Insights by Cathay

Further advancements in the fintech market have expanded the accessibility of private wealth management products and services to a broader range of individuals and families. Thus, the market has witnessed significant progress, enabling a wider segment of people and families to access a more comprehensive range of private wealth management products and services.

The aftermath of the pandemic has prompted many individuals to prioritize financial management and estate planning, recognizing the need to be prepared for future crises. To gain a comprehensive understanding of the latest trends, recommended practices, and concerns prevalent in the wealth management landscape, Phil Hurst participated in the L.A. Times panel to discuss his perspective and insights for 2023.

You may view the complete article here.

Q: How would you describe the current investment environment in 2023 and what do you consider to be the best investment approach, in general terms?

Today’s investment environment is a bit like a tug-of-war between inflation expectations and the Fed’s response. The Fed would like to see inflation settle at the 2% to 3% range but its actions to help make that happen cause the economy to slow and put it at risk. We have to hope for a soft landing but nine out of 10 times that doesn’t happen. Based on all this, caution is the keyword when it comes to the best investment approach.

Q: What should parents consider when determining how to involve their children in intergenerational wealth-planning discussions? What kind of information is good to share and at what age?

It’s important to involve kids in wealth planning discussions so they can appreciate the efforts being made to ensure family wealth is maintained when it passes to them, especially since historically a lot of wealth is lost during that transition. They should be made aware of the hard work involved to amass the wealth and understand the plans being put in place for their benefit. As for when that should happen, that really depends on the parents’ assessment of their kids’ capability, i.e., their level of maturity.

Q: How can clients protect their assets from threats such as creditors and bankruptcy and/or future estate taxes after their death?

An Irrevocable Life Insurance Trust owns insurance on an individual’s life, removing the insurance proceeds from the insured’s estate for estate tax purposes. A Crummey Trust, also an irrevocable trust, allows an individual to make gifts to the trust and qualify them for the annual gift tax exclusion. These are simple ways to shelter funds from estate taxes that can accomplish those objectives.

Q: What tools, products and processes can assist advisors in helping clients be more tax efficient while growing wealth and still maintaining cash flow needs?

Financial planning is an important tool to help clients get to their desired outcome, and tax mitigation strategies should be part of every plan. A healthy portfolio might include tax-deferred products, tax-free income, trusts, real estate and oil and gas investments – things that receive favorable tax treatment.

Q: As a trusted advisor, what advice can you share for longer-term portfolio asset allocation?

It’s very important to be cognizant of the changes and evolutions clients go through during the different cycles of their lives. Starting to save at a young age is ideal for having the best chance to grow wealth, and during those years when retirement seems so far away, it’s certainly appropriate to be more aggressive with investments. When clients are older, they need to ease off the gas a bit, perhaps turning to dividend-yielding, more conservative investments. Since people are living longer than ever, it’s important to maintain some level of growth but employ a philosophy focused on de-risking to ensure their portfolio covers their needs for the rest of their life.

Q: What keeps your clients up at night in 2023?

I think people are waking up to the damage inflation can do to our collective lives. They are wondering what the long-term effects of high inflation would do to their ability to maintain their current lifestyle. For instance, if inflation remains at 5% for the next 10 years, they would have lost half their buying power by 2033. This is why the Fed’s inflation strategies are so important. Everyone is affected.

Related Links:

• Chang M. Liu Weighs in on the 2023 Outlook

• Jim Haney Weighs in on the 2023 Outlook