Time in the Market versus Timing the Market

How Family Offices Are Adapting Their Wealth Strategies Globally

by Asset AllocationBlogFinancial PlanningInvestment Planning
Time in the Market versus Timing the Market

How Family Offices Are Adapting Their Wealth Strategies Globally

The global economic landscape has undergone significant changes in recent years, bringing with it challenges and opportunities for ultra-high-net-worth (UHNW) family offices seeking to preserve and grow their wealth. They must navigate a complex chain of economic factors, geopolitical risks, and market volatility. In this context, asset allocation has become more critical than ever as family offices strive to build resilient and diversified portfolios that can withstand the tests of time. This leads us to ask – globally, how are family offices adapting their wealth strategies?

For this, we turned to the UBS Global Family Office Report 2024. Here, we were not surprised to find that one of these strategies involves creating a diverse asset allocation strategy. Let’s explore what this can look like, along with what to consider when thinking of your own asset allocation and wealth strategy.

The Shift Towards Portfolio Rebalancing and Risk Management

According to the UBS Report, family offices made significant adjustments to their strategic asset allocation in 2023. One notable shift was the increased allocation to developed market fixed income, which rose to 16% in 2023, up from 12% in 2022, marking the largest increase seen in five years. Conversely, family offices reduced their exposure to real estate from 13% in 2022 to 10% in 2023. These changes reflect a growing emphasis on portfolio rebalancing and risk management.

The move towards fixed income can be seen as a response to the heightened market volatility and uncertainty that have characterized recent years. Family offices are increasing their allocation to this asset class in order to stabilize their portfolios and reduce potential downside risks. At the same time, the reduction in real estate exposure may be a reaction to the sector’s volatility and the potential for asset price corrections in certain markets.

Balancing Traditional and Alternative Assets

The UBS Global Family Office survey, which covered North America, Europe, Asia-Pacific, Latin America, the Middle East, and Switzerland, offers useful information about the typical asset allocation of family offices globally. The data reveals a diverse mix of traditional assets, such as equities (28%) and fixed income (19%), and alternative assets, including private equity (22%), real estate (10%), and hedge funds (5%).

This balanced approach to asset allocation suggests that family offices across these regions are seeking to diversify their portfolios by combining traditional and alternative assets. In doing so, they can potentially benefit from the stability and liquidity of public markets while also tapping into the higher return potential of private investments. However, it is essential to recognize that alternative assets also come with their own set of risks, such as illiquidity and higher fees.

The report also highlights some regional variations in asset allocation. For example, North American family offices tend to allocate a higher proportion of their portfolios to private equity (35%), compared to the global average, while Latin American family offices have a higher allocation to fixed income (34%). These differences suggest that the specific needs and objectives of UHNW families may vary depending on the economic factors and market conditions in their respective regions.

Building an Adaptable Asset Portfolio

Looking ahead, family offices must be prepared to adapt their asset allocation strategies to the evolving economic landscape. Several key factors are expected to shape the investment environment in the coming years, including interest rates, inflation, and geopolitical risks. Highlighted in the UBS Report, it’s stated that 73% of family offices believe that the U.S. will experience positive real interest rates for an extended period.

Globally, as central banks grapple with the challenge of normalizing monetary policy, family offices will need to keep a close eye on interest rate movements and their potential impact on different asset classes. Rising inflation is another concern, as it can erode the purchasing power of wealth over time. Geopolitical risks, such as trade tensions and regional conflicts, can also have significant implications for global markets and investment flows. The UBS report reveals that 58% of family offices are concerned about the potential impact of a major geopolitical conflict on their financial objectives over the next 12 months.

To more effectively navigate the above, family offices are adopting a range of strategies. Some are increasing their allocation to real assets, such as infrastructure and commodities, as a hedge against inflation. Others are focusing on sectors and regions that are expected to benefit from long-term structural trends, such as the transition to a low-carbon economy or the rise of emerging markets. In fact, over a third of family offices plan to increase their allocations to North America (38%) and Asia-Pacific (35%) over the next five years.

Ultimately, the key to success in this environment is to maintain a flexible, diverse, and adaptive approach to asset allocation. Family offices that can quickly respond to changing market conditions and rebalance their portfolios accordingly will be advantageously set to preserve and grow their wealth in the years ahead.

The UBS Global Family Office Report 2024 provides a wealth of insights into how UHNW family offices globally are proactively adapting their asset allocation strategies. The objective of these family offices is to construct enduring and diversified portfolios through the implementation of risk management and portfolio rebalancing, the smart allocation of traditional and alternative assets, and staying attuned to key economic and geopolitical indicators.

Family offices that can stay informed about the latest trends and projections to make informed decisions for their unique needs and objectives will be best positioned to protect and successfully transfer their multi-generational wealth.

