Construct a client's economic balance sheet and draw out what it implies for how assets should be allocated

An economic balance sheet widens the ordinary one. On the asset side it adds the present value of future earnings (human capital), expected pension income and other future inflows to financial assets and property. On the liability side it adds the present value of future consumption, education costs, bequests and philanthropic goals to mortgages and loans. The allocation of financial assets should complement the extended assets: a tenured civil servant has stable, bond-like human capital, so can hold more equity; a commission-based salesperson or entrepreneur has equity-like human capital, so should hold more bonds and avoid assets correlated with their employer or industry. The trap is optimising the financial portfolio alone and ignoring the largest asset a young client owns.