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Wealth Management Overview

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The Wealth Management Business is booming around the world. Learn more about this business with this overview, taken in part from the books: "Figuring Out Wall Street" by Floyd Saunders. We provide custom training to the financial services industry. Contact us to discuss your needs.

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Wealth Management Overview

  1. 1. Financial Services Industry Training Introduction to Wealth Management Saunders Learning Group, LLC Saunders Learning Group, LLC, Andover, KS
  2. 2. Training from Saunders Learning Group Saunders Learning Group provides a variety of training programs, workshops and seminars targeted to the financial services industry. Programs are available in a wide range of topics, and we are specialists in developing custom programs that are targeted to your needs. Contact the founder, Floyd Saunders at 316-680-6482 or at floyd@floydsaunders.com for more information. Saunders Learning Group, LLC, Andover, KS1
  3. 3. Topics 1. Six Dimensions of Wealth Management 2. Wealth Management Products 3. Investment Management 4. Private Client Investments 5. Personal Trust 6. Private Banking 7. Planning and Advisory Services Saunders Learning Group, LLC, Andover, KS Slide 2
  4. 4. Six Dimensions of Wealth ManagementSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
  5. 5. Six Dimensions of Wealth Management Wealth Management  Family Continuity  Strategic Philanthropy  Risk Management  Integrated Planning  Investment Diversification  Lifestyle Enhancement Saunders Learning Group, LLC, Andover, KS 4
  6. 6. Comprehensive Wealth Planning Discovery  Family, key issues  Goals, retirement timing, special needs  Values Discovery  Comprehensive view of current financial picture Identifying your values & goals  Risk tolerance, time horizon, attitude toward volatility Analysis, Recommendations  Analyze personal, financial information  Income goals, probability analysis  Analyze liabilities  Analysis of risks and threats  Coordination with outside advisors Monitoring Analysis & Reccomendations  Action plan: Client growth, preservation, transfer of wealth Building an Action Plan ImplementationOngoing evaluation & reporting  Retirement and education plans  Estate plan, trust, philanthropic plans  Borrowing plan  Risk plan including diversification, hedging, insurance, tax minimization  Family mission and bylaws Implementation  Asset management Monitoring  Track progress toward goals Choosing services & providers  Set/follow guidelines for liquidity, asset allocation  Notification when portfolio strays outside guidelines  Performance reporting  Online access Saunders Learning Group, LLC, Andover, KS 5
  7. 7. Wealth Management Services Comprehensive Wealth Planning Integrated analysis and planning for family issues, wealth transfer, asset location and protection Family Advisory Maintain family unity across generations focusing on family missions, goals and governance Philanthropic Services Invest in Others is more than our motto, it is our passion Investment Management Tax sensitive, asset allocation, hedge funds and private equity, concentrated positions, diversification, control and restricted security management, hedging and monetization strategies Reporting, Monitoring, Aggregation, Access Comprehensive view of assets and portfolio Saunders Learning Group, LLC, Andover, KS 6
  8. 8. Wealth Management ProductsSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
  9. 9. Typical Wealth Management Products Saunders Learning Group, LLC, Andover, KS 8
  10. 10. Investment ManagementSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
  11. 11. Investment Management Discretionary Asset A Discretionary approach means that, having agreed the strategy, you delegate Management the day-to-day investment decisions relating to your portfolio to an investment Asset manager. This is ideal if you don’t have the time or resources to commit to researching and monitoring the global financial markets yourself. Allocation and Investment Strategies Alternative Asset Allocation - A portfolio strategy that involves periodically rebalancing the investments portfolio in order to maintain a long-term goal for asset allocation, where investments are held in a mix of stocks, bonds, cash, commodities or alternative investment. Alternative investments include hedge funds, managed futures, real estate, commodities and derivatives contracts. Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of their complex nature, limited regulations and relative lack of liquidity. Link to 70 minute presentation on investment management @ Yale: http://openmedia.yale.edu/projects/media_viewer/video_viewer2.php?window_size=medium&type=flv&title=ECON%20252% 20-%20Lecture%209%20- %20Prof.%20Robert%20Shiller&path=%2Fcourses%2Fspring08%2Fecon252%2Fflash%2Fecon252_09_021308 Saunders Learning Group, LLC, Andover, KS 10