Listen to our Legacy Builders Podcast

If you are curious about how these global trends may be relevant to your family portfolio or are seeking new asset strategies, book an initial conversation with Beacon Family Office.

5 Ways you Can Better Organize Your Business’s Finances

The Significance of Asset Allocation for Business-Owning Families

by Asset AllocationBlogInvestment Planning
5 Ways you Can Better Organize Your Business’s Finances

The Significance of Asset Allocation for Business-Owning Families

One way many Ultra-High-Net-Worth (UHNW) families define success is through the enduring legacy they create. It’s a testament to the tireless effort, unwavering dedication, and strategic decision-making that transformed their family business into a thriving enterprise. But amidst the triumphs and challenges of running a family business, it’s easy to overlook one crucial aspect that can determine the long-term stability and prosperity of this legacy: asset allocation. When a significant portion of your family’s wealth is tied up in business, it can leave you vulnerable to the unpredictable tides of the market and the economy.

Imagine a ship setting sail on a vast ocean with all its cargo stowed in a single hold. If the waters remain calm and the winds are favourable, the journey may be smooth sailing. But what happens when a storm hits and the waves threaten to overturn the vessel? Just as a wise captain would distribute the cargo across multiple compartments to maintain balance and mitigate risk, a wise UHWN family steward must consider the strategic diversification of the family’s assets.

Understanding Asset Allocation

Asset allocation is the foundation of a well-balanced investment portfolio. It involves distributing your investments across different asset classes in a way that aligns with your financial goals, risk tolerance, family values, and time horizon. Each asset class has its own characteristics and responds differently to market conditions. For example, stocks are generally considered to be higher-risk, typically offering the potential for higher returns, while bonds are lower-risk but provide more modest returns.

Diversifying your investments offers several key advantages. If one asset class underperforms, others may compensate, helping to stabilize your returns over time. This is crucial for business-owning families because a variety of outside factors, such as the state of the economy, industry trends, and competitive pressures, can impact your company’s success.

In addition to risk reduction, diversification has the potential to enhance returns. Depending on market conditions – and other factors – different asset classes tend to perform well at different times. By investing in a mix of assets, you can potentially capture gains in various market environments and avoid the pitfalls of a concentrated investment strategy. This can help you build wealth over time and achieve your long-term financial goals.

Reinvestment Temptation and Future Business Success

There is an inherent allure to reinvest the majority of one’s profits back into the business, particularly when the returns on investment surpass those of expectation. However, while reinvesting in your company is important for growth, it’s equally crucial to allocate a portion of your wealth to other asset classes.

A real-life example of a business owner who found success through diversification is billionaire investor Warren Buffett, Berkshire Hathaway’s CEO and Chairman. One of the timeless investment lessons he shares in his annual letters to shareholders is about diversifying your investment.

He notes that while focusing on a few high-quality investments can be a successful strategy, it also exposes investors to heightened risk if those investments fail to perform as expected. Furthermore, Buffett stresses the importance of maintaining liquidity and flexibility in one’s financial position. By allocating a portion of your wealth to more liquid assets, such as stocks or bonds, business owners position themselves to have resources available to seize new opportunities or navigate unexpected challenges should/when they occur.

Liquidity for Ownership Succession

Having outside assets is particularly important when it comes to ownership succession planning. As a UHNW business family, you likely have a vision for the future of your company, whether that involves passing it down to the next generation or eventually selling it to a third party. In either case, having diversified assets can provide the necessary liquidity to facilitate a smooth transition.

Consider the scenario of passing your business on to your children. If most of your wealth is tied up in the business, your heirs may struggle to raise the necessary funds to buy out other family members or pay estate taxes. This can lead to financial strain and potentially force the sale of the business under unfavourable conditions. By having a portion of your wealth in liquid assets outside of the company, you can help guide a more seamless transfer of ownership and protect your family’s legacy.

Similarly, if you decide to sell your business, having diversified assets can provide flexibility and negotiating power. You’ll be able to approach potential buyers from a position of strength, knowing that you have the financial resources to wait for the right offer and terms. This can help you maximize the value of your business and ensure a successful exit on your own terms.

At Beacon Family Office of Assante Financial Management Ltd., we work with many UHNW business-oriented families, and there’s one thing they all have in common. They are passionate about their business and want to continue to see it grow and succeed. We suspect that you are no different – passionate and committed to success. Because of this, remember that your asset management abilities have a significant impact on the expansion and success of your business, in addition to your determination and diligence.

Listen to our Legacy Builders Podcast

If you’re curious about how asset allocation fits into your family business or wealth transfer, connect with us today.

