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8 Reasons to Focus on Wealthy Clients' Debt

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Financial advisors are used to helping wealthy clients invest their money and navigate evolving markets, but a new analysis published by Sora Finance suggests that many planners are overlooking an important part of the holistic wealth management process.

According to the paper, clients need and expect financial advisors to look beyond the asset side of their balance sheet to help them optimize their liabilities. Historically, however, advisors have been hindered by a lack of access to timely and reliable debt data.

This situation is changing rapidly, the paper explains, thanks to digital communication technology and new platforms that can help advisors understand and monitor their clients’ liabilities in granular detail. Thus, it may be worth advisors’ time to reconsider their approach to helping clients manage and monitor their debt.

The new analysis was put together by John O’Connell, founder of the Oasis Group, and Joel Bruckenstein, president of Technology Tools for Today. As the duo explains, effective liability optimization is best understood as “the practice of making sure that your client’s liabilities are always deployed in the most efficient and effective way.”

In other words, liability management is not really about helping to get people out of debt.

“Virtually all wealthy people have debt,” Bruckenstein says. “It’s one of the ways they structure their finances.”

With this dynamic in mind, the authors explore the “why” behind liability management, while also taking a more detailed look at what they call the “essential elements” of the practice. This ensures that current debt is always optimized and new debt is taken out on the most favorable terms to the client.

Other core elements include acknowledging the complexities of accessing and managing liability data, conducting informative debt assessments, as well as the use of securities-based lending techniques and securities-based lines of credit.

See the accompanying slideshow for a review of eight reasons why liability management should be a focus for advisors in the new year.