  12. 12. Asset AllocationAsset Allocation – Review, analysis and management Strategic Allocations Tactical Adjustments tactical underweight strategic overweight Build portfolios based on Further adjustments are made strategic risk and return assumptions and models. based on short-term insights. Asset allocation does not ensure profit or protect against loss. When an asset class is overweighted, other asset classes are underweighted by a compensating percentage so that the total allocation remains 100%.. 11 Saunders Learning Group, LLC, Andover, KS
  13. 13. Alternative Investments Strategies MARKET ANALYSIS SPONSOR ANALYSIS PRODUCT ANALYSIS  Investment Team  Investment Process  Current Market Dynamics  Financial Health of Sponsor  Risk Disclosure  Regulatory Environment  Experience, Track Record  Legal, Compliance Issues  Track Record  Market Participants  Organizational Alignment  Return Potential  Risk Profile Private Equity Hedge Fund Strategies Real Estate Structure Products Global Buyout Event Driven Trend Core Principal Protected Distressed Real Equity Long Managed Opportunistic Return Enhanced Estate Short Futures Mezzanine Absolute Return Multi-Strategy Value-Added Bull/Bear Saunders Learning Group, LLC, Andover, KS 12
  14. 14. Alternative Investment ResearchFocused on fund of funds, hedge funds, real estate, private equity, structured products and othernon-traditional assets. Identification Diligence and Implementation Monitoring  Broad Access to Innovative  Market Analysis  Concepts for combining Products Alternative with Traditional  Sponsor Analysis – assets  High Quality - Well Operational Processes Researched Products and Stability  Risk and Global based implementation strategies  Focus on Low Leverage –  Product Analysis – Legal/ fundamental research Disclosure oriented products  Cross wealth products  Product Analysis – Risk/ Return (Mutual funds to 3C-7) Investing in alternative investments may not be suitable for all investors and involves special risks such as risk associated with leveraging the investment, potential adverse market forces, regulatory changes, and potential illiquidity. There is no assurance that the investment objective will be obtained. Saunders Learning Group, LLC, Andover, KS 13
  15. 15. Structured InvestmentsStructured products are investments that offer some protection from downside risk in exchange for the investor foregoing some upsidepotential to achieve that protection. Structured products typically have two components: a note and a derivative, and have a fixedmaturity. If the option (derivative) turns out to be valuable, investors can gain exposure to the upside of the asset class. Structured investments with tailored terms and Structured product strategies: risk/reward profile are designed to help clients: - Customized notes, linked to a single stock, bond, or - Optimize returns, diversify portfolio holdings currency, basket of stocks, bonds, currencies, or indices; or baskets of asset classes - Provide leverage - Principal protected structures - Derive tax efficiencies - Leverage/deleverage notes - Minimize volatility, provide downside protection - Total return swaps, trigger swaps - Hedge fund derivatives - Fixed or floating rate payment instruments Investing in customized notes is not equivalent to investing in an index and the return of the notes is linked to the performance of the index which is subject to market risk. • Principal protected notes are used to gain exposure to an asset class while providing protection at maturity. • Principal protection varies from partial to 100%. Investing in PPN is not equivalent to investing directly in the underlying index and involves significant risk, such as risks associated with derivatives. • Such note does not guarantee any return of principal and the investment is fully exposed to any decline in the underlying investments. • Structured notes are intended as “buy and hold” investments. Investment value prior to the maturity will be influenced by many economic and market forces that may either offset of magnify each other. • These can include interest rates, implied volatility and time remaining to maturity. • No assurance can be given that the strategy will be successful.Investing in alternative investments may not be suitable for all investors and involves special risks such as risk associated with leveraging the investment, potential adverse market forces,regulatory changes, and potential illiquidity. There is no assurance that the investment objective will be obtained. Saunders Learning Group, LLC, Andover, KS 14
