Client Affairs

Advising Clients On New Asset Classes, Advanced Planning, And Philanthropy

David Jones and Janet Walker October 29, 2021

Advising Clients On New Asset Classes, Advanced Planning, And Philanthropy

With so many financial market changes, planning challenges and complexity around investment, there's only so much one can expect from ultra-high net worth individuals' in their ability to learn their way through. Advisors must step up their game.

This news service hears a lot these days on how high net worth and ultra-HNW individuals and families must be better educated about types of investment – as must those who advise them. It’s easy to see why. The increased focus on “alternatives” such as private equity and credit means that investors who are mostly used to the old trinity of equities, bonds and cash have to learn new terms such as “internal rates of return,” “vintages,” “capital calls” and “deal exits.” And it is not just investment where new terms and complexities lie – we see it in forms of estate planning and philanthropy. 

To address the topic about how to advise clients and on the state of information and guidance are David Jones and Janet Walker, Bailard, the wealth management firm based in San Francisco’s Bay Area. 

The editors are pleased to share these insights and invite readers’ responses. The usual editorial disclaimers apply. Jump into the debate! Email and

From traditional media outlets, to bestselling books, to social media platforms in this day and age, there is an endless array of information about investing and financial planning at consumers’ fingertips. But information is not the same as education. This is an important distinction, particularly for ultra-high net worth investors who have significant portfolios and complex financial needs. Advisors must supplement the information that their UHNW clients absorb online and elsewhere with the knowledge and context to make it applicable to their individual circumstances, empowering clients to make financial decisions that are both informed and educated.

Digital currencies and other new asset classes require extra guidance
The cryptocurrency conversation is one of the most active in terms of online advice for investors. Information on the subject abounds, with some leading investors calling it a “massive bubble,” while others laud it as “a Nobel prize-winning diversification strategy.” Advisors must help clients cut through the noise and analyze trending investment opportunities according to each client’s individual situation: Can the new asset class be integrated in their portfolio, does it align with their asset allocation and risk profile, and what will it mean for their estate plans and tax implications? 

The reality is far more nuanced than the latest buzzy headline.

For example, digital currencies purchased via online exchanges may not be titled in relevant trusts and moreover, trust documents may not include language applicable to these assets. Similar to other private investments such as hedge funds, private equity and real estate, investments in new asset classes may need to go through probate. Digital assets also present a distinct challenge in the sense that clients can lose access to them altogether if they lose the private keys associated with the currency. For tax implications, investors owning and trading cryptocurrencies must also be aware that wash sale rules do not apply for these assets. While this makes it a unique asset, it also creates an opportunity to nimbly manage realized gains/losses. 

Advanced estate planning demands ongoing education
For many clients, liquidity events like an IPO, the sale of a business or property, or a substantial inheritance will prompt them to ask questions about advanced estate planning. However, advisors should begin relevant conversations weeks or even months before clients will need to make decisions, as educating clients to the point where they are comfortable moving forward can take time. These conversations also need to incorporate the tactical details of how to create these plans, but also the less quantifiable aspects of planning, like how to align family values and investment goals. For instance, many families may consider a strategy such as a family limited partnership to align their values and shared goals. As an example of the timing it can take for these discussions, at Bailard we worked recently with a founder whose company was planning an IPO. We spent several months educating him about the estate planning process before he was ready to proceed with a plan.

Advisors need to help clients understand the cost and the time commitment required for advanced estate planning upfront in order to avoid surprises once they start the process. And while clients often come across information about different strategies and vehicles online or elsewhere, they need individual education and personalized advice to understand it in the context of their own estate planning needs.

Philanthropy starts with understanding core values
When it comes to charitable giving, decisions related to philanthropy, tax planning, and estate planning are deeply personal, and much easier to navigate when a client’s values are clearly articulated. These conversations also require ongoing education, as well as a periodic revisiting of core values, which may shift over time. Clients who feel compelled to support philanthropic causes or charitable organizations often make “expensive gifts,” for example, they donate cash instead of low-basis stocks. Advisors can guide them toward gifting strategies with greater tax benefits. 

As often happens in relation to new asset classes and estate planning, some clients will ask about establishing a charitable remainder trust or charitable lead trust after reading an article in which these vehicles are mentioned. These clients need education from an advisor in order to apply that information to their own circumstances and make decisions accordingly. Using software to illustrate how the trusts work, what distributions will look like, and the resulting impacts on their overall philanthropy and estate planning strategies can be a valuable way to educate clients.

Living in the information age affords UHNW clients access to mountains of information about investing, estate planning, philanthropy, and more. However, in most cases, there is a limit to what a client can learn via “Google research.” An informed but superficial understanding of individual investments or strategies is not sufficient to make educated decisions about how those vehicles factor into a client’s highly personalized portfolio and financial plan. Now, more than ever, advisors play a crucial role in guiding and educating UHNW clients on how to apply information to their specific circumstances and make informed financial decisions that align with their long-term goals.

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