Is Your Classroom Time Worthwhile? *Increasing Private Wealth Management Credit Revenue *

Given my perspective, the answer is a resounding, YES!  That said, there are a simple caveat to that answer. 

After 16 to 20 years of school, university and certification courses and completing seemingly endless professional education requirements the last thing PWM professionals desire is a trip to another classroom.  Unless . . .

This time in the classroom directly impacts production results . . . I mean measurable increases in Credit Opportunity Identification (OID).  Let's define OID. 

Opportunity Identification = Recognition by any member of the Private Wealth team that the client's desired financial end result could be enhanced through the use of a Strategic Credit facility. 

 

Given the collective perspective and training backgrounds of the majority of the PWM client team members, credit opportunity education will have an dramatic and immediate impact on the opportunities the team encounters. 

In most bank PWM environments credit professionals occupy only a "part time" position with the PWM team.  They usually partner with multiple PWM client teams and often span large regional geographies.  Inherent in this structure is a tendency to be reactive to client inquires about the use of credit rather that proactive in offering Strategic Credit as part of an alternative solution to many client financial activities.  In this model many opportunities are left undiscovered.  Why? 

• Typically members of the Wealth Advisory team (planners, trust advisors, investment advisors, insurance advisors, brokers) simply aren't exposed to credit opportunity discovery concepts. 

During my long tenure leading a team of Credit Advisors (that partnered with Family Office Wealth Advisors) I discovered that, over time, only about thirty percent (30%) of our total credit facility production and outstandings came from "client identified" uses of credit.  A good seventy percent (70%) came as part of client financial solutions when the Wealth Advisor and Credit Advisor partnership took a use of credit "idea" to the client. 

The opportunities discovered that gave rise to the these alternative financial solutions (that include the use of Strategic Credit) were the direct result of the OID approach we initiated shortly after the team was formed. 

My Credit Advisory team gave the Family Office Wealth Advisors' time in the classroom.  The direct and measurable result of the time spent in the classroom was significantly increased Credit Revenue from every team in the company. 

(The "classroom" may take many forms; from conference room wealth team meetings to webinars or simple conference calls supported by PowerPoint presentations) 

We found that while the increased OID certainly varies among Wealth Advisors, the time in the "classroom" resulted in extraordinarily sharp increases for all during the first eighteen (18) months of exposure to these Strategic Credit concepts.  While OID can continue to increase beyond this initial time period (albeit at a slower pace), to do so, Wealth Advisors require continued classroom reinforcement of the original concepts introduced and exposure to new Strategic Credit uses that evolve over time (illustrated in the graph above) as tax, trust and entity laws change.

I've published several articles previously about particular Strategic Credit uses and why they appeal to the High Net Worth and Ultra High Net Worth Individuals.  But that appeal is only realized once its presented and presentation is completely incumbent on OID.

(You can find all the articles through my profile on LinkedIn.com or on my blog at strategiccreditsolutions.com)

You "likes" and "comments" and "shares" are greatly appreciated.

I can present these concepts to your PWM Advisors (and follow them up) in a variety of effective ways. Please don't hesitate calling to discuss the best method for your institution.

Mark S. Johnson

mark.johnson@strategiccreditsolutions.com

Strategic Credit Solutions
404.909.5167
On twitter @CreditStrategic

Secret Sources of Credit Revenue - Financial Planners Hold The Keys

Private Wealth leaders on the divisional, regional and team levels are all looking for new sources of revenue.  One typically untapped source sits in the office right down the hall.

Your Financial Planning colleagues know it all!  They are invited into your client and prospect families' current and future worlds.  For them to rationally introduce and eventually recommend future financial  stratagems they are given a level of information not typically reached by any other member of the advisory team. 

"Credit Opportunity Discovery"education is not often offered to the planning staff.  You can change that paradigm.   Those companies' that do formalize a opportunity discovery training approach for this constituency have enjoyed significant gains in Private Wealth Management credit production.  As strategies are designed to provide either wealth preservation, wealth accumulation or both, previously undiscovered possibilities will come to light.  Situations will arise where the use of a Strategic Credit Facility, as an alternative to the "standard" financial solution, can provide the client and their family with substantial  Economic Benefit.  Benefit that can and should be quantified by a member of the Credit Advisory group prior to presentation to the client. 