  16. 16. “Economic Seasons” Capital Structure Special Situations Arbitrage Fundamentally Undervalued Securities Distressed Securities Economic Activity Merger Arbitrage Macro Relative Value Long/Short EquityA generic business cycle is presented above, for informational purposes only. Investing in alternative investments may not be suitable for all investors and involves special risks such as risk associated with leveraging the investment, potential adverse market forces, regulatory changes, and potential illiquidity. There is no assurance that the investment objective will be obtained. Saunders Learning Group, LLC, Andover, KS 15
  17. 17. Investment Manager ResearchEvaluation Framework: The Key Areas Investment Process People Philosophy Personnel Quantitative & Implementation Qualitative Criteria Quality of Composite Performance Process Dispersion Business Evaluation Quality of Research The Research Team maintains a strictly-derived “short list” of strategists that have been reviewed and believed to be of enhanced quality. This is done by monitoring managers’ performance, adherence to philosophical guidelines, low personnel turnover, consistency of assets under management, etc. Saunders Learning Group, LLC, Andover, KS 16
  18. 18. Investment Research and Strategy The Six “I”s of Research:  Integrity Investment Research provides macro and quantitative analysis of markets and sector trends. The core focus of  Independence the group is to help investing clients make informed decisions by providing value-added, independent,  Insight insightful analysis.  Innovation Financial analysis, advice and reports are designed to deliver independent opinions empowering advisors to  Illustration work in the interest of clients.  Illumination Saunders Learning Group, LLC, Andover, KS 17
  19. 19. Financial Investment Process Investment Strategy Committee Research ProcessSTEP 1: Gathering the STEP 2: Tweaking the Mix STEP 3: Finalizing the STEP 4: SolutionsInputs to Set the Strategic for Tactical Benefit Model PortfoliosAllocations Strategic Discretionary Tactical Allocations Solutions Outlook and Model and Portfolio Portfolios Economic Advisory Positioning Base Case SolutionsThe Research Analytics Strategy The Investment Strategy Group It’s not always practical or cost-Group gathers market data, key formulates an economic outlook effective to make a change to The model portfolio is used ineconomic variables as well as and suggests tactical positions on model portfolios every time there’s two ways:other fundamental information to equity, credit, currency and a change to the short-term view. For discretionary relationships,build 10-year projections of risk alternative asset classes based But periodically, changes in the the authority to make buy andand returns for a variety of asset on key market indicators gathered outlook prompt it to alter its sell decisions on your behalfclasses. by the Economics Research team recommendations. to inform clients on guidance inThe Investment Strategy Group and top third-party analysis. The Portfolio Strategy Group an advisory capacity.then produces a series of transforms the tactical positions tostrategic portfolios for a wide specific portfolio weightings usingspectrum of risk levels. the strategic portfolios as a baseline. Saunders Learning Group, LLC, Andover, KS 18
  20. 20. Private Client InvestmentsSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
  21. 21. Portfolio Construction - Investment Spectrum Investment Spectrum Liquidity, Income, Growth of Capital Exchange Structured Fixed Funds/ Products/ Real Hedge Private Cash Equities Income Managed Derivatives Estate Funds Equity Futures/ Commodities Money Managed High Quality Fund of Unique Funds Fund of Leveraged Market Portfolios Managed Funds Structured Funds Buyouts Joint Funds Portfolios Products Individual ETFs Ventures Macro Mezzanine Other Cash Issues Mutual Funds Unique Financing Futures Operating Long/ Instruments Derivative Annuities Funds Companies Short Distressed Strategies Debt UITs Event Driven Special Innovative Situations equity-linked Market products Neutral Saunders Learning Group, LLC, Andover, KS 20
