Wealth Mgmnt

Strategies for Special Asset Management

For most of us asset management consists of the traditional diversity between stocks, bonds, and cash in general. However, there are many that have non-traditional or specialty assets that are the backbone of their financial net worth. Specialty assets, or non-financial assets, may include things such as farms, ranches, real estate interests, closely held businesses or natural resources rights. In addition to being diverse they are often very illiquid needing special wealth management planning. There can be considerable value and upside potential in these other asset classes, but they also bring with them a wealth of challenges in how to manage them. Specialty asset management can be broken down into several main categories, including farm and ranch, real estate, oil and gas, and private business.

For many wealthy individuals and families, farm and ranch holdings and investments can be attractive sources of potential income and diversification. While most financial advisors focus on traditional assets, you will want to seek out special talent that often goes beyond what you would get at the big banks and investment houses. However, depending upon your location you can get services from places like the Bank of America and others. It is important to know someone who understands your ranch or farm who are often times involved in the farming communities themselves. Managers like Farmers National Company is a comprehensive farm management service for landowners. While each farm is individual and unique there are collective areas of management that concern them all, such as:

  • Increased income
  • Asset conservation
  • Management continuity
  • Consistent communications
  • Budgeting to achieve cost control
  • Improved crop marketing to increase profits

Other services that a farmer or rancher may be looking for include professional land management. If you own land but are not sure how to best utilize it, specialists will help you secure qualified farmers who understand how to enhance value and use sustainable practices. If you decide to lease your land to farmers or others, your specialty manager will perform services like rent collection, paying taxes and securing the proper insurance. In addition, if you decide to buy more land or dispose of your current property it is essential to value it in terms of raw value plus the added value of its production capabilities. Lastly, if you are in this specialty asset segment you are probably concerned about the environment and conservation programs. A specialty asset manager will help with not only operating efficiency but hopefully through soil and water conservation as well.

While most of us are familiar with real estate it can be a highly specialized asset area when it is property other than your personal residence. Real estate can include the ownership of single family homes, multifamily residences, as well as commercial and the agricultural that we have mentioned. Since real estate is usually one component in a larger portfolio, it is important for your specialty advisor to work with your traditional wealth management team to coordinate advice and to make sure each is on the same page as it relates to your overall goals.  This includes any Trust Administrators or Investment Manger’s who control a portion of your estate. When considering a specialty manager in real assets, you can run the gambit from managing all aspects of the property to long-term planning and various transactions. According to the specialty asset management group at J.P Morgan, some of the capabilities that you should look for in a manger include the following:

  • Capital planning, hold or sell analysis, and executing sales, purchases and leasing transactions.
  • Property accounting, including collection of rent and accounts payable related to the ownership and/or operation of property.
  • Overseeing day-to-day property management and capital improvements.
  • Risk mitigation, environmental compliance, pre-transaction planning and maintenance of legacy assets over multiple generations.
  • Managing fiduciary regulatory compliance, including annual reviews, inspections and valuations.
  • Serving as a liaison among beneficiaries, the company’s management team and its advisors.

A more esoteric asset class for most is that of minerals, including oil and gas, which are generally held in trusts or in investment management accounts. However, you may be the owner of mineral interests and need help in the field as well. This would include support from specialty professionals who have a deep understand of the petroleum business. From a financial and legal perspective, this would include helping you negotiate leases and other contracts to best optimize your resources, as well as provide the traditional revenue reports and other financial and accounting reports.

Private businesses are perhaps one of the best known methods for creating generational wealth in America. These businesses are nonmarketable equity and include various types of corporations and LLC’s, among others. Since this is your business, no one understands the day to day duties as well as you do. However, most of the expertise provided by a specialty wealth manager here would be in selling or passing on the business to beneficiaries. This could be done for a myriad of reasons including to generate liquidity, diversify your investment risk, or simply to retire and pass the business along to family. In any event, like the other specialty asset areas mentioned, it is important to coordinate these activities with that of your traditional assets to assure that all your goals and needs are accounted for.

Wealth Mgmnt