Credit Opportunity Discovery education in today's Client Team approach to the Private Wealth market is essential to the team reaching its full success potential.  In this team structure the Planners are not asked to become experts in providing Credit Advice but only to become aware of apropos credit concepts and then to recognize situations where a Strategic Credit Facility potentially could provide Economic Benefit. 

Do your Financial Planners encounter situations where an Strategic Credit alternative could aid their client?  Experience tells me that your Financial Planners encounter them everyday.  

For instance, do your clients:

-Use GRATS to pass low basis, easily valued, marketable securities to future generations?
Consider a Strategic Credit Facility to "insure" GRAT success

-Gift low basis stock to subsequent generations and there-by loose its potential  step-up in basis?
Consider a Strategic Credit Facility to fund the gift and maintain the basis step up

-Purchase high dollar life insurance within an ILIT?
Consider a Strategic Credit Facility for the ILIT itself to:
1. to defer or potenitally avoid creating tax liability for the insured when gifting premiums
2. keep cash otherwise used to pay premiums invested

-Incur Estate Taxes where prudent financial planning has isolated the client's liquid assets from the estate’s executor/administrator?
Consider a long term fixed rate Strategic Credit Facility to actually reduce estate tax liability and pay the total tax due in a timely manor

These concepts and many others can be covered in a scalable and repeatable seminar designed to significantly stimulate growth in the credit related revenue achieved by your company's  Private Wealth organization.  Your Financial Planning constituency is one of the keys to meaningful credit production success.  Once armed with this education immediate opportunities will result.  While not all opportunities will result in "at bats" or subsequent credit production, those that do will very rapidly increase the team's comfort in recommending the use of Strategic Credit Facilities leading to increase in overall team productivity.  

For a deeper level of detail on the Strategic Credit uses I've mentioned here please review the previously published articles my LinkedIn profile page or on my blog.


I am ready to discuss the delivery of an "Credit Opportunity Discovery"educational offering for your Financial Planners.  Please don't hesitate in contacting me at 404-909-5167.  Thank you.

Mark S. Johnson
Strategic Credit Solutions

mark.johnson@strategiccreditsolutions.com

The Hardest Bucket To Fill - Stimulating Wealthy Individual Credit Revenue

With the high level of private banking focus on increasing Assets Under Management (AUM/A) or Advisement the potential revenue increases that robust Credit Outstandings can provide sometimes take a back seat.  It's understandable in that the clients themselves don't often think of borrowing a their financial solution.  More often than not the High Net Worth Individual thinks borrowing is, at best, costly and at worst places undo risk on their financial plans.  By showing the client the Economic Benefit potentially gained through the use of a Strategic Credit Structure the Adviser's role is truly enhanced and the client gains a viable alternative financial solution.  A solution that not only provides the client with substantial Economic Benefit but also increases the bank's credit balances outstanding and maintains or potentially enhances the current level of AUM. 

Hopefully, this short discussion will stimulate your interest.  There are many Wealthy Individual Client situations the will give rise to substantial and measurable Economic Benefit through the use of a Strategic Credit Facility as an alternative to the client's original approach.

A few examples would include:

Your client plans to draw down cash or liquidate investment assets to fund “Private Equity Investments" -Consider the use of a Strategic credit Facility so as to keep cash and investment assets invested

Your client is planning the purchase of or already owns Life Insurance within an Irrevocable Like Insurance Trust - Consider the use of a Strategic Credit Facility to avoid Gift Tax and/or investment asset liquidation

Your client uses GRATS to accomplish inter-generational transfer residual assets - Consider the use of a Strategic Credit Facility to "insure" the GRATS are successful

Your client seeks to finance or refinance an asset purchase (or desires 100% financing) - Consider the use of a Strategic Credit Facility to avoid typical market "closing costs" and obtain a lower rate of interest


To review a short PowerPoint on the subject please click the Link embedded here.

For a much deeper level of detail on the Strategic Credit uses I've mentioned here please review the previously published articles my LinkedIn profile page or on my blog.

I am ready to discuss the delivery of an "Credit Opportunity Discovery"educational offering for your the many advisory constituencies that make up your team.  Please don't hesitate in contacting me at 404-909-5167. 

Thank you.

mark.johnson@stategiccreditsolutions.com

on Twitter @creditstrategic

Why Should Your N.R.A. Clients Borrow In The US?

At first blush many international clients will ask the same thing. 

The answer is simple, it's the QEB.

