Wealth Planning

This fall, take control of your finances—and future

Four actions you can take now to make a big difference.


Headlines may be filled with news of the trade war, market volatility, slowing global growth and more, but “getting caught in the swirl is unproductive,” says Michael Liersch, Global Head of Wealth Planning and Advice at J.P. Morgan, who has a Ph.D. in Cognitive Psychology.

Of course, it’s important to stay engaged and informed. But if you find yourself getting swept up, one approach, Liersch suggests, is to “focus on what you can control—which includes decisions you are making to help you meet personal goals.”

To that end, we recommend you take these four actions on the financial front this fall: Communicate with family about your goals. Embrace year-end U.S. tax planning. Assess your cash holdings and investments. Review your loans and opportunities in light of lower rates. 

Here are some best practices to help you carry out these actions effectively.

Set (or revisit) your goals—be sure to share them with key players

To help you and your family members work toward the same goals, you first have to identify, discuss and agree upon those goals. It may make sense to take these concrete steps to avoid common pitfalls that often derail these conversations.

Step one: Articulate (or review what you’ve identified as) your intentions for your money. Be sure to discuss these intentions with your professional advisors to ensure your goals align with your wealth and planning.

Step two: Ask yourself, “Have I shared and confirmed this information with the people affected by my decisions?”

If you haven’t, it is time to talk. People often hesitate to start these discussions or get bogged down in emotions about amounts. Try not to get tangled in numbers. Maybe you do not yet know how much you want to, or will have to, pass on. Maybe you simply do not want to discuss it now—or ever.

This conversation can be less about dollar amounts and more about the key information your family members need to know: Your view on the purpose of your wealth plus some key facts they would need if anything were to happen to you.

Step three: Share basic information

Everyone, no matter how young, should share with their family members the names of and contact information for their attorneys, accountants, executors of their estates, and firms where they have accounts. They also must tell them where to find key documents such as healthcare proxies and wills.

Step four: Make this dialogue a regular part of family life. 

Family conversations about wealth should occur regularly. Your circumstances, perspective and family needs may change. These talks can be formal or happen ad hoc around a dinner table.

We advise families with significant resources, particularly those with operating companies, to hold regularly scheduled formal meetings to discuss how the family’s wealth is organized and deployed—as well as how younger generations are learning to manage it.

Look at the books while embracing your year-end tax planning

Every fall is an opportunity to review your finances to make sure they are on track to support your goals. It’s also a last call for taking actions that may reduce your tax burden for the year. “For example, especially given recent market volatility, you may want to speak with your tax advisor about harvesting tax losses before year-end”, says Thomas McGraw, Head of Tax Advisory.

Just keep in mind as you look into the great tax-saving opportunities available to you that the way you structure your wealth goes beyond tax considerations.

For example, you don’t just want to automatically put your annual gift tax exclusion amounts into a 529 plan because it is a great tax-deferred account. You first want to evaluate whether it may make more sense for your particular goals and wealth plans for you or other benefactors (such as grandparents) to pay for your children’s education expenses directly.

So familiarize yourself with the possibilities: Read our quick guide here

Assess your cash holdings and investments

Talk about getting caught in the swirl: This historically long economic cycle, macroeconomic concerns and political headlines have made “this one of the most hated market rallies,” says Russ Budnick, Global Head of Fixed Income. “Many people are wary of putting their money to work in the market in risk assets; they fear a recession is right around the corner.”

But staying out of the markets can mean your portfolio may not be working toward your long-term goals. It can also mean missing lucrative opportunities. Indeed, “many clients are telling us that they are holding more cash than they need from a liquidity perspective,” says Budnick.

J.P. Morgan currently sees a less than 50% chance of a recession in the next 12 months. And there can be risks to sitting in cash—especially now, Budnick says. As the Federal Reserve cuts rates, the yield earned on cash goes down. If the Fed continues to cut rates (as many observers think possible), it makes sense to buy intermediate-dated core bonds (such as Treasury, municipal or highly rated corporate bonds) today. That way, you would lock in a higher rate, benefit in price terms from lower yields, and avoid the reinvestment risks associated with short-duration bonds.

Here’s where your personal framework can help you be more effective. We recommend identifying your cash needs for the short and medium terms—setting money aside for your operating cash flow, psychological safety net, opportunistic funding and any big-ticket items you anticipate needing to purchase. Then you may be comfortable putting any additional capital to work for the long term, being sure to invest thoughtfully.

“We’ve reduced risk in many ways in anticipation of a potentially volatile late-cycle market—and built resilience into our portfolios over the last 18 months,” says Cayman Wills, Global Head of Equities. To do that, she says, we’ve generally been taking a three-pronged approach, focusing on:

  • Dividends—Investing in high-quality companies that are committed to maintaining, and potentially growing, their dividends.
  • Protection—Including vehicles that offer downside protection, such as structured notes.
  • Long-term secular growth—Investing in companies and sectors where we see multi-year growth opportunities, specifically technology and healthcare. 

Review your liabilities and opportunities in light of lower rates

The Fed has lowered interest rates twice since July, and another cut before year-end is still plausible. Clearly, now is the time to review your debt to see what makes sense for you, your family and your goals. Should you:

  • Lock in rates—Consider bank products such as CDs that offer you the ability to earn at a fixed rate, even in a falling rate environment.
  • Refinance mortgage(s)—However low your current mortgage rate may be, you may be able to reduce your debt service by refinancing (even at the same rate) because you’ll likely be borrowing less than your initial loan amount (if you paid down principal). Make sure to talk to your Mortgage Advisor about conducting a breakeven analysis, including the cost of the refinancing, to see if it’s the right decision for you.
  • Invest loan proceeds—Borrowing to take advantage of investment opportunities can be attractive in the current rate environment. Done properly, interest paid on these loans may be deductible, which may increase the value of your strategy.
  • Give to your children—When interest rates are low, it’s time to consider making a “split-interest gift,” such as a Grantor Retained Annuity Trust or Charitable Lead Annuity Trust. These strategies can transfer wealth to children free of transfer taxes, while setting up annuity payments benefiting you (with a GRAT) or a charitable beneficiary (CLAT). The lower the applicable federal rate (which moves in tandem with general interest rates), the greater your odds of successfully making a meaningful gift to your heirs.

Speak with your J.P. Morgan representative to see if any of these strategies are right for you, and be sure to have that conversation as soon as possible. After all, says Wealth Strategist Michael Injijian, “rates this low create a unique opportunity, and it would be a shame to miss out.”

We can help

But most importantly: Thoughtful planning takes time to consider and implement properly. Your J.P. Morgan representative is ready to help you make sure that your cash flow, assets and liabilities are working well together to support your goals.  

 

 

 

 

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