To ensure assets are well diversified across multiple asset classes, sensible credit planning for clients is essential to strategic wealth management, according to J.P. Morgan Private Bank.
Date: June 29, 2012
"Interest rates are at historic lows and with some inflation concerns, we see clients holding cash for safety but with negative real rates of return. Clients have two sides to their balance sheets but a lot of wealth advice focuses just on the asset side and not debt,” said Peter Flavel, chief executive officer of J.P. Morgan Private Wealth Management Asia. “Credit planning is an important element. We should not lose sight of the strategic and valuable role of credit in a disciplined wealth management plan.”
According to the bank, establishing a credit line against an investment portfolio or concentrated stock position can provide timely financial flexibility. Importantly, leverage can be adjusted to diversify the portfolio without disrupting the longer-term investment strategy.
Added Flavel: “Now is an opportune time to evaluate the role of borrowing in the overall wealth management plan. Whether for meeting the short-term liquidity needs, making tax-efficient investments or diversifying a portfolio, moderate credit can offer benefits to the overall wealth and investment planning strategy.”