Many US banks now provide deposit and investment management services for citizens of other countries.  Because of its proximity, our more stable and growing US economy, and to accommodate their payment process for "importing business materials" many business owners (e.g.; car dealers, beverage bottlers, pharmacy chains, commodity exporters) situated in Latin America keep significant $ denominated deposits in US banks.  Importantly, most of these clients also maintain personal $ denominated deposits and investment accounts.  Often times these personal assets are "held" in offshore trusts, or personal investment companies (PIC).

While the legal ramifications of pledging these offshore investment assets must be thoroughly investigated by bank counsel competent with regard to the holding entities' legal jurisdiction, borrowing opportunities that will provide the client with "Quantifiable Economic Benefit" (QEB) often go unidentified.  In a recent article posted here I enumerated several International High Net Worth Client "Observable client Behaviors" (OCBs) that could lead to QEB through borrowing.  One of those OCBs relates to this situation.

 Do your clients own operating businesses that borrow in their home?

Have you reviewed the latest balance sheet and income statement of every operating company your client owns and that has a deposit account with your bank?  If you see "in-county" debt on a client company's balance sheet you can likely provide the client with QEB by taking advantage of historically low US interest and inflation rates by transferring their business borrowing out of their home country

 Using their Trust or PIC held investment assets as collateral and borrowing at a US bank where the credit facility's interest rate will be indexed to LIBOR with a spread favorably affected by the liquid collateral will almost always reduce the client's net interest cost.   In this scenario their PIC or Trust becomes the "in country" company's "lender." The client an then control the operating company's interest rate and repayment terms such to create the maximum QEB for the client's family.

Below is a chart showing the most recent inter-bank interest rates and core inflation rates in selected Latin America countries as reported today by Trading Economics.com. As you can see, the rate the US bank charges for its "secured" borrowings is likely to be significantly less that rate the operating company is paying for its commercial credit needs in most Latin American countries.

Clearly there are other considerations! 

 

On the positive side:

• Borrowing in the US will aid the client and their family maintain a level of privacy that is highly valued by High Net Worth Latin American clients
• The client can now set the interest rate charged by the "lender" (Trust or PIC) to its operating company and thereby exert control over jurisdictional  taxable profits 
• The PIC or Trust can set the interest rate such that it creates positive arbitrage over the rate it pays the bank and the the interest paid by the operating company is earned by the non-taxed offshore entity. 
• The client can keep his investment assets fully invested rather than periodically withdrawing and reinvesting to augment or accommodate business cash flows
• The client can expand this strategy to accommodate direct payment to its company's vendors in situations where local currency exchange to a "vendor acceptable currency" is restricted or limited (a good topic for expansion in future articles)

On the negative side:

• The operating company's country of domicile may require government registration of all debt to be repaid in a foreign currency inviting unwanted scrutiny
• The operating company and/or the client PIC or Trust may incur additional legal costs

My experience tells me that in most situations the positive QEB significantly outweighs the potential negatives and this advice will solidify and/or strengthen your relationship with your international N. R. A. clients.  International clients are traditionally "fee only" or fee mostly" and this approach to developing interest income will broaden each client's value to the organization.  Further, it will aid your business development results as the "in country" business community is often close knit.
If you'd like to discuss this concept or other Strategic Credit Solutions designed specifically to stimulate borrowing and its resultant interest income don't hesitate calling me directly.

Stay tuned and "follow" me on LinkedIn for the next Strategic Credit Solution aimed at stimulating borrowing by your N. R. A. clients that will provide then with QEB.

Your "likes, comments, and shares" are greatly appreciated.

Mark S. Johnson - Strategic Credit Solutions
404-909-5167

mark.johnson@strategiccreditsolutions.com
@creditstrategic

 

Higher Wealth Team Credit Production Performance

Strategic Credit Solutions  

 

How many times have you seen a chart like the one below?

Probably, your answer is something like, "more than I can count."  It seems as though every consulting firm brings some variation of it to the table when suggesting the best approach to the Private Wealth market.  Oh, the terminology is always somewhat different (advisor vs. manager or wealth vs. banking) and the chart may contain bubbles for additional professional disciplines but the concept holds true in most every presentation.  I completely agree with the concept and approach . . . as far as it goes.  Over the past 20 years, as most banks have adopted some variation of this, both the client families and the banks have clearly benefited from the greatly enhanced and better coordinated financial advice the approach creates.

