What Does Financial Structure Mean? | Brandon Averill, Justin Dyer | AWM Insights #92

Financial Structure is a household’s entire net worth, human capital, and tax rate evaluated in a comprehensive and holistic framework.

No matter how many different accounts you have, you only have one effective tax rate. 

A portfolio is only one part of your Net Worth. Other assets should not be ignored.

Human Capital, often the greatest asset on a personal balance sheet, should also be counted.

Priorities are everything you want to achieve in life and the financial structure should be tailored to achieve those outcomes.

EPISODE HIGHLIGHTS:

• (0:40) Markets are struggling and have finished down for three out of the last four weeks. 
• (1:03) The Federal Reserve has pivoted to be more “hawkish” and is speeding up the end of QE and signaling faster interest rate hikes.   
• (2:40) The Omicron variant is having less of an impact on the market as it is proving to be less deadly than previous variants. 
• (3:25) HSBC and Wells Fargo are settling currency trades between each other on the blockchain. A great tangible benefit and use case for the blockchain. 
• (4:05) Reddit has filed for an IPO and will go public early next year.
• (4:15) The Build Back Better bill currently in Congress is not going to pass before the end of the year. Joe Manchin has shut it down and will be pushed to January. 
• (5:20) Fed Chair Jerome Powell has publicly said he can’t predict interest rates. 
• (7:10) Financial Structure is the big picture of one net worth, one effective tax rate, and knowing the value of your human capital.
• (8:25) Planning is an ever present item. Waiting until the last minute means you most likely have already lost out on the opportunities.
• (9:00) Roth Conversions and Backdoor Roth strategies. 
• (9:30) Mutual funds are required to pay out their capital gains in the fund. These distributions can sometimes be massive short term capital gains.
• (10:35) Turnover in funds, meaning they are churning their holdings through frequent buying and selling can mean a huge tax bill.
• (12:15) Because of the reporting, no one really sees the tax drag this causes for investors.
• (13:15) Tax loss harvesting is a strategy to bank losses to offset future gains while staying fully invested.
• (13:50) A dynamic trading system allows the opportunities to be exploited throughout the year and doesn’t wait until an arbitrary date.
• (14:40) Integration with tax planning, investments, financial strategy, insurance, and estate planning keeps.
• (15:40) Many times tax preparers don’t understand tax loss harvesting and many other financial planning strategies.
• (16:15) Donor Advised Funds and giving appreciated assets maximize impact for both you and the cause you care about.
• (17:10) Instead of selling and donating cash, gift the shares directly to the DAF and receive a deduction for the value of the appreciated asset.
• (18:40) A Donor Advised Fund explained.