the STANDUP portfolios completed later this year. I’m highly confident that investors will be thankful for the stability they are destined to provide. This is a huge step forward in client centric portfolio design and a huge win for nervous investors.