  22. 22. Equity and Fixed Income StrategiesWhether your goals include opportunistic investments, yield-enhancement instruments, or risk-aversestrategies, Wealth Management specialists are responsive to the complex wealth challenges of affluentindividuals and sophisticated investors.Wealth Management research specialists are experienced problem-solvers, helping clients realize financialopportunities and manage the burdens of potential risk despite volatility in pursuit of achieving beneficialoutcomes for your significant personal, trust, business, and philanthropic assets. Identifying Opportunity:  Strategies with tailored terms and risk/reward profile are - Economic perspective designed to help clients: - Strategic and tactical asset - Diversify risk allocation - Reduce volatility, provide downside protection - Preserve and enhance expected returns - Domestic and Global - Laddered or “Barbell” income portfolios - Growth, Value, Core - Access liquidity from stocks - Capitalization biases - Provide leverage - Credit Analysis - Managed Portfolios - Mutual Funds - Annuities - UITs Saunders Learning Group, LLC, Andover, KS 21
  23. 23. Hedging and Monetization Strategies Hedging Monetization Diversification Option Strategies Hedging + Margin Loan Private Exchange Fund Pre-Paid Forward Sale Single or Multi-Investor Sale of a Call Option Contingent Forward Sale Securities Law Regulatory Tax Issues Implications Client Equity Deal Derivatives Structuring Equity Trading Saunders Learning Group, LLC, Andover, KS 22
  24. 24. Concentrated Stock ManagementLiquidity & Risk Considerations for Restricted, Control, & ConcentratedStock Positions Preservation of Capital  Margin Loan  Rule 144/145 sale  Option Strategies Liquidity Strategies  Pre-Paid Forward Sale  Exchange Fund  Reinvestment of prepaid forward sale Hedging Strategies  Reinvestment of margin loan proceeds  Exchange Funds  Loan to finance diversification strategy Diversification  10b5-1 Trading Plans Saunders Learning Group, LLC, Andover, KS 23
  25. 25. Cash Management Strategic OptionsFORMULATEINVESTMENT DEVISE A STRATEGY EXECUTE MONITORPOLICYClient Interest Rate Yield Curve Sector Security BenchmarkingObjectives Management Management Allocation Selection & ReportingUnderstand Needs for Establish Investment Determine Positioning Identify Relative Value Identify and Capture Select AppropriateReturn, Liquidity and Policy Parameters on Yield Curve Between Sectors Value Between Index / BenchmarkPreservation of Alternative Adjust Portfolio Conduct PeriodicCapital Investments Maturity Profile Based Forward Break-Even Performance Yield vs. StabilityDefine Investment on Interest Rate Analysis MonitoringGoals, Acceptable Outlook Taxable vs. Tax- Security Analysis Provide FullInvestments, Portfolio Horizon Roll-Down Exempt Compliance ReportingLimitations, Analysis ExecutionResponsible Parties Provide Monthlyand Authorized Broker Spread Analysis Reports Conforming to/ Dealer / Bank Month EndIdentify and ScheduleAnticipated CashOutlays 24 Saunders Learning Group, LLC, Andover, KS
  26. 26. Personal TrustSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
  27. 27. Personal Trust Services  Trust & Estate Planning Trust and A trust is a relationship where one party ("the grantor") gives fiduciary control Estate of property to another party (a person or an institution, "the trustee") for the benefit of another ("the beneficiary"). Planning The trustee (Bank trust department) administers and controls the assets of the Custody trust according to instructions found within the trust document.  A personal trust can be used to: reduce estate taxes, as a tool for protecting the IRA assets of your estate, to ensure the proper distributions of assets to Administration beneficiaries, to provide support for your spouse and children.  Some of the services offered by a Trust Company include: Will  Living Trusts – A document that directs an trustee to managed investments for the trustor while appointments the trustor is still alive. This allows you to avoid probate and allow for the distribution of assets quickly after death. Foundations  Revocable Trust - A trust that may be altered or terminated during the grantors lifetime. Since the trust can be altered, it is part of the estate and subject to taxation. and Charitable  Special Needs Trust - A specialized legal document designed to benefit an individual who has a Trust disability and allows for the payment of benefits from government programs.  Testamentary Trust - A trust created by the terms of a will, with the executor as trustee, for the benefit of someone else (spouse, child etc.)  Dynasty Trust – A trust in which assets are controlled through several generations and makes use of generation-skipping tax exemption.  Life Insurance Trusts - An irrevocable trust set up with a life insurance policy as the asset, allowing the grantor of the policy to exempt asset away from his or her taxable estate. Saunders Learning Group, LLC, Andover, KS 26