Why Succession Planning is Key for Your Business

Wealth Strategies: Facing Unforeseen Challenges with Resilience

by BlogFinancial PlanningInvestment Planning
Why Succession Planning is Key for Your Business

Wealth Strategies: Facing Unforeseen Challenges with Resilience

Life’s plot twists often arrive unannounced. For ultra-high-net-worth (UHNW) families and business owners, these events can present both challenges and opportunities. Twists, such as the inherent instability of the economy, provide an opportunity for family stewards of UWHN families to be more intentionally strategic and forward-looking in their approach to financial security. This intentional strategy builds resilience within family enterprises when confronted with challenging circumstances, building a legacy that can adjust, recover, and thrive regardless of the economic environment.

One essential strategy for UHNW families and business owners revolves around liability and risk management. This requires a thorough examination of existing wealth management strategies and a proactive stance towards potential vulnerabilities. Comprehensive liability coverage should be assessed to act as a robust shield against a spectrum of risks, from property-related challenges to personal and business liabilities. It is crucial to establish partnerships with trusted financial advisors, legal specialists, and insurance practitioners to identify, assess, and mitigate potential risks. This approach allows UHNW families to transform uncertainties about the future into opportunities.

Assessing Comprehensive Liability Coverage

Comprehensive liability coverage is essential for UHNW families and business owners to protect their assets and interests. This involves a thorough review of property insurance, considering factors like property appreciation and specialized assets. Business owners need to adjust their commercial property coverage to account for market changes, expansions, or acquisitions. Personal liability coverage should be tailored to address potential legal challenges, reputational risks, and emerging liability trends.

A holistic review of business-related risks is also crucial. This includes professional liability, cyber liability, and Directors and Officers (D&O) liability coverage. Professional liability coverage, often referred to as Errors and Omissions (E&O) insurance, serves as a shield against claims stemming from mistakes or oversights in the services provided. This is particularly crucial as it mitigates the financial ramifications associated with professional errors, ensuring that any potential legal claims are met with an appropriate defense.  Cyber liability coverage has grown significantly over the past decade and continues to become a necessary investment for family enterprises as it protects you against data breaches and cyber-attacks. D&O liability coverage is recommended for UHNW families and business leaders, tailored to protect the personal assets of executives and board members in the event of legal action arising from decisions made while managing the company.

Implementing Effective Risk Management Strategies

Proactive risk management goes beyond regular insurance coverage. It involves deliberately and strategically dealing with potential threats, acknowledging that just having insurance might not be enough for effective wealth preservation. A straightforward collaboration with financial advisors, legal experts, and insurance professionals transforms into a partnership aimed at accurately identifying, assessing, and mitigating risks unique to an individual’s or business’s circumstances.

Encouraging ultra-high-net-worth (UHNW) families to adopt comprehensive risk management strategies highlights the benefits of moving from reactive measures to a proactive wealth management approach. This means integrating financial expertise, legal know-how, and insurance insights to understand and anticipate potential challenges. The approach recognizes that a one-size-fits-all method won’t cut it for the nuanced challenges posed by substantial wealth and complex business structures. Implementing these strategies aligns with the article’s theme of preparing for unexpected events or crises by fostering a proactive, adaptive mindset capable of navigating the complexities of family wealth management.

Creating a Personalized Contingency Plan

Within the context of crisis preparedness, a contingency plan is a roadmap that outlines specific actions and protocols to be executed in response to unforeseen events. These plans prepare for a range of potential crises, including financial downturns, legal disputes, and personal emergencies. Contingency measures are strategically designed to mitigate the impact of crises and facilitate a swift recovery.

Central to any crisis preparedness plan is the establishment and maintenance of emergency funds. An emergency fund serves as a financial cushion, providing liquidity to navigate unexpected challenges without resorting to liquidating assets or disrupting long-term investment strategies. For UHWN families and businesses, there is an underlying principle: have a dedicated financial reservoir ready to deploy when unexpected events unfold.

In particular, two areas should always be included in a contingency plan. These include legal documentation and effective communication strategies.

  • Legal documentation involves the detailed review, organization, and storage of essential legal documents ranging from wills and trusts to business contracts and property deeds. Legal documentation becomes a key factor in crisis management, offering clarity and structure amid tumultuous circumstances. In your contingency preparedness plan, all critical legal paperwork should be readily accessible in times of crisis, streamlining decision-making processes and safeguarding assets. 
  • Effective communication strategies can save families from misunderstandings and miscommunications. In times of crisis, clear and timely communication is paramount. This involves internal communication within a family or business as well as external communication with relevant stakeholders, financial institutions, legal advisors, and other pertinent parties. Establishing communication protocols in advance ensures that everyone is on the same page, reducing confusion and leading to a collaborative approach to crisis resolution.

When it comes to managing wealth and dealing with unforeseen events, the age-old saying “the only constant thing is change” resonates. For UHNW families, leveraging an integrated wealth management approach allows for proactive and strategic protection, preservation, and growth of their wealth.

