FA-IQ reached out to advisors to ask: What are the top financial advice questions you are getting from your clients?
Brooks Hays, partner, managing director and wealth advisor at Cresset Capital. San Francisco-based Hays has been in the industry for 15 years and has $120 million in client assets.
“The question I get the most seems to be, ‘I have too much cash but can’t stomach high equity multiples — what should I do?’
First and foremost, it is important to anchor every portfolio in a long-term plan, which at Cresset we accomplish through goals-based investing. This approach helps instruct our clients’ broad asset allocations and then we use carefully curated capital market assumptions to analyze risk and reward of sub-asset classes to create portfolios. Furthermore, as clients watched stocks tumble in March 2020, many expected the equity market to follow the economy and stay weak for a prolonged period. The Federal Reserve acted quickly, though, lowering the Fed funds rate to 0-0.25%, which not only encouraged spending but also made a case for much higher equity multiples. Importantly, this boon happened primarily in U.S. large-cap equity markets, which lasted until U.S. mid- and small-cap and international equities caught up toward year's end.
Because most public equities are now relatively fairly priced, it’s more important than ever to consider private markets. While many of our clients have access through their professional networks to private investment opportunities, the power of Cresset’s platform is the ability to offer access to a much broader ecosystem of private credit, private real estate, and private equity.
Further, we’re taking care to stay true to the core tenets of investing — deep underwriting, careful diversification, low leverage, and experienced managers and operators.
The reality is a new administration, in tandem with skyrocketing levels of debt in the U.S., makes higher taxes almost inevitable. The trillion-dollar question is: Which taxes will go up, when and by how much? Although no one knows for certain, it’s pretty clear that the all-time-high lifetime estate tax exemption is low-hanging fruit and is likely to be lowered by half or more in the coming years.
To be prepared, it’s imperative to dive deep into the assets and liabilities on client balance sheets, how they will grow over time and whether gifting makes sense. Clients should work with experienced trust and estate specialists to define structures that fit each client’s unique needs in accordance with modern trust law. We feel as though we’re in a time of ‘use it or lose it’ when it comes to estate and gift tax exemptions.
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