Wealth Management - Who here knows this stuff?

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Ocean Mist

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Who here knows stuff about wealth management, not limited to investments?
Looking for something more aligned with preservation and accumulation of wealth…
Examples:
-How to keep assets out of probate when someone dies
-For businesses, setting up the appropriate structure to obtain best treatment
-Planning of assets / income stream, etc. etc.
I’ve come across some pretty intricate (and ingenius) wealth management tactics. Was wondering if anyone here specialized in it.
 
ASSet_MANagement Wrote:
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> Probably more geared towards a lawyer.
Yep, and estate laws can be state-specific as well.
 
I heard that tax accountants that do this to a certain extent. I initially thought CFP did this… but found out they don’t. Same with CFA.
I think the lawyers have to deal with someone more numbers based to hammer out all the scenarios though, and I’m trying to figure out who this would be. Like the lawyers know the theoretical, but they hire experts to come up with the gruntwork.
 
I know ICs that have a fairly good understanding in the topics you mentioned.
When the estates start becoming very very complex, they begin to use their in-house lawyers
 
investment counsellors ,
maybe its a canadian term, basically advisors who manage on a discretionary basis
 
In my firm, wealth management is very specialized. We have three pieces, financial planning(CFP, CPAs), Trust advsiors (CTFA), and investment managers (CFA) work together for a relationship. Each will focus on their segment of the relationship and give best advice to client.
 
You can set up various trust account or charitable accounts to reduce taxes/or keep asset out of probate.
 
What specifics are you looking for? I’ve been in Wealth Management for a while.
-How to keep assets out of probate when someone dies
Once the person dies you can’t change anything you need to set this up ahead of time. With every family being unique I can’t give specifics. The common boiler plate system is to put most of the assets into a trust prior to death this will shield the assets out of probate. What is the goal? Bypass probate, lower estate taxes, get funds out of elder persons name to avoid all of the funds being spent on eldercare, fund a charity? The best bet is to work with a Quality qualified Financial Advisor/Wealth Manager and an Estate Attorney.
-For businesses, setting up the appropriate structure to obtain best treatment.
This is a tough one, “best treatment” of what? How big is the company, how many owners, what is the structure (corp, Partnership, Sole Prop.), is the a succession plan? This I think would probably go straight to a lawyer. If a partnership is there a buy sell set up?
-Planning of assets / income stream, etc. etc.
This is the area where I have to say the entire financial planning industry sucks 95% of “Advisors” use a boiler plate asset allocation model that all work off the same set of ibbotsen data. Go to Merrill, UBS, Morgan Stanley and you will usually get three plans that will have almost the exact asset allocation. Having been a Financial Advisor for 17 years I can tell you that just about everyone on this board has a better understanding of this concept than 95% of the FA’s in the business.
Not to belittle the Financial Planning industry but all income planning = a Level 1 Portfolio question: Figure income needed in retirement net of taxes, use a mortality table, discount back to a lump sum needed at retirement, then discount the lump sum back to present. There are a bunch of online calculators that allow you to do the what if’s. Obviously the key’s are the discount rate, taxes and inflation everyone has issues with theses assumptions even the large BD’s can’t guarantee you that there assumptions are better than anyone else.
I run things totally custom one at a time. Depending on where in a market cycle we are I set up the income stream differently. If a client is below 70 years old I also use hedge funds to try to keep the portfolio uncorrelated to the equity markets.
 
Great answer cpepin! You’re dead on about the planning of assets & income stream. The stuff is really useful. Something that I’m very interested in.
WS -> What is your department called? Is it all under the general blanket of wealth management? Which part are you involved with?
 
When I read “Business structure” and “Estate Planning” in the same passage I think Family Limited Partnership.
 