Listen to our Legacy Builders Podcast

Ultra-high net worth requires a proactive approach to navigating the complexities of risk. Connecting with a strategic partner to protect your financial legacy helps take the burden off of you - the steward of family wealth. Contact us for an initial conversation about what a proactive wealth strategy means for you.

2024 Week 3

Starting the Year Right: Re-evaluating Financial Wealth Strategies

by BlogFinancial PlanningInvestment Planning

Starting the Year Right: Re-evaluating Financial Wealth Strategies

The first quarter of every year tends to be a time when Ultra-High-Net-Worth (UHNW) families assess what the past year brought and what the year ahead holds. This often involves a re-evaluation of their financial wealth strategies. This reflection is particularly important for those who are stewards of substantial wealth, as it allows them to assess the effectiveness of their current strategies and align them with the evolving financial climate. Along with this, considerations for market dynamics and global economic trends that can significantly impact wealth portfolios allow UHNW families to be more proactive in ensuring their financial plans are robust and adaptive to potential changes. Incorporated into these considerations is the focus on developing a  forward-looking mindset. This mindset allows family stewards to more effectively lay the groundwork for a resilient and flexible family wealth management strategy that lasts for generations. Three areas that this mindset drills down on in relation to wealth include the evaluation of wealth trajectory, navigation of the global market, and developing strategic succession plans for long-term family success and continuing legacy.

Evaluation of Financial Wealth Trajectory

When it comes to managing financial wealth, an annual review becomes an essential means for achieving financial success. Effectively managing your wealth means having a clear understanding of how your strategies are performing. An annual evaluation provides you with a comprehensive snapshot of your strategy’s trajectory, giving you an idea of the current state and potential future paths. This process identifies which strategies are producing good results while enabling the identification of any necessary adjustments or reallocations.

The evaluation becomes a proactive measure for safeguarding and augmenting your generational wealth. Aside from serving as a testament to the resilience and foresight necessary for navigating the complex world of family wealth management, through an annual review, you can stay on top of evolving economic conditions, capitalize on emerging opportunities, and shield your family’s wealth – thereby their financial well-being – from potential risks.

Navigating Global Uncertainties through Diversification

One key aspect that warrants attention is the practice of diversification, a financial strategy that involves allocating your assets across different asset classes, geographies, and industries. This approach is instrumental in enhancing resilience in the face of an unpredictable economic landscape. Diversification serves as a shield against concentrated risks; therefore, spreading assets across a spectrum of opportunities can mitigate the impact of economic volatility.

The emphasis on diversification acknowledges the ever-changing nature of global markets and reflects a proactive stance toward risk management. By strategically allocating your assets, you are positioning yourself to weather uncertainties while maximizing the potential for long-term gains. This deliberate and thoughtful approach to diversification encapsulates the ethos of prudent family wealth management.

Strategic Succession Planning for Long-Term Sustainability

Strategic succession planning is a crucial aspect of family wealth management, ensuring the smooth transition of wealth across generations while maintaining the family’s values and financial sustainability. It requires a balance between open communication, generational education and knowledge sharing, collaborative decision-making, and a forward-looking mindset. Open dialogue among family members, stakeholders, and financial wealth advisors is essential for understanding the unique dynamics and expectations that will continue to shape the family’s financial legacy. Working with a wealth advisor partner, such as Beacon Family Office, helps to facilitate these necessary conversations through a structured framework for open communication and periodic family meetings. Here, UHNW families receive comprehensive guidance, combining financial expertise with a deep understanding of familial dynamics.

A forward-looking mindset is essential for long-term sustainability, as succession planning is an ongoing, iterative process that allows families to adapt their plans to accommodate unforeseen challenges and capitalize on emerging opportunities. This proactive approach ensures the family’s wealth remains resilient in the face of changing circumstances, contributing to sustained financial success across generations.

As you re-evaluate your financial wealth strategies at the dawn of a new year, remember that they include a history built on toughness, forethought, and a promise to change with the times. Always bear in mind that your present is built on the past, while your decisions today lay the groundwork for the future success of your generational wealth goals.

Listen to our Legacy Builders Podcast

If you're contemplating the need for a strategic re-evaluation of your financial wealth strategy at the onset of this new year or if you're seeking guidance on diversification and succession planning tailored to your family's unique dynamics, Beacon Family Office is here for you. Reach out for an initial conversation focused on you, your goals, and the legacy you’re protecting and growing and will one day transfer to the next generation. Book your conversation here. Initiate a meaningful conversation with us today.

3 Reasons Why Investing in Real Estate isn’t for Everyone

Elevating Ultra-High-Net-Worth Families through Generational Financial Wealth Mastery

by BlogFinancial PlanningInvestment Planning
3 Reasons Why Investing in Real Estate isn’t for Everyone

Elevating Ultra-High-Net-Worth Families through Generational Financial Wealth Mastery

January is often a time of renewed wellness focus for numerous families. Our Januarys are filled with new commitments to our physical wellness, emotional wellness, and even our financial wellness. This is no different for many ultra-high-net-worth (UHNW) families. Yet, for aging family stewards, their focus on financial well-being often looks toward how the family unit and family business can secure a sustainable and thriving financial future for the rising generation and what must be done over the next 12 months for this to happen.

