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

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