Image by Mark S. Johnson 

 Teams that perform at high levels must meet regularly to discuss  their clients' financial activities and the multitude of ways their collective professional advice could provide Economic Benefit.   And, while the consultants' charts always seems to indicate the professional interaction always runs through the Client/Wealth/Family Advisor, the highest performing teams go beyond that basic approach.  While communication and coordination is one the concept's key attribute, each of the team's professionals is an expert in his/her field and with their deep expertise comes the ability to recognize those Client Behaviors that indicate an alternative approach to the client's planned activity that should be explored.  The trick is how to help each professional recognize an opportunity in another professional's area of expertise.   As you might have already surmised from the red bubble in my chart the focus here is on Credit Opportunity recognition. 

It is the Credit Advisor's responsibility to make sure the other team members are aware of the client financial activities in each professional's sphere of influence where the use  of a Strategic Credit Facility might provide the client family with significant and measurable Economic Benefit.  (I've added my red back and forth arrows to the chart to reflect how information flow between the various professionals should augment the consultants' traditional flows between the Client/Family/Wealth Advisor and the team). Each professional, over time, will observe Client Behaviors that indicate an alternative solution involving a Strategic Credit Facility could provide the client and their family with Economic Benefit.  Recognition of those behaviors by the professional that is in the position to observe them is the key.  For example, the Credit Advisor should make sure that:

1.  the team's Investment Advisor knows that a client request for asset liquidation and/or cash distribution to fund a private equity investment indicates economic benefit potential enhanaced yields from the use of a Strategic Credit facility

2.  the team's Insurance Advisor knows that a client considering the purchase of a "wealth replacement" high dollar insurance policy, to be owned in a ILIT, indicates economic benefit potential in gift tax avoidance/deferral and enhanced investment yields from the use of a Strategic Credit facility

3. the team's Trust Advisor knows that clients who use or are considering the use of GRATs to accomplish the generational transfer of wealth (appreciated publicly traded stock with volatility) could "insure" GRAT success through the use of a Strategic Credit facility

4. the team's Estate/Tax/Financial Planner knows that clients can accomplish significant economic benefit from estate tax saving through the use of a Strategic Credit facility

These are but a few of the possibilities. I refer you to my previous post called "Observable Client Behaviors (OCBs) on July 13, 2015 or my blog at: strategiccreditsolutions@blogspot.com for more detail.

Obviously, this interactive approach must work in multiple directions among all the team's professionals to reach the highest level of success.  My experience indicates that consistent reinforcement is required to reach and maintain optimal levels. Team meetings dedicated to professional education led by the appropriate teammate seem to work best once all team members buy into the concept.   The result is simple; more opportunities in every team member's area of professional expertise are recognized.  Certainly, all opportunities don't result in an "at bat," but their recognition definitely leads to higher levels of production and increased client economic benefit fulfillment.

If you would like to discuss this concept further or how Strategic Credit solutions could help your Wealth Team achieve its highest potential Credit Sales please don't hesitate contacting me.

Your "likes, "shares" and "comments" are welcomed and appreciated.

Mark S. Johnson
Strategic Credit Solutions

404.909.5167

@creditstrategic

mark.johnson@strategiccredit.com

 

 

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Funding the "Family Bank"

Strategic Credit Solution

As I have demonstrated in previous posts, the key to stimulating borrowing by Wealthy Individuals is showing each client the Economic Value to be gained by the use of a Strategic Credit. The credit strategy described here will not only provide the family with measurable economic benefit through aiding in preservation of their current wealth and accumulation of additional wealth but may also assist their efforts toward fostering generational responsibility. 

I will leave the reader to muster their own research on the reasons High and Ultra High Net Worth families should consider creating a Family Bank.  The research is extensive and very easy to find in libraries and throughout the internet. 

My focus here is on the use of a Strategic Credit Facility with which to fund the Family Bank and its activities.  In the downloadable Linked Power Point I'll describe the economic benefits that families can derive from this strategic credit approach and, importantly, how the understanding and application of this concept can aid Private Wealth Group Managers drive credit balance outstanding growth and increase profitability within their banking divisions.  Additionally, this brief presentation illustrates the structure of the bank line of credit that provides the funding and its typical funding mechanics.  Please download the PowerPoint and take a look.  

Don't hesitate contacting me directly if you'd like to discuss the concept in more detail or discuss how Strategic Credit Solutions might help your Wealth Management Team attain its Credit Sales potential.

Your "likes," "comments" and "shares" are greatly appreciated.