This January, as you focus on the financial wellness of your legacy, connect with the rising generation in your UHNW family to discuss strategies to grow their confidence in preparation for when they become the stewards of your family’s wealth. Below are four of these strategies to help initiate these conversations for your family’s long-term financial well-being.

Understand Your Complete Family Wealth

The foundation for securing the financial well-being of future generations lies in a complete family wealth plan that is augmented by an Integrated Wealth Management approach. This involves a thorough examination of your current financial landscape, including assets, liabilities, and potential risks. Along with the more “technical” aspects, there is a deep dive into the overall family values and long-term objectives to ensure there is alignment between the strategic plan and their values. Many of Beacon Family Office’s clients are referred through industry partners, such as the family accountant or lawyer, to gain a more holistic view of how their assets interact with each other and how they can work more proactively together in a way that moves the client’s vision forward.

By including the rising generation in these kinds of conversations, they begin to understand how family wealth remains healthy, what their role will be in the future of the family business itself, and where they may need to further their knowledge to prepare for their future responsibilities. This leads to one of the most important things you can do as a family steward – sharing key knowledge with the rising generation.

Be Intentional with Education and Knowledge Transfer

At Beacon Family Office, we know that the best way to achieve goals and protect one’s wealth is to continually educate oneself. This results in gaining intellectual capital – wealth that can easily be lost if not shared across generations. Be proactive in fostering financial literacy in your family by transferring knowledge about wealth management principles to the younger generation. Ways we’ve seen our clients successfully transfer knowledge have included establishing an educational program within the family business, mentorship initiatives, and regular family meetings. Each of these helps to facilitate an open dialogue about financial responsibility, philanthropy, and the values that underpin the family’s wealth.

One of my favourite things to do is help my clients prepare their children for how to manage a large sum of wealth before they are responsible for it. This can be done in several ways, but the one that stands out most for me is when a client gifted a large sum of money to each of their adult children with the caveat that they were to connect with me on how to manage the wealth they were gifted. Without giving confidential information away, it was an absolute success whereby each child did something different with the significant sum and was successful based on what they did because of the trust they received from their parents, the discretion they were given to use the funds for, and the guidance to their questions they learned along the way. This is a highly impactful way to prepare your rising generation, so you’re not leaving your legacy to chance.

Plan Strategically with Family Philanthropy

Community is our passion here at Beacon Family Office and our clients carry this same value, often expressing it in the philanthropy work and giving that they do. When we include the rising generation in meaningful philanthropic endeavours, there is a deeper connection to the purpose of your family’s wealth. By involving the rising generation in philanthropic conversations, such as the type of legacy giving strategy to build, you give them a voice to influence decisions and care about the impact they can have, fostering a sense of social responsibility.

You’re not just being strategic in your complete family wealth plan. You’re being strategic in how your legacy will continue to do good in the world through your family line.

Remain Adaptable to Technological Advances

Like it or not, technological advances are both simplifying and complicating the work of financial wealth. While we’re not encouraging you to become a leading technology expert in FinTech (unless that’s what you want to do), we do recommend staying abreast of technology and how you can use it as a proactive tool. Technologically literate family members tend to be better prepared to navigate the challenges and opportunities that arise. The future requires that UHNW families embrace change to continue building their meaningful legacies.

What’s fun here is that while you may not be at the forefront of technological advancements, your rising generation may be, thereby supporting you as you navigate the future of your family’s financial wellness today and into the future.

As a UHNW family steward, you know the journey toward securing the financial well-being of future generations is a dynamic and multifaceted one. It was the same as when you initially stepped into the role of family steward. By embracing the rising generation and including them in conversations around family stewardship, philanthropy, and a more holistic approach to wealth, you equip your legacy for a bright future founded on great purpose.

Listen to our Legacy Builders Podcast

If you’re beginning to have these conversations with your rising generation or are curious to learn more about how you can strategically preserve, protect, grow, and then successfully transition your wealth, we’re here to support you. Connect with us today for an initial conversation.

Financial Planning: Balancing Post-Secondary Education and Retirement Savings

The Family Business: The Core of Wealth Generation

by BlogBusinessInvestment Planning
Financial Planning: Balancing Post-Secondary Education and Retirement Savings

The Family Business: The Core of Wealth Generation

The family business is more than just a source of income. It’s the preservation of family values, shared aspirations, and a lasting legacy. It stands as a testament to the enduring strength of family collaboration and the potential for building generational wealth.