  28. 28. Personal Trust Services Custody  Custody - A service in which a brokerage or bank holds securities on behalf of the customer. In addition to the safekeeping of assets the bank as custodian can sell the asset as directed by the customer.  IRA Plan Administration - A group of services providing complete administrative, IRA operational, and compliance support for individual retirement accounts  Tax Reporting – Produces and mails tax information to IRA owners and the IRS Administration  Periodic Payment Notification and Calculation – Notifies you of IRA owners nearing critical ages to elect payment options  Death Benefit Claims Processing – Informs you and beneficiaries of payment options, and notifies you of how and when to disburse assets. Will  Will Appointments – Arrangements were a trust department is appointed as the administrator for a person’s will. The trustee will act to distribute assets according to the Appointments provisions of a will, pay final expenses and file tax returns. Will appointments often include arrangements for the creation of a trust to continue to manage assets for the benefit of beneficiaries.  Foundations – A legal categorization of a nonprofit organization set up to support specific causes or charitable purposes. This type of non-profit organization differs from a private Foundations and foundation, typically set up to provide for a family or individual. Charitable Trust  Charitable Trusts - Trust created for advancement of a specific cause and can be funded to exist pass the lifetime of the person creating it or funding. Generally exempt from taxes. Saunders Learning Group, LLC, Andover, KS 27
  29. 29. Private BankingSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
  30. 30. Private Banking Also referred to as Wealth Management services Personalized financial and banking services that are traditionally offered to a banks rich, high net worth individuals (HNWIs). For wealth management purposes, HNWIs have accrued far more wealth than the average person, and therefore have the means to access a larger variety of conventional and alternative investments. Private banks aim to match such individuals with the most appropriate options. Private banking offers an array of deposit and cash management services, along with residential mortgages, specialty lending and other custom financing solutions to help you:  Manage your assets and liabilities  Provide the liquidity you need for important investments  Liquidate a concentrated stock position tax-efficiently  Fund short-term cash flow needs  Obtain financing for major purchases such as private aircraft and yachts Saunders Learning Group, LLC, Andover, KS 29
  31. 31. Planning and Advisory ServicesSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
  32. 32. Corporate Consulting Type of Fund Key Services  Asset / Liability Studies  Asset Allocation Advice Defined Benefit Plans  Traditional and Alternative Investment Manager Search Capabilities  Performance Measurement Reports  Trust and Custody Services  Bundled Platform Services Defined  Investment Consulting for Fund Lineup Contribution Plans  Lifestyle Funds and Automatic Enrollment  Personalized Asset Allocation Advice for Plan Participants Foundations and  Investment and Spending Policy Statements Endowments  Traditional and Alternative Investments  Board Member Communications Family Offices and  Specialized services for high net worth families including all Private Individuals of the above and art advisory, private banking, aircraft leasing and other capabilities Saunders Learning Group, LLC, Andover, KS 31
  33. 33. Philanthropic Planning Seek unique products and opportunities Interested in what money can’t buy Philanthropic mind-set Financial The Private Client Advisers Trust Company  Endowment Funds  Charitable Bequests  Large Direct Capital Gifts  Charitable Lead Trusts  Pooled Income Funds  Charitable Remainder Trusts  Private Family Foundations  Donor Advised Funds Saunders Learning Group, LLC, Andover, KS 32
  34. 34. Family Advisory and Education  A Wealth Manager can  Client Education & Mentoring helps clients manage the family dynamics of inter-  Family Philanthropy generational wealth transfer.  Business Succession Plans  Wealth consists not just of a family’s financial  Advice on family offices or capital, but of their human alternative structures and social capital as well.  Family Governance Help clients maximize the structures/documents value of all their family capital through the transfer and  Family Mission Statements preservation of the family’s shared values and the  Wealth Structuring, jurisdiction creation of an enduring family analysis legacy.  Education Savings Programs Financial Team & Client  529 College Savings Program  Custodial Accounts  Trusts  Education Tax Credits/Deductions  Investment Strategies  On-going Education Saunders Learning Group, LLC, Andover, KS 33