Mark S. Johnson
Strategic Credit Solutions

marksthephnejohnson@comcast.net

@creditstrategic

404-909-5167

Stimulating Borrowing - High Net Worth International (N.R.A.) Clients

Strategic Credit Solutions

In previous posts I have discussed at length how Family Offices or RIA Wealth Advisors are in a unique position with their clients.  They are, by definition, in a position of great trust.  According to work published by the CFA Institute, the families surveyed said that the most important attribute they look for in choosing a Wealth Advisor is that they be can trusted to act in the client's best interests.  This situation goes for International (NRA) Wealth Advisors as well.

To fulfill this expectation of trust these advisors must be knowable regarding the many areas important to the overall financial health of the client and their family.  Multi-generational financial planning, tax planning, investment management, insurance management, family governance, risk management, banking advice, and Strategic Credit advice, are all important components of every HNW or UHNW family's financial solution. International Wealth Advisors have to account for additional components like, in-county interest rates, currency exchange rates, in-country inflation rates and applicable tax issues. In additional, they must be keen observers of the client's typical financial behaviors.  Many of these behaviors don't key the typical international client to think credit.
Just as with domestic US families, often times the financial solution related to many of actions discovered from these "Observable Client Behaviors (OCBs)" can be aided by the use of a Strategic Credit facility.  The word strategic in the term Strategic Credit relates to the reason or purpose for which the HNW or UHNW client would use leverage.  Typically, the NRA client will not be familiar with the economic benefit of borrowing in the US.  Advisors that can bring these credit or leverage strategies to the attention of their NRA clients will strengthen their client relationship in a very competitive market and importantly, expand their company's revenue generation beyond  traditional "fee based" services and deposit credits.

Similar to the domestic US client, as part of a the international client's financial solution Strategic Credit might be used:
1. instead of the typical loan, mortgage or line of credit with which the client might be familiar or,
2. the use of portfolio cash or a portfolio liquidation to raise cash.

"Strategic Credit” will always provide the client with the opportunity to realize “Quantifiable Economic Benefit (QEB)." This economic benefit can be measured and generally be classified in one of three ways; those solutions where Strategic Credit can offer interest and fee cost savings over the more traditional mass market or in-country credit available, or through those solutions where, by the use of Strategic Credit the client can reduce personal or corporate taxes while benefiting from the use of US dollars rather their local inflation-sensitive currency, or where the client's cash that would be otherwise utilized in the planned action can be or remain invested over the term of the Strategic Credit’s outstanding.  When used in combination with the clients' offshore Private Investment Company (PIC) these strategic can be powerful generators of economic benefit for the client and their family members.

Becoming familiar with these International client OCBs can put wealth advisors in the unique position of offering and demonstrating the economic benefit  that a tailored Strategic Credit Solution can provide. Linked here is a chart outlining a few of these International OCBs. I think the client behaviors will ring true with all International Advisors. You have likely been asked for help and given advice around each of these situations.

As this blog progresses, I will post Strategic Credit Solutions that can be used when these International OCBs arise and describe how each solution has the potential to provide the client with Quantifiable Economic Benefit.  Additionally, you may run into some level of client resistance as is the case with most new ideas.  I'll also provide advice on on to overcome those objections as they arise.  Stay tuned.

If you would like to discuss this concept at a deeper level or would like to explore ways I could aid your team in realizing its credit production potential don't hesitate contacting me.  

Your "likes," shares and comments are welcomed and appreciated

Mark S. Johnson
Strategic Credit Solutions
404.909.5167
mark.johnson@strategiccreditsolutions.com
@creditstrategic on Twitter

Funding Alternative for ILIT Life Insurance Premiums

Strategic Credit Solutions

High Net Worth and Ultra High Net Worth individuals often use the death benefit from a Life Insurance Policy as a means of wealth replacement. Replacement for the value of their estate that is expected to be used to settle their estate tax liability. In essence, making the client's heirs "whole."
These policies are typically owned by an Irrevocable Life Insurance Trust (ILIT) that is considered “remote” from and whose assets are not included in the individual’s estate.

The source of the funds used to pay the insurance policy premiums can have wide spread implications on the individual’s effort to continue accumulating wealth during the remainder of his/her lifetime as well as their potential for preservation of wealth already accumulated.
More often than not, the ILIT that holds the policy will not have the resources itself to fund the premiums creating a "cost of transaction" dilemma for the insured.  This is where strategic credit advice from the insured's advisor can make a real difference.