History is filled with success story after success story of family enterprises. Companies that started as small family businesses, such as Johnson & Johnson and Ford Motor Company, grew into international conglomerates, standing the test of time, remaining committed to a family vision, and operating on their core values while being open to adapting as the world and economy continue to evolve. This willingness to adapt while remaining true to the legacy created becomes the foundation of success for family enterprises.

The Need for Diversification

While the family business is typically the nucleus of a family’s financial well-being, it can also present risks. Overreliance on a single asset can be a double-edged sword, especially when market dynamics fluctuate. Therefore, diversification in the family asset portfolio becomes paramount. 

Diversifying into other private assets, such as real estate, private equity, and infrastructure, can provide a cushion against market volatility. Take, for instance, the Rockefeller family, whose diversified portfolio has withstood the test of time. By branching out beyond the oil business that initially propelled their wealth, they secured their financial future. Here are some of the other fields they invested in, to mention a few:

Banking and Finance: The Rockefeller family has had a notable presence in the banking and financial sectors. David Rockefeller was an American investment banker who acted as chairman and chief executive of Chase Manhattan Corporation (now JPMorgan Chase), which was a key institution associated with the family’s financial interests.

Real Estate: One of the notable projects in which the Rockefellers have invested in real estate properties and development was the development of the Rockefeller Centre in New York City, a prominent commercial complex.

Philanthropy: The Rockefeller family is also renowned for its philanthropic endeavours. John D. Rockefeller, Sr., established the Rockefeller Foundation in 1913, which has been involved in funding various educational, medical, and social initiatives worldwide.

Success stories such as the Rockefeller serve as a reminder that a well-balanced portfolio can be a game-changer for preserving and growing family wealth.

Categorizing the Enterprise

Managing family wealth involves understanding the nuances of the family itself, along with the intricacies that come with coordinating multiple assets. This complexity is best supported by a strategic management approach, such as integrated wealth management. This approach provides one primary location to coordinate, advise, and manage the various aspects of your wealth, such as the family business, financial assets, real estate, heirloom assets, and deferred assets. Each category requires unique attention, expertise, and care.

Family business demands continuous innovation and nurturing, ensuring it remains robust and adaptive. Financial assets, such as stocks and bonds, require expert financial management to optimize returns. Real estate can serve as both a source of income and additional portfolio value. Heirloom assets, laden with sentimental value, deserve special preservation and insight to protect and transfer. Deferred assets, including trusts and long-term investments, represent the legacy waiting to be passed on.

By categorizing assets in this manner, families can gain clarity and devise tailored strategies for each component. This ensures that each asset is properly preserved and protected, clearly articulated for distribution, and accounted for based on the impacts of the greater family wealth portfolio.

The Role of Family Offices

With the complexity and intricacies that come with a family enterprise, the family office plays a crucial role, particularly when you look at wealth management as a whole. Family offices serve as the compass, steering the ship of family wealth through uncharted waters. These institutions bring professional expertise, specialized knowledge, and a commitment to family values to the table in order to help the family enterprise thrive over multiple generations.

One aspect of the family office that family enterprises benefit from is working with a dedicated private wealth advisor. These individuals help develop and implement diversified strategies that align with your family’s long-term goals, both personal and professional. Whether it’s structuring investments, tax planning, or facilitating intergenerational wealth transfer and successor education, family offices play a pivotal role in safeguarding the family’s financial legacy.

Listen to our Legacy Builders Podcast

While the family enterprise is often the primary source of generational wealth, it is merely one piece that helps these legacies last. Rather, diversification, categorization, and the expertise of family offices are essential elements in ensuring the enduring strength of family wealth. By embracing the above strategies, families can safeguard their financial legacies and create opportunities for generational collaboration that transcend time and circumstance. The journey to lasting wealth begins with these deliberate steps. If you're ready to take the next step, connect with the Beacon Family Office today. Together, we'll safeguard your family's financial legacy.

5 Outside Factors that Can Help You Determine Your Investment Spend

5 Outside Factors that Can Help You Determine Your Investment Spend

by Investment Planning

Your investments are heavily influenced by a number of external factors, ranging from interest rates to commodity prices.  Before you invest, it’s essential to understand how these factors affect your returns. Read on to learn more about the most important outside factors that can help you determine your investment spend.   

Interest Rates

When the economy starts to expand rapidly, the Bank of Canada (BOC) often raises interest rates in response to prevent too much borrowing. In contrast, when the economy begins to slow down, the BOC lowers interest rates in order to stimulate borrowing to boost the economy. These changes in interest rates can impact investments quite significantly, especially if companies need to pay more for loans or materials when the rates rise, as this often leads to lower profits. However, some investments will rally when the interest rates spike, such as short-term bonds. It’s important to talk to an advisor who understands the relationship between investments and interest rates to guide you with your financial decisions.

