Is there a planning strategy that can expand your wealth’s growth potential?
Key takeaways
- Segregating wealth by purpose may unlock greater growth potential. By distinguishing between assets needed for lifestyle and philanthropic goals versus those not required within your lifetime, you can align your portfolio more efficiently with your ambitions for yourself, your family and your community.
- A flexible, goal-based approach can help preserve both comfort and opportunity. Funding high-priority goals with conservative assumptions may provide confidence in meeting your needs, while excess wealth can be allocated to longer-term or higher-growth strategies.
- Strategic planning for perpetual growth requires ongoing family engagement. Sustaining wealth across generations involves clear succession planning, robust decision-making processes and regular communication to ensure that capital allocation continues to reflect evolving goals and values.
Being intentional is the key to making successful plans and creating options for yourself. This can start with a simple conversation with your advisor about what you want to accomplish.
Many of our clients find they have saved and invested enough to provide for their own needs, those of their loved ones, and to make a major philanthropic impact—and that there are still funds remaining. These assets can be allocated to a part of the balance sheet we call “perpetual growth.”
Why perpetual growth?
Our clients sometimes treat their entire investment portfolios as single pools of capital without considering when and how they might use their funds. This can impede long-term wealth creation. Some clients choose a different path: By distinguishing between the amount of wealth needed to fund their lifestyles as well as other goals (such as gifting to family or charitable giving) from the amount of wealth that may not be required within their lifetimes, they can more efficiently align their balance sheets with the things they want to achieve for themselves, their families and their communities.
Here are three steps to help you start preparing a plan to optimize your strategic allocations and segregate your funds according to goals and the appropriate time horizons for reaching them.
1. Articulate your goals
Any wealth planning process starts with identifying a vision for your wealth and organizing your capital toward these ambitions. This will typically include goals such as personal travel and lifestyle needs, supporting loved ones and charitable giving. It is also important to recognize that these expenses will change over time, therefore our approach is designed to be flexible and adaptive. Once those goals are established and prioritized, we’ll determine how much funding each will require, along with the appropriate time horizon.
What is a Goal?
Goals are specific targets you want to accomplish with your money. Every goal has four parts.
2. Fully fund your lifestyle and other high-priority goals
When earmarking the amount required to fully fund articulated goals, your team will incorporate factors such as market volatility, longevity, inflation and taxes, using conservative assumptions to provide a high probability that these assets won’t be exhausted prematurely, irrespective of the market environment.
The appropriate asset allocation for this portfolio will be determined by when you might start withdrawing from it, how long those withdrawals might last, and finally the risk and return parameters that are most appropriate. While these portfolios will not be the same for every family, the objective of providing comfort around funding the way you want to live or things you want to do for others remains the same.
3. Fund perpetual growth
With the assets required to fund your lifestyle and other high-priority goals ringfenced (assuming there is an excess amount of wealth), there is an opportunity to think through additional family goals, or to pursue additional safety or additional growth .
Since we know that you and your family won’t be leaning on this portion of your wealth to achieve your goals, investments directed to that portion of your it can be allocated to a mix of investments, ranging from less-liquid assets with greater growth potential to more stable options, depending on your risk capacity. Alongside traditional assets such as stocks, we believe private equity, private credit and hedge funds can play an important role when investing for perpetual growth. In addition to these asset classes, many families own and will continue to own unique assets that fit neatly into the perpetual growth construct. These can include:
- Privately held businesses
- Concentrated positions
- Real estate
- Leveraged investments
Considering a broad spectrum of investment opportunities can help you optimize your portfolio to meet long-term goals you may not have envisioned yet, and create options for your future self.
In addition to making investment decisions, preserving the purpose and integrity of these assets requires multiple generations to develop and adhere to strategic capital allocation plans that address the needs of family members at various life stages. It is crucial to have a clearly articulated succession plan and a robust decision-making process. We advise clients to make a habit of discussing their plans and goals with family members, and updating their goals and needs as required.
Build a Vision for your Wealth (Bucketing)
We can help
Your J.P. Morgan team can help you start the process of preparing a comprehensive wealth plan that incorporates your current needs and your long-term goals.
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