Archive for August, 2018

Financial Technology is Changing Wealth Management

Posted by Jeremy Walla

How the FinTech Industry is Influencing High Net Worth and Ultra High Net Worth Wealth Management

FinTech, the clever portmanteau of financial technology, has been the buzzword of the decade when it comes to financial management and investing. The advent of mobile trading apps, cryptocurrencies, and especially robo advisors has changed the landscape of wealth management. But there are still segments of the market that have lagged on the innovation front.

For high net worth (HNW) individuals with wealth in the millions, or ultra-high net worth (UHNW) individuals whose assets reach the tens or hundreds of millions, much has been unchanged over the last 10-20 years. Their complex investment strategies, and relationships with dozens of managers or custodians, results in a lot to keep track of; multiple, disparate accounts and plenty of paper statements and tax documents that easily pile up. The more money you have, the more difficult it is to produce accurate and timely reporting and advice–until now.


The Challenges of an RIA-Client Relationship That Doesn’t Leverage Technology

Until now, Registered Investment Advisors were so focused on the influx of office work required for larger clients, and as a result, more personalized relationships were difficult to foster. RIAs must manage tons of data entry, constant paper chasing, and agonizingly long waits for quarterly data. Without technology, there exists a constant time lag because information isn’t centralized. Advisors in the UHNW space were (and still are) data aggregators, gathering information from a plethora of sources at varying speeds throughout the year.

After far too long, the world of HNW and UHNW investing is finally beginning to see much-needed change. RIAs are beginning to see a flood of new technology that makes their jobs faster, easier, and more relationship-focused.


Leveraging Financial Technology (FinTech) to Streamline HNW and UNHW Investing

There are now some incredible solutions available, and firms should start taking advantage of the efficiency gains that will eventually be commonplace. Two major areas where technology is making improvements include Customer Relationship Management (CRM) and Document Management systems. Both systems have been around for a while now, but have traditionally been focused on internal data gathering and organization. More specifically, CRM systems were almost exclusively built for organizations that were transactional in nature, and primarily sales-focused. Think Salesforce; the name alone indicates the initial intent of the system. However, CRM systems now have a plethora of native functionality, as well as endless customization potential, either through manual build-out, or the addition of plug-in applications. Gone are the days of pulling data from one system and entering it into another.

Although not perfectly seamless, system integration is improving at lightning speeds, and customization is allowing firms in the UHNW space to build out a technology stack that finally serves the complexity of their client base. Satellite systems were the first step in centralizing chunks of data, but we’re seeing some fascinating opportunities to link up multiple databases to create one true home for information. Finding that right combination of parts can be a lengthy and strenuous process, but the gains are seemingly endless. Data from the CRM can now simply be pushed to document templates held in the Document Management System. From there, these documents can be “checked-out” for e-signature by the client, and then “checked-in” when done. What previously required cutting and pasting, printing, FedEx-ing, scanning, and re-filing now just requires a few mouse clicks. In addition, there are now solutions out there that will even download bills or account statements automatically. The process of gathering data is getting ever easier, and although there is still often some data entry, Artificial Intelligence (AI) solutions appear to be on the way to make this piece better as well.


FinTech Innovations Aren’t Just for the RIA

The life of an advisor is improving considerably thanks to financial technology innovations, but what about the lives of their clients? Documents and reports may be arriving faster, and e-signature is likely appreciated by some, but what’s really in it for the client? Where is the value-add, and why should they continue paying the same amount, if not more than they already do?

Clients who have always looked to receive customized attention should be your biggest cheerleaders. With the advances in technology, both HNW and UHNW advisors have more information at their fingertips than ever before, and that should mean faster, more accurate information when or before it’s needed. Rather than being primarily reactionary–gathering data and reporting on it, advisors are starting to become proactive advocates for their client. Better yet, operational tasks can become standardized and systematized, which leaves time for true strategic financial planning. As projects begin to take less time, that leaves more time for a client’s projects.


Working Through the Challenges of FinTech Toward the Ultimate Goal

New possibilities are coming to light daily, and the benefits of all this work are still tough to nail down in the short term. As we continue to implement and improve our processes, it’s clear major changes won’t happen overnight. Challenging projects require time, money, and careful planning, as we are always committed to meeting our clients’ unique needs. Some of these projects can take more than a year to reach completion, and while it does take time, implementing technological innovations to help grow client relationships is highly worth it in the end.

Here at Lake Street, we have worked diligently to monitor industry trends and focus on the solutions available in the market. While we may not be interested in being on the leading edge of technology, we do strive to find tested, vetted systems that can improve our own daily operations. In doing so, we find ourselves implementing solutions that have added great value to the productivity of each department within the firm, but our ultimate goal is producing time and opportunities to enable better client service. With that in mind, we have certainly had our share of small victories since beginning this initiative, and we look forward to adding these up and capitalizing on more exciting projects in the years to come.