When I read “Business structure” and “Estate Planning” in the same passage I think Family Limited Partnership.
 
cpepin Wrote:
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>
> Not to belittle the Financial Planning industry
> but all income planning = a Level 1 Portfolio
> question: Figure income needed in retirement net
> of taxes, use a mortality table, discount back to
> a lump sum needed at retirement, then discount the
> lump sum back to present. There are a bunch of
> online calculators that allow you to do the what
> if’s. Obviously the key’s are the discount rate,
> taxes and inflation everyone has issues with
> theses assumptions even the large BD’s can’t
> guarantee you that there assumptions are better
> than anyone else.
Let me preface this by saying I can’t tell if you are advocating the technique above or saying that this is what the big wirehouses or planning industry uses.
It isn’t quite that easy in my opinion. Because you have used a mortality table in your technique above, you have planned to have enough assets exactly 50% of the time as the table is the average life span for an individual at a certain age. This is quite dangerous. This also assumes that returns aren’t variable each year. Volatility will have a HUGE impact on how long your principal will last.
Also, most calculators assume that living expenses (usually the largest income needs) are indexed to inflation. While this may be true for some expenses, it won’t be for all (especially a mortgage which will be flat and eventually gone).
I think we would agree though that an even larger danger are your inputs. One of the biggest things my firm tries to stress is the LACK of precision in our plans. You can run a plan that has numbers out to 3 decimals. This leads to a false sense of security for sure. We try to show our clients the variability using Monte Carlo simulation. They don’t really understand it most of the time, but it does help show them how one “30 year lifetime” can be quite different from another - rich vs broke.
As far as probate avoidance, it is pretty easy. As others have mentioned, trusts are common, but other methods are available. Did you know that brokerage account can have a Transfer On Death (TOD) attached to them? This acts like a beneficiary designation for non-retirement accounts. Bank accounts can now have the same (depending on the state). Retirement accounts and insurance have beneficiary designations so as long as those are up to date you can avoid probate. All of these methods are easy and much cheaper than trusts.
I would need more information for the business structure.
 
Here are my two cents on this
1) Bypassing Probate - There are other ways, but Insurance is the best. Again it is subjective and depends on insurability of the person. But money contributed towards one time premium will bypass probate or any kind of public records and will stay a private matter.
On the same lines - Segregated Funds will achieve the same.
Trust is another way to bypass the probate but in a more complicated way.
It all depend on the personal situation.
2) Business Sucession Planning - Well if you mean Taxes by the best treatment - then look at creating Trusts with Capital Gains. Tax rules allow tax free rollover of business interest to these trusts in most jurisdictions. Trusts hold common shares, so all capital gains from that point on flow to the trust. You effectively transfer all future capital gains to the trust. You take prefs from the corporation and maintain your income stream and in a way, you also control the corp. Mutiple Voting shares where allowed go hand in hand with such a structure.
Again, let me know your specific problem, And I can advise you on this.
3) Income stream - Depends. Where are the assets ? Taxable ? Non Taxable ? What kind of reurn do you expect. But it is possible to creat structures which will bypass all taxes and still you can continue receiving income from the assets.
Again, give me more details.
Hope this helps.
 
Family LP’s are ingenious. Basically acting as holding agents for investments. You can deduct all these expenses through it and not be limited to the investment expense deduction (for the very rich that is… most folks will never have to worry about the 1 mill limit). This is among other benefits…
TOD advice is pretty good - but you still need to set up a trust to transfer the home no? Unless you want to change title and gift it, but then you would pay gift taxes… which is not beneficial.
My firm does all of this to an extent, but it’s incidental to the services we offer. We’re actually REALLY GOOD with the income stream portion for different reasons.
Thanks everyone! Very useful advice.
 
Ocean Mist Wrote:
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> Great answer cpepin! You’re dead on about the
> planning of assets & income stream. The stuff is
> really useful. Something that I’m very interested
> in.
>
> WS -> What is your department called? Is it all
> under the general blanket of wealth management?
> Which part are you involved with?
We are the Private Bank of a larger bank. Our wealth mgt is under the Private Bank, I am on the investment team.
 
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