Current Events

A devastating natural disaster like a hurricane, new government policies, political uprisings, and elections can have a direct impact on the stock and bond market. Even a relatively small incident can have severe consequences for your investment portfolio. That’s why it’s vital that you are well diversified and taking on the appropriate risk level for your age and financial condition.

Taxes

Taxes also affect your investment portfolio. Without the right tax plan, your returns could take a big hit, which is why it’s important to pay careful attention to the income tax consequences of your investment decisions. Otherwise, you could end up paying high capital gains tax that could have otherwise been avoided.

The State of the Economy

High unemployment and low economic growth can cause people to become more frugal, keeping more money in their own pocket. This eventually creates more stress on the economy and in turn, on your investments. This is yet another reason why it’s important to have a long-term strategy in place that you can stick to through good and bad times.

Commodity Prices

The prices of commodities such as oil, gold, lumber, and wheat have a tremendous impact on the earnings of public companies and the markets. For example, the price of oil can affect a wide spectrum of companies, from manufacturers to retailers. Companies like Amazon have to ship all their products and therefore, rely on the cost of fuel. If they can’t pass on the price to consumers, then they have to internalize the damage which can hurt the stock prices along with your investment in the company.

As you can see, there are many outside factors that can help determine your investment spend. If you don’t have time to stay informed, it’s best to hire someone who can manage your portfolio for you. Our team of financial advisors are here to help you shape your portfolio to ensure maximum earnings no matter which direction the outside factors move in. Contact us today to get started!

What to Teach Your 18-Year old About Opening a TFSA

What to Teach Your 18-Year old About Opening a TFSA

by FinancialFinancial PlanningInvestment Planning

It’s not easy getting your teen interested in the idea of investing in their future. Most teens have a shorter attention span and are rarely focused on long-term goals — they’re thinking about the present. This can make it somewhat difficult to explain the benefits of saving, especially if most of the financial terms go straight over their head.

If your teen has turned 18, it’s time to start teaching them about TFSAs. 18 is the age when Canadians can begin opening and using TFSAs, and with compounding interest, it’s wise for them to start early and do just that.

With the right words and some guidance, you can help them grow a future nest egg as they ease into adulthood. But where to begin? Here are five things you can teach your 18-year old today about opening a TFSA.

The Art of Compounding

If you start early, the power of compounding can add up to millions of dollars over the long-term. If that won’t get your teen’s attention, nothing will. Once they are interested in what you have to say, that’s when you shock them with the long-term benefits of a TFSA. The best way to make them understand is to show them a real-life example of how much money they can expect to earn in 20, 30, 40, and even 50 years when they start making small contributions each month, starting now. When they see the power of compounding in action, it’s sure to get them excited about forming a long-term strategy that invests heavily in their future.

The Benefit of Tax Savings

It’s unlikely that your teen knows much about taxes or how they will impact their savings over time (and if they do, great for them!). That’s why now is the best time to teach them about tax-sheltered instruments, like a TFSA. They may not fully understand all the tax jargon in relation to capital gains, interest earned, or Canadian dividends. Hone in on the fact that with a TFSA, they can withdraw their money tax-free — unlike the majority of banking accounts. They’ll appreciate the idea of avoiding fees and having more money in their pockets.

How to Maximize Contributions Without Penalties

Accidentally contributing more than $5500 a year may result in penalties. It’s essential to teach your 18-year old about the maximum contributions and how they can add to their account without acquiring fees. For instance, if they were to contribute the full $5500 in one year, they could have to wait a full calendar year before putting more money into the account. Your teen can contribute to their TFSA for every year that they have been at least 18 since 2009, as illustrated here. An example of this would be if you have a son who turned 18 in 2016 and is just opening a TFSA now, he would actually be eligible to contribute $16,500 right away.

How to Be Smart With Their Money

Unlike an RRSP, money can be withdrawn from TFSA at any time without paying taxes. This could be a concern if you invest in your teen’s savings account and they withdraw the money straight away. That’s why it’s important to teach them how to be smart with their money, why a long-term goal is better than short-term gains, and that a TFSA is an investment tool more than a savings account.  You may even consider teaching them how to use their TFSA to purchase mutual funds, GICs, and other investment accounts to help grow their money, not just save it. The more they know now, the better choices they will make in the future.

If you’re not sure how to discuss TFSAs with your teen, we can help. At The Beacon Group of Assante Financial Management Ltd., we manage not only our client’s wealth plans but also their children’s investments too. We can teach them the benefits of long-term objectives and what the right choices are for investments with a particular goal in mind. To learn more about our family wealth planning, contact us today.

5 Common Investing Mistakes

5 Common Investing Mistakes

by FinancialFinancial PlanningInvestment Planning

Protecting your wealth is arguably more important than growing it. Even if you make smart investment decisions, pay yourself first, and put some money away for your retirement, there are still a number of common investing mistakes that could drain your finances dry. Don’t waste your hard-earned money on poor financial decisions — be prepared for success by avoiding these common investing mistakes.

