Strong Client Relationships and Cautious Actions in the Face of Market Turbulence
December 28, 2022
An Interview with Jessica Cutrera
We recently had a discussion with the president of Leo Wealth, Jessica Cutrera. She sits at the helm of a global wealth and tax advisory specializing in global citizens living abroad. Below is the condensed version of a conversation about strong client relationships, and prudent actions in the face of market turbulence.
- How has your experience positioned you to lead?
- Talk about the vantage point your personal background gives you.
- What types of situations or complexities do you see most often with your clients?
- Is there an age to start taking inventory of planning?
- What are the issues people are dealing with today and does it affect how you run the business?
- What’s your vision for Leo in 2023?
- Any parting message you’d like to leave for us as we near the end of 2022?
When we look at Leo Wealth, we see an integrated global wealth manager and financial planning firm. Leo has a very comprehensive services offering, covering areas that each evolve in their own ecosystem. How have your personal background and experience positioned you to lead such a broad offering of services at Leo Wealth?
You know it’s interesting, I had the opportunity to come to Asia in the beginning of 2003 to work for an independent firm and quite honestly, I really didn’t know what I was getting into. My experience in the US had been working for a big institution – I was at Charles Schwab, and when I came abroad to work for a small independent firm it was because they wanted to serve Americans abroad.
It became clear very quickly how difficult that was to do. There was just so little support when it came to investments, tax protection, and financial planning that was available for US citizens living abroad. I was fortunate enough to be able to start to build something. My firm had no infrastructure around that, but they encouraged me to explore what it would take to serve the expat community.
It was through this exploration that I was fortunate enough to meet some fantastic attorneys, tax advisors, and insurance advisors who were willing to help me and support me in building out that practice. When I left and moved to Hong Kong and got my first asset management license and set up my first company here, in early 2008, we really had been able to build on comprehensive resources.
You have an interesting personal background that’s fairly unique to this particular industry. Can you talk a little bit about the vantage point your background gives you?
Sure. You know, I joke with people sometimes on my path into the finance industry. My first career was in social work; I was a social worker in human development and community psychological services. And I joke with people that my time in social work was more useful to my work today than my MBA (Master’s in Business Administration).
My social work time was working in a very challenging population. I specialized in working with people who were both mentally ill, and had a diagnosis of mental disability. And in my efforts to help these very complicated families, I forged skills that I still use today in working with a different type of complicated family – the complicated modern workforce, where we have incredible cultural diversity and geographic mobility.
Today’s investing, tax, and retirement climates are very challenging for a global citizen to tackle alone, with multi-market compliance, regulatory oversight, and varying tax code compliance. So in order to be successful in helping clients meet their long-term goals against this complex backdrop, you really need a close personal relationships. The more we can understand the key relationships in our individual clients’ lives, the more we can provide thoughtful advisory that is aligned with their estate and financial planning goals.
And we as fiduciaries need to be able to help them manage the non-financial challenges in their life – which will ultimately have financial implications anyway. Leaning on strong personal bonds is the best way to help clients navigate these challenges. This relationship-driven ideology has really been the foundation of what we’ve built at Leo Wealth.
We want to be the first person that a client calls when anything goes wrong, whatever that anything is, so that their ultimate financial goals do materialize and aren’t derailed by anything else that impacts their personal planning process.
What types of situations or complexities do you see most often with your clients?
For the past 12 or so months, a lot of what we’re hearing from people are questions around, “Am I still on track?”
There have been several market disruptions, the resilience of COVID, inflation, and the pullback in stock and bond markets. These are all things we have witnessed largely within a years’ time.
This uncertainty flows through to the client’s questioning their plans in place.
Does that mean I have to work longer? Does that mean I need to change my plans? Am I still on track for my goals and my long-term picture if things persist like they have? How does what’s going on in the short term impact my long term?
And I think a big advantage we have is the depth of planning we do with clients. We take time to understand their objectives up front, and this allows us to create adaptive, fluid financial plans. We can very easily show them, “Okay, here’s the impact this year of higher inflation”, or show how next year could look given different assumptions.
One of the silver linings of a market downturn is it motivates people to review their plan, to review their goals, and to touch base with their advisors and their planners to review their investment allocations.
And it’s an incredible opportunity for us to add value. The level of work we do on tax and portfolios and planning really doesn’t change year to year. Clients don’t see it so much in years where markets are positive, or when there’s not a lot of news or there’s minimal change in landscape.
We’re still doing all that same work in analysis and optimization, year in year out. But in a year where things are difficult or volatile, people become concerned about what is the implication of that in their life and their ability to retire, to fund their children’s education, to buy real estate, and to have their own financial freedom.
We really have the opportunity to use our comprehensive planning tools and infrastructure to help give clients confidence that they’re still on track, their goals are still able to be realized and meet their needs. Investing and planning over long time frames is very often a game of managing emotions and exercising patience. These tools help give the client confidence and comfort and take away some of the anxiety that arises from any disruptive market backdrop.
