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How to draft an Investment Policy Statement?

Financial Planning Dentist
  1. Define the investment objectives: The first step in drafting an IPS is to define the investment objectives. This involves assessing the risk tolerance of the trust or family office and determining the desired return.
  2. Establish the asset allocation: Once the investment objectives are defined, the asset allocation strategy can be established. This involves determining the proportion of assets allocated to each asset class based on the investment objectives and risk tolerance.
  3. Develop the risk management strategy: The risk management strategy should be developed based on the investment objectives and the risk tolerance of the trust or family office. The strategy should define how risks will be managed, monitored, and evaluated.
  4. Establish the roles and responsibilities: The IPS should establish the roles and responsibilities of the investors, fiduciaries, and investment managers. It should define who is responsible for making investment decisions, monitoring the portfolio, and evaluating performance.
  5. Evaluate performance: The IPS should include a performance evaluation process that assesses the performance of the investment portfolio relative to the investment objectives. The evaluation should be conducted regularly and used to make adjustments to the investment strategy.

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Peter Locke

8 “Make or break” tax strategies for real estate agents and brokers to round out 2021

Key points in this article: The effects of rising home prices on Real Estate Agents tax liabilities Long-term methods for reducing your overall tax exposure Compensation alternatives that save on taxes We have been meeting with several real estate professionals. Rising home prices are leading to higher commissions and greater tax liability. One common theme has been that each of them thinks, “their CPA has done everything they can to help” but very few of them have installed the tax ecosystem that will help them avoid the most taxes. While the CPAs have done what they can to help identify and capture deductions in the rearview mirror, InSight is working with these real estate professionals to get prepared for 2021 and beyond with far more lucrative options for tax mitigation and investing. Here are the eight tax conscious strategies the real estate agents need to run, not walk, to get set up by the end of the year: Self Directed IRAs – It’s no secret that Real Estate professionals love owning real estate, it’s close to home, they are fluent in the market, and often can front-run great opportunities. While we think there is value in diversity, we don’t think you should break away from something that works. The issue is, we’ve worked with several agents and brokers who see huge gains in the assets in the last decade, only to turn around and give 20%-40% back to the government in the form of capital gains taxes and depreciation recapture. Savvy brokers need to get better about working with a CFP® to make a forward-looking plan to mitigate those taxes and a Self-Directed IRA might be part of that plan.  SEPs, Corporate 401(k) or Solo 401(k) – Most of the brokers we work with are 1099 employees, and if you are, you’re going to have to be in the driver’s seat regarding what method of tax-advantaged savings vehicles you use. What’s unique for Agents we work with, is that the strategy might change from year to year. One of our clients used a SEP in 2019 then a Solo 401(k) in 2020 in order to match the changes in her personal income. This is fine, as each of these methods can work to optimize the savings rate and maximize the success rate of her plan. The key is working closely with their CFP® to know what the year is going to look like, and how best to account for the income. OZ funds – Use your capital gain proceeds from a recent sale and invest it into opportunity zone funds, real estate, or businesses. The benefit now is the ability to defer your current tax liability until 2026 while also receiving tax-free growth on your investment after holding it for 10 years. Real Estate agents often have personal assets that have accrued capital gain liabilities in the past. This is a program that allows them to mitigate the past liability and avoid some of the taxes they will owe as the new asset grows in value.  Diversity – Becoming wealthy and staying wealthy means diversifying your income streams and risk into different sectors, industries, and accounts in order to give investors flexibility with liquidity, estate planning, tax mitigation, and correlation of returns between assets. Several of the agents we work with have had fantastic success with real estate assets which in turn causes them to neglect other, more tax advantageous and growth capable vehicles.  Cash Balance Plans – Great for Real Estate owners that want to “super fund” (2021 Contribution Limit is $281,000) their retirement while simultaneously reducing their tax liability. This is an underutilized strategy for agents. Any of them will have huge years here and there and are without the tax ecosystem to get those big commission checks into a tax advantages account. A single year of being able to set aside over $200k into your tax-advantaged retirement account can make up for about 5-7  years of neglecting it.  Capital Gain Harvesting – Capture gains proactively (death and gifting will soon be realization events). Most of us have heard of tax loss harvesting but an equal and effective way to mitigate future tax liabilities can be to realize gains along the way in order to reset the basis in investments. There will be times when strategically capturing your gains and accepting your losses can help you pay lower taxes each year.  Private Placement Life Insurance – An incredible way to fund a life insurance product that gives you tax-free growth and access to the cash value. The reason Real Estate agents like using this form of tax-free growth is it gives them the freedom and flexibility to fund other real estate ventures, grow their brokerage, or find other investments.   Many of these methods can be used for most small business owners and entrepreneurs, but for real estate agents working in this climate of elevated home prices these are our “run don’t walk” ideas for getting yourself in the best possible tax position through the end of the year. 

