A 55-year-old Canadian client, nearing retirement in 10 years, has expressed a primary goal of capital preservation with a secondary objective of moderate income generation. They have a moderately conservative risk tolerance. Their current portfolio is 60% equities and 40% fixed income. Given their objectives and risk profile, which of the following best describes the appropriate strategic asset allocation approach for this client?

Question: A 55-year-old Canadian client, nearing retirement in 10 years, has expressed a primary goal of capital preservation with a secondary objective of moderate income generation. They have a moderately conservative risk tolerance. Their current portfolio is 60% equities and 40% fixed income. Given their objectives and risk profile, which of the following best describes the appropriate strategic asset allocation approach for this client?

Answer options: ✅ A long-term target asset mix designed to meet their specific investment objectives and risk tolerance.

• A short-term adjustment to the portfolio to capitalize on anticipated market trends or economic events.
• An allocation focused solely on high-dividend Canadian equities to maximize income.
• A dynamic strategy that frequently shifts between asset classes based on daily market movements.

Correct answer: A long-term target asset mix designed to meet their specific investment objectives and risk tolerance.

Explanation: Strategic asset allocation involves establishing long-term target asset class weights based on a client's investment objectives, risk tolerance, and time horizon. For this client, capital preservation and moderate income with a moderately conservative risk profile suggests a pre-defined, stable long-term mix.