In this document I suggest that the use of “Strategic Credit Facility” (click on highlight and download) should be considered as a potential funding source. I discuss a suggested structure for this type of facility and the potential client benefit of its use.  In many cases the individual will gain significant and Quantifiable Economic Benefit (QEB). 

The blog topics I cover here are parts of an one or two day course on HNW Client Credit Opportunity Discovery available to Bank Private Wealth/Banking groups and Family Offices and RIA shops.  If you'd like a full course syllabus please let me know.

I welcome your "likes" and comments.  They are most appreciated.  Don't hesitate to contact me if you would like to discuss this or any of my other Strategic Credit Solutions in more detail.

404.909.5167, mark.johnson@strategiccreditsolutions.com

"Synthetic" Mortgages

Strategic Credit Solutions

 "Synthetic" Mortgages

Wealth Advisors are often called upon to guide their HWN or UHNW client families through the home acquisition process.  Cash or the traditional bank "mass market" mortgages (with HWN client features) are the most often used methods of financing such a purchase.
Continuing my discussion of Strategic Credit Solutions as alternatives to the norm that can create measurable Economic Benefit for the client, this post will illustrate a solution I call the "Synthetic Mortgage" (click on any highlighted text). Synthetic in that it can be structured in term and repayment to look and act like a traditional mortgage while typically costing the client far less and creating the opportunity to maintain investments that would otherwise be liquidated to cover the "lender required" down payment.  This Economic Benefit can be quantified based on unique client circumstances.
Research shows that Americans hold their homes, on average, about seven years and refinance those they hold longer even more often than that.  On average second and third homes are typically held for even shorter periods.  That said,  even HNW or UHNW clients often think only in terms of 15/30 year fixed rate loans.  Even when opting for a shorter term "adjustable rate" mortgage, the loans' closing costs and origination fees create an unnecessary economic burden for the HNW or UHNW client.
When Advisors observe this client behavior (real estate purchase) suggesting a Strategic Credit Solution may add value to their relationship.
The Synthetic Mortgage strategy I discuss in this linked presentation (click here and then "download" for best viewing) can be structured as a stand alone credit facility or as an advance under the "Family Bank" strategy I will discuss in my next
post.  As part of the Family Bank strategy multiple generations within the family, all with different income levels and tax requirements, may benefit economically from facility structural variations designed to take advantage of each generation's needs. 

 Your past "likes" and "comments" have been most welcome and appreciated.  I look forward to more. 

Don't hesitate to contact me directly for deeper discussion on how my approach Strategic Credit production can drive your Private Wealth Division's profitable growth.  

Mark S. Johnson
404.909.5167

"Insuring" GRAT Success

 

  

Strategic Credit Solutions

The key to stimulating borrowing by Wealthy Individuals is showing each client the Economic Value to be gained by the use of a Strategic Credit. The credit strategy described here will provide Grantors with the means to stay "Fully Invested" while creating or maintaining the ability to effect a "Asset Substitution" that will prevent Grantor Retained Annuity Trust (GRAT) failure and potentially maximize beneficiary value.

Under current tax law wealthy individuals often use Grantor Retained Annuity Trusts to maximize the Economic Value transferred from one generation to the next. When the asset that represents that value is low basis publicly traded stock the success to the strategy and amount of value transferred is subject to the vagaries of the public markets. The use of a Strategic Credit Solution can aid those individuals in exercising their power of “asset substitution” under Internal Revenue rules to effectively “insure” that value will remain to be distributed to its beneficiaries at it maturity. Here, I’ll not detail the rules for, or the circumstances under which, the use of GRATs is recommended. I leave that to the trust professionals.

But, if/when the decision to use a GRAT is made, having cash available to effect an IRS allowed asset substitution at the point in time the client deems appropriate during the term of the GRAT is beneficial on several fronts. The use of cash to effect the substitution will remove any potential for valuation questions related to the assets substituted as well as return low basis shares to the Grantor’s estate.
For “fully invested” individuals cash substitutions can best be done through the grantor’s use of a Strategic Line of Credit specifically structured for this purpose. This will insure that the Grantor has cash available when needed to effect the asset substitution at anytime during the GRAT term.

This Presentation Link (click and make sure to click "open" when the PowerPoint loads) leads to a brief Power Point example, based on actual market values and interest rates, for a theoretical client who owns a large position in Exon Mobil.  It illustrates how use of Strategic Credit can aid the Grantor in his quest to maximize the value of a Generational Asset Transfer achieved by the use of a GRAT.  I hope you will take a look . . .
  