  35. 35. Insurance Planning Life Insurance may provide:Explore the possibilities of leverage premiums  A substantial benefit in exchange for a relatively low amount of premium dollars  An income tax-free death benefit to your named beneficiariesLife Insurance strategies integrated with:  Estate tax-free proceeds with proper planning  Liquidity when estate taxes are due Financial Planning  An opportunity to accumulate assets on a tax- advantaged basis Trust Services  A source of tax-free funds to satisfy a variety of Retirement Programs objectives, including education funding and retirement planningCan Provide Income and Estate Tax benefits for: Personal Needs Business Needs Legacy planning Succession planning/key person Estate tax liquidity Deferred compensation Philanthropic aspirations Buy/Sell funding Income replacement COLI Saunders Learning Group, LLC, Andover, KS 34
  36. 36. Investment Advisory ConsultingFlexible Choices Open Architecture  Strategic Asset Management Potential Benefits - comprehensive advisory platform offers clients broad customization from 5,900 investment options, including mutual funds, stocks, bonds, UITs, conservative options, fund of hedge funds, managed futures and no-load variable annuities  Manager Select - separate account platform offering over 120 institutional managers and over 330 strategies, with research-recommended short list and the flexibility to customize portfolios to client needs Centrally Managed  Optimum Market Portfolios - mutual fund asset allocation platform with both strategic and dynamic models, ongoing due diligence and automatic rebalancing; a turnkey small-account solution  Personal Wealth Portfolios - unified managed account for high net worth clients, offering a sophisticated and efficient “one account, fee and contract” solution; invest in separate accounts or combine separate accounts with mutual funds; features automatic rebalancing and the customization benefits of overlay portfolio management  Model Wealth Portfolios - discretionary research-driven platform helps clients construct portfolios, features overlay portfolio management, superior mutual fund managers, automatic allocation of deposits and withdrawals Saunders Learning Group, LLC, Andover, KS 35
  37. 37. Questions Saunders Learning Group, LLC, Andover, KS
  38. 38. Post Workshop Action Plan  Complete the Post Workshop Action Plan Saunders Learning Group, LLC, Andover, KS37
  39. 39. Thank You !Saunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
  40. 40. About the Author/Presenter  Floyd Saunders has worked on Wall Street with both Bank of America and JPMorgan, where is was a vice president in global financial systems. He has worked across the industry in retail, commercial, and investment banking.  He has taught courses in Money and Banking and extensively for the American Institute of Banking and various colleges.  As a consultant, he developed and taught a wide range of banking and investing courses.  He authored three programs for the American Bankers Association: Banking on Mutual Funds and Annuities, Introduction to Securities Markets and Investing in Securities.  He is the author of “Figuring Out Wall Street” and his next book is “Family Financial Freedom” a book on personal money management. Saunders Learning Group, LLC, Andover, KS
  41. 41. Reference Material Figuring Out Wall Street Consumer’s Guide To Financial Markets By Floyd Saunders Publisher: Saunders Learning Group ISBN: 978-0-9824019-0-3 Available from Amazon: http://www.amazon.com/Figuring-Out-Wall-Street- Consumers/dp/0982401906 and many other online book stores. Book summary: Figuring Out Wall Street, is the concise guide to help everyone understand how what to do now to restore our financial systems. Written in an easy to understand manner, even the most complex financial concepts are easy to digest. This book provides help to monitor investments with a review of investment products, financial regulators and economic indicators. Learn how the stock market exchanges work and the world of investment banking, hedge funds, venture capital and private equity. Every chapter includes action plans for investing. Saunders Learning Group, LLC, Andover, KS