Creating or Revising Your Estate Plan

Posted by Melissa Olszak, CFP®, CFA®

Know How to Spot What’s Missing from Your Estate Plan and What Can be Improved

Maybe you’re thinking for the first time about what your estate plan should look like. Maybe you’re revisiting your estate plan for the second or third time.

Either way, your ultimate goal should be to have an estate plan that aligns with your long-term objectives. While we don’t recommend going it alone, there are a handful of factors you should be sure to consider as you craft or re-craft your estate plan.

Naming the Executors, Agents and Trustees of Your Estate

Depending on the type of estate plan you have, you will need to choose a trusted person to act on your behalf if you are not able. For instance, with a Health Care Proxy, you are choosing someone to make medical decisions on your behalf. For a Durable Power of Attorney, you are asking someone to make financial decisions (while you are living) on your behalf. For your Will and Trust, you are asking someone to handle the disposition of your estate according to your wishes.

Given the significance of each of these roles, one of the important decisions you will make is choosing someone (or often a combination of people) who are sophisticated and savvy to handle the complexity of estates, taxes and finances, but who also know your values and will respect them.

Once you’ve made the decision on who to name (whether that be a trusted family or friend or a trusted attorney), it is as important to understand what the back-up rules will be if that person is unable to serve – i.e. who can appoint a successor, who can remove a trustee, what occurs with further vacancies.  

Walking through a few scenarios with your attorney as the documents are drafted will help flush out your objectives.

At Lake Street, we often advise that clients choose both a trustee family/friend along with a trusted advisor (attorney, CPA, etc.) and also provide future beneficiaries with appointment and removal powers in case adjustments need to be made in the future.   

Managing Your Assets: Do You Leaving Them Outright or in Trust?

Another important consideration for your estate plan is how you want to leave assets to your beneficiaries – whether that be a surviving spouse, your children, further descendants, friends and/or charity. This decision is often influenced by the size of the assets. The larger the assets, it generally is more beneficial to leave them in trust versus outright, since there is typically a higher level of asset protection.

Although court decisions are often unpredictable, trust assets that are not self-settled (i.e. funded with one’s own assets) typically will have language built into them to provide some level of protection from the beneficiary’s creditors (such as divorce, accidents, business, etc.). Once the assets are distributed from the trust and fully in the control of the beneficiary, that asset protection is lost.  

With the right trustee in place who understands your values, the beneficiaries can still be supported in a way you would like without having to distribute the assets to them (for instance a trust can purchase a home for a beneficiary).

Keeping assets in trust does come with costs, however, including trustee and legal fees, accounting fees and investment management fees, so these costs need to be considered relative to the total assets that will be retained or distributed.

How to Build Flexibility into your Estate Plan

To err is human; therefore, It is not uncommon to make a decision and look back years later wondering what you were thinking. This scenario happens as life evolves with family and friends, but can also happen as a result of tax and legal changes at the Federal and State level. Given that it is impossible to predict the future, it can be helpful to build flexibility into your estate plan.  

For instance, with Irrevocable Trusts, which are trusts that by design cannot have the dispositive provisions changed, it is helpful to consider whether there may be any administrative changes that may be needed in the future to adjust for trustee changes and/or legal and tax changes. When you consider the potential changes that may occur in the life of your spouse (if you predecease him/her, for example) or a child/grandchild, you may want to provide them with the flexibility to change your plan if it makes sense. One way to do so is to provide them with a power of appointment over the assets in trust for their benefit. It is important to do this with your attorney, as there are tax differences between the types of powers of appointment you can provide – general or limited.  

That being said, one example is that you could provide your spouse with the ability to change the plan to change the amounts left to children, spouses of children and charity. Say, for instance, there is a child with special needs in your family. This situation may require a modification of the estate plan to account for how it is best that the child receive the trust assets.

This same example could apply to your children – i.e. giving them the ability to redirect assets in a trust for them to include their spouse rather than potentially defaulting to a trust for only their children.

While there is no “right” answer, it is important to think through your objectives and determine whether to add in the flexibility, and also discuss with your attorney as there are also often tax implications to consider as well.

Putting Your New or Revised Estate Plan Into Action

Once you think through your estate plan, it is equally as important to implement it by signing the estate documents and thinking through whether any assets should now be shifted to take advantage of your new plan. This action could simply involve retitling assets from your personal name to your new Revocable Trust to move assets outside of probate (which will save time and money if something happens to you), or it could involve more advanced wealth transfer strategies such as shifting assets to an Irrevocable Trust via a lifetime gift.  

At Lake Street, our goal is to understand your objectives and work with you and your other advisors to help implement a customized plan that best meets your needs. Estate plans can be complicated, and the more people you have working on your team, the better!