Your past "likes" and "comments" have been most welcome and appreciated.  I look forward to more. 

Don't hesitate to contact me directly for deeper discussion on how my approach Strategic Credit production can drive your Private Wealth Division's profitable growth.  

Mark S. Johnson
404.909.5167

What the heck is QEB?

Quantifiable Economic Benefit (QEB)

Strategic Credit Solutions

High Net Worth and Ultra high Net Worth Individuals maintain wealth through their family's generations through capital preservation and continuing to accumulate additional wealth through time.  The Economic Benefit gained through any financial solutions employed should be measured against potential alternative solutions.  I've made the point in past posts that many or most HNW/UHNW individuals don't consider the use of a Strategic Credit Solution when making financial decisions.

In my last post I discussed "Observable Client Behaviors (OCBs);" those client behaviors that Family and RIA wealth advisors learn about through their position of trusted advisor with the family.  Often times the financial solution related to many of the actions discovered from these "Observable Client Behaviors (OCBs)" can be aided by the use of a Strategic Credit facility.  The word strategic in the term Strategic Credit relates to the reason or purpose the HNW or UHNW client would use leverage and the credit facility usually differs in term, rate, collateral and repayment from that with which the client might be familiar.  It is not the typical loan or line of credit that most all banks make readily available to these clients.
As part of a financial solution Strategic Credit might be used:

1. instead of the typical loan or line of credit with which the client might be familiar or,
2. the use of portfolio cash or a portfolio liquidation to raise cash or.

"Strategic Credit” will always provide the client with the opportunity to realize “Quantifiable Economic Benefit (QEB)." This economic benefit can be measured and generally be classified in one of three ways; those solutions where Strategic Credit can offer cost savings over the more traditional mass market credit available, those where a tax liability that would otherwise be incurred can be deferred or avoided or those solutions where, by the use of Strategic Credit, the client's cash that would be otherwise utilized in the planned action can be or remain invested over the term of the Strategic Credit’s outstanding.  Many times the Strategic Credit Solution can combine more than one of these benefits.
Becoming familiar with the QEB that Strategic Credit can provide in these circumstances adds a new level to the wealth advisor's capabilities. In partnership with a bank Private Wealth Management Credit Advisory Professional delivery of these credit structures can be a seamless process.

In my last post  I included a chart that delineated some common HNW/UHNW client OCBs.  Follow this link to an expanded chart that shows the Strategic Credit Solution I suggest for each OCB and the source of the QEB potentially derived by employing it.

I think these client behaviors will ring true with each of you. You have likely been asked for help and given advice around each of these situations.   Now you have an additional alternative to help you client consider. 

Please review my past LinkedIn posts at: https://www.linkedin.com/profile/preview?locale=en_US&trk=prof-0-sb-preview-primary-button for more detail on the Strategic Credit Solutions I mention here and don't hesitate to contact me if you'd like to discuss the topic more fully.

Your past "likes" and "comments" have been most welcome and appreciated.  I look forward to more. 

Don't hesitate to contact me directly for deeper discussion on how my approach Strategic Credit production can drive your Private Wealth Division's profitable growth.  

Mark S. Johnson
404.909.5167

Observable Client Behaviors (OCBs)

Strategic Credit Solutions

Family Office or RIA Wealth Advisors are in a unique position.  They are, by definition, in a position of great trust.  According to work published by the CFA Institute, the families surveyed said that the most important attribute they look for in choosing a Wealth Advisor is that they be can trusted to act in the client's best interests.

To fulfill this expectation of trust these advisors must be knowable regarding the many areas important to the overall financial health of the client and their family.  Multi-generational financial planning, tax planning, investment management, insurance management, family governance, risk management, banking advice, and Strategic Credit advice, are all important components of every HNW or UHNW family's financial solution. Wealth Advisors will ofter partner with other professionals whose specific area of expertise enhances the client's ultimate financial solution in all these areas.

With the trust client families afford their advisors, often comes the opportunity to observe the inner workings of family decision making and their resultant behaviors.  Advisors are in a unique position to observe behaviors that have financial impact of the current and, many times, the future generations of their client families.