Not Funding a Retirement Plan

As a Canadian, you have access to a number of retirement plan options, whether through your employer or through the bank. One of the biggest mistakes many people make is not setting up a plan in advance and adding the maximum amount to it every year. Why is this important? Because most retirement plans are tax-sheltered, so you can protect your money until after you retire and your tax rate declines. Besides the tax advantages, you might also be eligible for a match program with your employer. Some will match your contributions which is essentially free money (that will steadily grow over time).

Forgetting to Rebalance

One mistake most investors make is forgetting to rebalance their portfolio back to its target asset allocation annually. Without a routine check-up and rebalance, your asset classes could end up overweight or underweight, neither of which is a good thing for your performance. If this sounds familiar, contact a financial advisor to help get the proper allocation to increase your overall expected return.

Doing it All Yourself

Unless you have industry experience in trade and finance, it’s best to get a helping hand from a seasoned professional. An experienced financial advisor can help you understand all the relevant risks to you and your portfolio, including what the appropriate benchmarks are, which asset allocation will achieve your goals, and how to diversify for steady long-term gains.

Not Planning for the Long Term

Short selling and day trading can make you a lot of money, but it can also gut out your entire savings if the market takes an unexpected swing. Instead of chasing performance and focusing on short-term gains, you should create a long-term plan and stick to it. Having a sound investment plan is not as much fun as playing the market, but it’s much more profitable in the long run.

Not Creating an Investment Strategy

Investing is not just about growing your assets, it’s also about using cost-efficient structures and tax planning to keep more of your money. Without an investment strategy, you could essentially be missing out on much of your opportunity for growth. Therefore, successful investors are ones that ensure they operate under a prudent investment strategy — the best plans are not only ones that offer significant growth opportunities but also help to shelter against taxes and minimize risk along the way. Always remember that each individual will need a strategy that fits within their goals — no approach will work for every investor.

When you’re ready to move forward with an investment strategy that’s tailored to your specific needs, contact us at The Beacon Group of Assante Financial Management Ltd. We’ll create a plan and implement strategies by choosing the best-in-class products and services that will excel through the market’s ups and downs, creating long-lasting wealth for you.

Methods to Gauge Any Investments Risk Level

Methods to Gauge Any Investment’s Risk Level

by Financial PlanningInvestment Planning

Every investment has risks. If you put your money into individual securities, your risk lies solely with that company and how they perform in the market. When you purchase a mutual fund, your money is spread across a number of individual securities, and the performance will be the result of the whole. To give you an idea how to gauge any investment’s risk level before you add it to your portfolio, follow these rules.

Check The Beta

Many investors use Beta to determine how volatile a particular security or portfolio is in comparison to the entire market. Any beta number greater than 1 will indicate a higher level of risk. For instance, a beta of 1.5 means that an investment return will be 1.5 times as volatile as that of the market. On the other hand, if the beta dips below 1, it implies that the investment will be less volatile than the market and pose less risk.

Look At The Company History

It’s easy to get caught up in the idea of investing in a start-up that could be the next Amazon or Facebook, but the odds of that happening are not in your favour. Instead of throwing money into unknown start-ups and crowdfunding campaigns, pick companies that have illustrious histories of success and trends of making money. You can reduce your risk by putting your money into businesses that have spent decades navigating through the competitive marketplace and generating solid returns to their investors.

Research The Owners

Before you put your money into a security, you should know who you are investing with. Do the owners have a track record of success? Can they easily raise capital if needed? Can the team execute their vision? It doesn’t matter how great the idea is if they don’t have the right management team. If you can’t get a clear view of where the company is headed and whether they are positioned to carry through the market storms, then it’s best to avoid the risk.

Know What Risk Profile They Fall Under

It’s important to understand which investments are considered high risk and which ones are deemed safe. Options, Futures, and Collectibles are considered high-risk because they can provide significant returns as well as big losses. Mid-risk investments like equity mutual funds, large and small-cap stocks, high-income bonds, and real estate investments still carry risk, but they are relatively safe and usually provide stable returns. The safest investments you can purchase are government bonds, money market funds, and treasury bills. You won’t get the biggest returns but the likelihood of a return is very high.

Check If They Are Diversified

When investing in funds, you should only put your money in something that is diversified across a number of asset classes. Without asset allocation, you’re susceptible to risk during market swings. When you have a portfolio that is properly diversified, your investments will continue to grow no matter what the market condition.

Predicting the markets is challenging, especially if you don’t have a background in finance. At The Beacon Group of Assante Financial Management Ltd., we can help you manage your risk and create a balanced portfolio that will take advantage of the markets up and downs, maximizes your wealth, and provides you with stable returns into the future.