At this hour, it may be that advisors and investors are finally putting the unprecedented market volatility of 2008 and 2009 behind them. But the "new market normal" we're all coming to realize is hardly the same. We're beginning to know the critical importance of effectively managing portfolio risk. And that means there is an urgent need for the ability to separate and manage various sources of portfolio returns to improve portfolio structure — to build a kind of portfolio efficiency that combines return-generating opportunities with the means to manage volatility.

It's still true that the overwhelming majority of a portfolio's return is the result of asset allocation decisions and not individual securities selection. The effective allocation of assets across equities, fixed income, alternative investments, and cash is the most important step when building a client's portfolio.

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