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June 24, 2021 No Comments
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Kevin Taylor

The Bifercated Landscape of the “Technology” Group: Exciting Investment Trends to Follow

In the realm of technology investments, we can observe a distinct bifurcation between two categories: stable cash-flowing investments and risky, cash-burning companies. This differentiation arises from the varying nature of these investments and their roles in the technology landscape. On the one hand, we have large, stable cash-flowing investments in technology. These are typically established companies that provide essential products, services, or infrastructure to support the operations of enterprises across various industries. These companies have a proven track record, generate consistent revenue streams, and often have a strong market presence. Examples of such investments include established software companies, cloud service providers, telecommunications companies, and hardware manufacturers. These investments are sought after for their stability, predictable cash flows, and potential for long-term growth. They are considered less risky and are often favored by conservative investors looking for reliable returns. On the other hand, we have risky, cash-burning companies that are the future of innovation and ideas. These are typically early-stage startups or emerging companies that are pushing the boundaries of technology and driving disruptive innovations. These companies are characterized by high research and development costs, aggressive market expansion strategies, and a focus on growth rather than profitability in the short term. Examples include companies in emerging fields like artificial intelligence, biotechnology, renewable energy, and e-commerce disruptors. While these companies may not generate substantial cash flows initially, they have the potential to revolutionize industries, capture significant market share, and provide exponential returns to investors who are willing to take on higher risk. The distinction between these two categories of technology investments reflects the different investment strategies and risk appetites of investors. Stable cash-flowing investments provide a sense of security and are suitable for risk-averse investors seeking steady income and capital preservation. On the other hand, risky, cash-burning companies offer the allure of high growth and substantial returns, attracting more adventurous investors who are comfortable with the uncertainty and volatility associated with early-stage ventures. Both categories play an essential role in the technology investment landscape. Stable cash-flowing investments provide the backbone of the industry, supporting day-to-day operations and ensuring the smooth functioning of enterprises. They offer stability and reliability to investors. On the other hand, risky, cash-burning companies are the engines of innovation and drive technological progress. While the risks are higher, the potential rewards can be significant for those who identify and support the next big breakthrough. The technology investment landscape has been bifurcated into stable cash-flowing investments and risky, cash-burning companies. Each category serves a distinct purpose, with stable investments providing reliability and predictable returns, while risky investments fuel innovation and offer the potential for exponential growth. Successful investors navigate this bifurcation by diversifying their portfolios and balancing the need for stability with the appetite for risk. We are seeing a transformation in the way technology companies behave. In the past, rising interest rates were bad (and still are for debt-laden companies) but now that Technology has become a cornerstone to all enterprises, the solution for labor shortages, and addressing inflation the upper half of the group is no longer the interest rate exposure it once was. The world of technology is constantly evolving, and each passing year brings new advancements and innovations that shape our lives in unimaginable ways. As we enter a new era of possibilities, it’s time to explore the exciting trends that will shape the future of technology. From artificial intelligence to quantum computing, let’s dive into the realm of the unknown and uncover the potential that lies ahead. Artificial Intelligence (AI) Revolution: Artificial Intelligence has already made significant strides in various industries, but its potential is yet to be fully realized. In the future, AI will continue to transform the way we live, work, and interact with technology. From self-driving cars and personalized healthcare to virtual assistants and intelligent robots, AI will become an integral part of our daily lives, enhancing efficiency, decision-making, and convenience. Internet of Things (IoT) Connectivity: The Internet of Things has already connected billions of devices worldwide, but its expansion is far from over. In the future, IoT will create a seamless network of interconnected devices, enabling smart homes, smart cities, and even smart industries. From smart appliances and wearables to intelligent transportation systems and environmental monitoring, IoT will enhance efficiency, reduce waste, and improve the quality of life for people around the globe. Augmented Reality (AR) and Virtual Reality (VR): Augmented Reality and Virtual Reality technologies have gained significant traction in recent years, offering immersive experiences across various fields. In the future, AR and VR will blur the lines between the physical and digital worlds, transforming industries such as entertainment, education, and healthcare. Imagine attending virtual meetings, exploring distant locations, or even undergoing virtual medical procedures from the comfort of your own home. AR and VR will revolutionize how we perceive and interact with our environment. Blockchain and Decentralization: Blockchain technology, popularized by cryptocurrencies like Bitcoin, has the potential to disrupt traditional systems and bring about a new era of transparency, security, and decentralization. In the future, blockchain will revolutionize industries such as finance, supply chain management, voting systems, and intellectual property rights. It will enable secure and transparent transactions, eliminate intermediaries, and empower individuals with control over their data and assets. The future of technology is incredibly promising, filled with endless possibilities and transformative innovations. Artificial intelligence, quantum computing, IoT connectivity, augmented and virtual reality, and blockchain are just a few of the trends that will shape our lives in the coming years. As we embrace these advancements, it’s important to keep an open mind and adapt to the changing landscape. The future is here, and it’s up to us to make the most of it, harnessing technology to build a brighter, more connected, and sustainable world. Let’s embark on this exciting journey together and witness the marvels that lie ahead.

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May 8, 2023 No Comments

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