“Safeguard and Grow Your Wealth” – Asset Protection Tips, Real Estate Update, and More

“Safeguard and Grow Your Wealth” – Asset Protection Tips, Real Estate Update, and More

Last Thursday, April 27th, we hosted our 3rd annual State of the Firm event, “Safeguard and Grow Your Wealth,” at The Santaluz Club.  Thank you to all attendees for sharing this evening with us and making it such a great success!

Behavioral Finance

To start the evening, I touched on a topic that is a passion of mine: Behavioral Finance.  We all make decisions based on emotional and cognitive biases, or ways of thinking.  While our biases are as unique as our individual personalities, here are a few I’ve seen often in my career:

  • Loss aversion bias. People are twice as sensitive to losses as they are to gains. As a result, portfolios need to be positioned appropriately for clients with this bias.
  • Endowment bias. If you inherited a stock, or have simply held a position for a long time, this bias can keep you from selling a position that should be sold (e.g. Eastman Kodak).
  • Recency bias. People have the tendency to purchase investments that have performed well recently and avoid those that have done poorly.  However, recent performance is no predictor of how a position will continue to perform.
  • Confirmation bias. People tend to seek research that supports their point of view without regard for the opposing side.  However, the opposing side may be right!
  • Anchoring bias. People who purchase an investment only to have it decline may decide to sell only once it goes back up.  What if that never happens and the stock continues to fall?  It would’ve been better to book the loss and move on.
  • Regret aversion bias. People with this bias will avoid any investment where they’ve had a poor experience in the past. However, they may miss out on future opportunities that have zero connection to the prior, poor performing investments.

Real Estate

Mark Gleiberman gave us an update on the real estate market:

  • Looking good. Jobs and new construction, the two key metrics in measuring demand for real estate, continue to remain strong.
  • Renting is on the rise… Since the 2008 housing market crash, tighter lending requirements have made it difficult for households to finance a mortgage.  Also, we’ve seen a strong shift in thinking away from home ownership, especially among Millennials.  Both factors bode well for rentals.  The ravenously strong demand for rentals is expected to slow down in 2018 yet still remain healthy.
  • …especially on the West Coast. The demand for apartments is heavily weighted in the Western United States. 12 of the 20 top metros for projected rental growth lie west of the Rockies, with Sacramento, Phoenix, and Las Vegas topping the list.

Asset Protection

Elizabeth Morgan closed by sharing an introduction to the legal side of safeguarding your wealth:

  • We all need it… Nearly every investor needs asset protection to some degree.  And, the higher the net worth, the more difficult it is to achieve solid asset protection without a protective legal structure in place.
  • …and it’s legit. The US legal system allows individuals to protect assets from creditors.  This principle, which allows business owners to learn from past mistakes instead of being destroyed by them, is a core tenant of the US legal system built by our Founding Fathers.
  • Have a majority of your assets in CA? Unfortunately for us in the Golden State, California is the worst state for creditor protection without crossing the border of another state or even country.  Just like a diversified investment portfolio is spread between separate areas of the market, investors may need to diversify asset protection outside the US.  The key issue in international asset protection is due diligence: you need to know which domiciles to trust and how to navigate the increasingly complex IRS tax rules surrounding international structures.
  • Attention, entrepreneurs. A lot can be accomplished to keep assets safe.  A common mistake for many business owners is keeping all assets in the same partnership. This allows the liability from one entity to bleed into the liquid assets of another.  A decentralized business structure, which separates business ventures into distinct entities, puts a cap on your liability.  Another great tip: keep cash and other valuable assets out of the direct operating company.

Don’t Miss Out: Upcoming Cyber Security Event

Thank you again to everyone who attended our event.  This September, we’ll close out our educational offerings with an event on keeping yourself safe from the rising threat of cyber fraud.  We hope to see you then.

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