With regard to the behaviors HNW or UHNW families exhibit, they can generally be classified into two groups.  Those behaviors where the advisor is asked to aid in the decision making regarding the best way to fulfill the clients' planned actions or those situations where the advisor is simply directed to make capital funds available to fulfill actions the client has already taken.

Often times the the financial solution related to many of actions discovered from these "Observable Client Behaviors (OCBs)" can be aided by the use of a Strategic Credit facility.  The word strategic in the term Strategic Credit relates to the reason or purpose the HNW or UHNW client would use leverage and the credit facility usually differs in term, rate, collateral and repayment from that with which the the client might be familiar.  It is not the typical loan or line of credit that most all banks make readily available to these clients.

As part of a financial solution Strategic Credit might be used:
1. instead of the typical loan or line of credit with which the client might be familiar or,
2. the use of portfolio cash or a portfolio liquidation to raise cash. 

"Strategic Credit” will always provide the client with the opportunity to realize “Quantifiable Economic Benefit (QEB)." This economic benefit can be measured and generally be classified in one of two ways; those solutions where Strategic Credit can offer cost savings over the more traditional mass market credit available or those solutions where, by the use of Strategic Credit, the client's cash that would be otherwise utilized in the planned action can be or remain invested over the term of the Strategic Credit’s outstanding.

Becoming familiar with these OCBs can put wealth advisors in a unique position of offering and demonstrating the QEB that a tailored Strategic Credit Solution can provide. Below is a chart outlining a few of these OCBs. I think the client behaviors will ring true with each of you. You have likely been asked for help and given advice around each of these situations.

As this blog progresses, I will post Strategic Credit Solutions that can be used when these OCBs arise and describe how each solution has the potential to provide the client with QEB.

A Few Observable Client Behaviors Examples

Purchase of a Residence or other Major Asset; e.g., Planes, Yacht, Equip	Asks for help to find the “best” purchase money mortgage  in the market
Refinancing the Debt on their Primary or Second Home	Asks for help to find the best refinancing alternative that may include “cashing out some of their equity”
Making a Private Equity Investment	Asks for cash withdrawal from their investment accounts (which often times leads to need to “re-balance” the accounts to replenish the cash allocation)
Funding the Capital Needs of Family Members or Family Investments Entities	Asks for multiple cash withdrawals from their investment accounts (which often times leads to need to “re-balance” the accounts) or you are asked to arrange  multiple market rate loans to family members or family entities
Has Obtained Non-Mortgage  Debt in the Past	You learn about debt that originated possibly before becoming a your client or from a local banking connection
Operates a Commercial Business that has Debt Financing Needs	You learn that the business borrows commercially to fund its operations
Uses GRAT’s to Pass Estate Value to Future Generations	Has had GRATs fail because the per share value declines from its height during the GRAT term before termination to less that its contribution value  or has simply been able to pass less value on in a successful GRAT because of  the assets’ market value declines from it zenith during the term
Now Owns or is Contemplating the Purchase of High $ Life Insurance	Is funding or plans to fund future premiums through “gifting” or family "loans" to an Irrevocable Life Insurance Trust

Don't hesitate in calling or emailing me if you like to discuss the topic further.  

Mark S. Johnson
Strategic Credit Solutions
404.909.5167
mark.johnson@strategiccreditsolutions.com

Increasing Bank Wealth Managment Divisions' Net Interest Income

This blog will be dedicated to discussing ways that bank's (both domestic and international clients) Wealth Management and Private Banking Division leaders can significantly increase "net interest income" revenue. 

 My first post "Stimulating Wealthy Individuals Borrowing" sought to outline the opportunity.  Subsequent posts will be aimed at the techniques Wealth Advisors and Private Bankers can develop to realize this revenue gain while, most importantly, providing their clients with economically beneficial alternatives to to the Wealthy Individuals typically approach to their financial solutions.

I will explain the key concepts of Observable Client Behaviors (OCBs) and Quantifiable Economic Benefit (QEB) in detail and I will suggest Strategic Credit Solutions that provide the QEB I'll describe when clients exhibit these certain behaviors. This benefit may manifest itself as cost savings over more traditional forms of credit, reduction or deferral of many types of taxation or in revenue that would not otherwise be available to the client. 

keys to maintaining and increasing wealth will be discussed

So stay tuned and feel free to comment.  Your observations and experience will make this a better resource.  Argument or support, both are welcome and the discussion will be stimulating.

Mark Johnson

Strategic Credit Solutions
mark.johnson@strategiccreditsolutions.com
404.909.5167