Abstract
A majority of private client practitioners rely on mean-variance optimization (MVO), rules of thumb, or model portfolios for making asset allocation recommendations. Considerations for income levels and other constraints figure into the typical approach. However, not enough attention is given to the nature of an investor's multiple time horizons and implications for cash flows. These are the future demands placed upon the portfolio. The risks that these demands will not be met need to be clearly understood in order to validate any asset allocation decision. The lack of a widely embraced risk management approach that addresses each investor's unique time horizons and cash flows often exposes individual investors to undue risks and, potentially, opportunity costs. An adequate risk management framework is lacking profoundly where it is needed the most, especially since the broad populace has less discretionary dollars, and assets are shifting away from pensions to selfdirected accounts. Even though a meanvariance approach as the sole method for asset allocation may subject an investor to undue risk, MVO s contribution to portfolio construction remains valid, making it quite helpful within a broader risk management approach to asset allocation.