The traditional 60/40 portfolio — sixty percent allocated to equities and forty percent to fixed income — no longer serves as the singular framework for sophisticated investors seeking durable, risk-managed wealth across multiple market environments.

Why It Matters

For decades, the 60/40 portfolio was considered a foundational model of diversification (the practice of spreading investments across different asset classes to reduce the impact of any single loss). The logic was straightforward: equities provided growth potential, while bonds provided stability and income. The correlation of those two broad asset classes — the statistical relationship between how they move relative to one another — held reasonably well for much of the late twentieth century.

More recently, however, periods of simultaneous equity and bond drawdowns, among other factors, have prompted a reconsideration of that relationship. For high-net-worth investors managing substantial wealth across generations, the question is no longer whether the 60/40 model served its purpose, but whether it remains sufficient as a standalone framework. For families who have relocated from high-tax states like New York to Tennessee or Florida, and who are simultaneously managing the tax and structural implications of that transition, the portfolio conversation extends well beyond simple allocation percentages.

What to Know

Modern asset allocation strategies often incorporate what practitioners refer to as alternative investments — asset classes outside traditional publicly traded equities and bonds. These may include private equity (ownership stakes in companies not listed on public exchanges), private credit (loans or debt instruments extended outside the traditional banking system), tangible assets such as real estate and infrastructure, and hedge strategies designed to perform independently of broader market direction.

Institutional investors — endowments, sovereign wealth funds, and large pension systems — have incorporated alternatives for decades as a means of seeking return streams with lower correlation to public markets. The migration of these strategies to high-net-worth individual portfolios has accelerated, in part because access has broadened and in part because investors with longer time horizons and lower liquidity needs may be better positioned to absorb the illiquidity premium (the additional expected return an investor may receive for accepting reduced access to capital over a defined period) that alternatives can offer.

Key Considerations

Liquidity remains one of the most important practical considerations when evaluating alternative allocations. Unlike publicly traded securities, many alternative investments carry lock-up periods — defined timeframes during which capital cannot be withdrawn. Investors must evaluate their liquidity needs across both planned and unplanned horizons before committing capital to illiquid structures. This analysis is particularly relevant for business owners whose personal wealth may already be concentrated in a single illiquid asset: the business itself.

Tax efficiency is another layer of consideration, especially for investors who have relocated to Tennessee or Florida — both states with no individual income tax on wages or investment income at the state level. The structural form of an investment — whether held in a taxable account, a tax-deferred vehicle, or through a tax-advantaged entity — can have meaningful implications for after-tax outcomes. A CFA charterholder (Chartered Financial Analyst — a globally recognized investment credential held by only roughly fifteen percent of investment professionals worldwide) working within an RIA (Registered Investment Advisor — a firm regulated under fiduciary standards by federal or state securities regulators) structure is positioned to evaluate these dimensions through a fiduciary (a legal standard requiring the advisor to act in the client's best interest at all times) lens, coordinating where appropriate with the client's tax and legal counsel.

How Families Typically Approach This

Discerning families typically begin by clarifying what the portfolio is designed to accomplish across different time horizons. Funds intended to sustain lifestyle expenses carry different requirements than capital designated for generational transfer or philanthropic purposes. This segmentation — sometimes structured through a goals-based or liability-matching framework — allows families to hold more concentrated illiquid positions in one portion of their wealth while preserving liquidity elsewhere.

The stewardship of a multi-asset portfolio also tends to involve ongoing rebalancing (the systematic process of returning a portfolio to its intended allocation after market movements have caused drift), manager and strategy evaluation, and coordination with the family's broader financial picture. Families who work with a fee-only RIA — a financial advisory firm compensated solely by client fees rather than commissions — benefit from advice that is structurally aligned with their interests, as described on the firm's services page at Skela Financial's services page. 

What is a 60/40 portfolio and why are advisors reconsidering it?

A 60/40 portfolio allocates sixty percent of investable assets to equities (stocks) and forty percent to bonds, based on the historical tendency of these asset classes to offset one another during periods of market stress. Advisors are reconsidering this model mainly because the correlation between stocks and bonds has shifted in certain market environments, particularly during periods of rising inflation and interest rate increases, where both asset classes have experienced simultaneous declines. For investors with longer time horizons and greater complexity — such as business owners or families managing multi-generational wealth — relying on two asset classes alone may leave meaningful diversification and return potential unrealized.

What are alternative investments and who are they appropriate for?

Alternative investments refer broadly to asset classes outside publicly traded stocks and bonds. Common categories include private equity, private credit, hedge funds, real estate partnerships, infrastructure, and commodity-linked strategies. They are generally considered most appropriate for investors who meet accredited investor or qualified purchaser thresholds as defined by securities regulators, who have sufficient liquidity outside the alternative allocation, and who have time horizons that can accommodate the illiquidity inherent in many of these structures. Suitability is highly individual and should be evaluated within the context of the investor's complete financial picture, not in isolation.

How does relocating to Tennessee or Florida affect portfolio strategy?

Tennessee and Florida both impose no state income tax on wages or investment income at the individual level, which can meaningfully affect the after-tax return calculation on certain investment structures. Investors relocating from states with high income tax rates — New York, California, New Jersey, and others — may find that asset location decisions (determining which accounts hold which types of investments for tax efficiency) warrant reconsideration after the move. The transition period itself often surfaces planning opportunities related to timing of income recognition, capital gains, and retirement account distributions, which is why coordination between an investment advisor and a qualified tax professional is prudent during and after relocation.

What is the difference between a fee-only RIA and a commission-based advisor?

A fee-only RIA firm is compensated exclusively through fees paid by the client — typically a percentage of AUM, a flat retainer, or an hourly arrangement — and does not receive commissions for recommending specific products. A commission-based advisor, in contrast, earns compensation when a client buys or sells certain financial products, which can create structural conflicts of interest even when the advisor intends to act in the client's best interest. The fiduciary standard that governs RIAs legally requires the advisor to prioritize the client's interest at all times, whereas commission-based advisors in some contexts are held only to a suitability standard, which requires that a recommendation be reasonably appropriate for the client's situation rather than necessarily optimal.

How should a business owner think about portfolio allocation differently than a salaried professional?

A business owner's personal financial profile differs meaningfully from that of a salaried professional in several respects that bear directly on portfolio strategy. The business itself often represents a large, illiquid, and concentrated asset — effectively functioning as a significant private equity position within the owner's total wealth. This concentration generally argues for greater diversification in the liquid investment portfolio rather than additional concentration in the same sector or asset type. Business owners also face less predictable income streams, which affects how much liquidity the investment portfolio must maintain, and they often confront complex decisions around the timing and structure of an eventual business transition or sale that should inform the broader financial plan prepared while working with their trusted financial advisor.

This article is for educational purposes only and does not constitute investment, tax, or legal advice. Skela Financial, LLC is a registered investment advisor in the states of Tennessee and Florida. Individual circumstances vary and require personalized analysis before any financial decision is made.

Skela Financial is a registered investment advisor based in Tennessee and Florida, providing portfolio management, wealth stewardship, and bespoke financial planning to business owners, families, and individuals nationwide.