So if someone were taking inventory of their comprehensive planning, or just getting started or really close to retirement, is there an age too young or too old where, they might look at it like, “Oh, I’m just not going to bother?”
Is there an age where this is actually true? That I’m too young or too old to actually plan? No, there really isn’t, as planning isn’t age-specific and is dynamic whether young or old. I think anyone who is old enough to understand personal finance can start to build financial goals.
We encourage parents to talk with their teenagers, their college-aged children, even if it’s putting very simple things in place like setting aside small amounts of savings, looking at their earnings stubs, understanding how taxes get paid, starting to build some skills and competency.
Now, the goals in the planning for someone who is very early in their planning is very different from someone who is in a later stage and I think that’s really where the bespoke and flexible nature of what we do really adds value to clients.
It’s not a cookie cutter output, nor is it a kind of one size fits all plan, where you just plug in some different numbers and the timeframe is what’s different. We really drill down on the individual factors, but ultimately you’re never too early to start to build good habits around savings and tax reporting and planning for life goals.
And it’s never too late to take a look at your overall financial picture and goals, and from there to strategize a plan for going forward. So sometimes there’s a sense of why bother, even for people who are later in life, particularly if they’ve had a very disruptive event or events. We work with families going through death and divorce. Those are issues that are incredibly disruptive and sometimes destroy the financial plan without careful planning. You’re starting from zero again, because the existing infrastructure and assumptions have been completely obliterated.
But getting started on a new plan, one with new assumptions, is critical for moving forward. Life may be different, but it’s never too late to try and put a plan in place. And often later in life, it’s about getting that confidence and the ability to be realistic. This is another area where we rely on the strength of our personal relationship with clients.
What can you spend, what are different scenarios going to mean with regards to your longer-term outcomes? Even for families who have more wealth than they are likely to ever spend, there are very important conversations around legacy and philanthropy to be had. How does the family use its resources for multiple generations to come in ways that match their goals and values? How are family members prepared to inherit wealth, carry on family values and be supportive in career/philanthropic endeavors? This is the crux of estate planning.
There’s really no barrier on planning either related to age, life stage, or net worth. There are planning opportunities for everyone.
The journey has gotten rocky for some people given recent market disruption. You touched on some of what the last year has brought us; what are the issues that people are dealing with in their journey today and does it affect how you run the business itself?
One of the important things about the way we run the business and the way we structure our relationships with clients and our investments is that we’re realistic and upfront about how clients take risks. We don’t encourage clients to take large amounts of risk beyond what they can ultimately afford to really lose.
And we take a very long-term view of performance; there’s an abundance of evidence that having a patient, long-term view is how people have a successful investment experience. This is how the wealthy accumulate wealth over time.
It is not the short-term bets and the tactical, I’m-going-to-take-risk-here-and-there strategy. It’s having a comprehensive plan that takes a long-term view that buys quality assets. Prudent choices on the investment side need to be met with good decisions with regards to budgets and spending, for a cohesive financial plan that fits each client.
In totality, if you’ve built the plan and the strategy, even very disruptive markets are often much less of an issue. So we have a lot of clients who have been on this simple path for this year, and they know they’re on track. They know that major market disruptions, recessions, market cycles – these are actually all a normal part of what markets do.
Downswings and flat periods of asset returns are often referred to as the price or the toll of capital appreciation. The strong long-term average growth numbers that history has provided were achieved by making it through both the upside and the downside and avoiding the temptation to panic and sell into emotions, to react to greed and fear and market movements in the short-term.
This is not going to be the last year that we have this kind of experience, and most every disruptive event is impossible to predict. There’s always something a little bit new, right? COVID was a global surprise. The inflation dynamic spent a long time percolating but we hadn’t seen inflation for nearly 20 years.
There’s some interesting dynamics that we haven’t necessarily seen in more recent market drawdowns, but there’s always something new and different. So it’s keeping people focused on the long term, while working hard on the analytical research to best understand the objective truth of the moment.
No one likes market disruption, particularly because we care so deeply about the families we serve. But we remind them that if they’re in their forties and fifties, they’re going to see several of these again in their lifetime. We use that as an opportunity to help people focus more on their plan, focus on what’s important, and not get distracted or derailed by what’s going on in markets day to day.
And it’s really the same approach we take in the business. You read all the stories now, and there’s many layoffs happening, right? So many of the banks have done deep cuts. Many of the tech companies have done deep cuts in staffing.
We don’t staff up and staff down – we build teams. We know that there are going to be years where, because of markets, and the portfolio management revenue, we’re going to have less income. That is in fact a normal part of a business like ours. Now, we’re fortunate that our business has continued to grow significantly. We’ve added a lot of assets and clients this year, but we expect that, and we plan for that. We don’t want to hire and fire. We want to build teams. We want to be able to promote from within.
We also want to be sensible in our own business planning, so we’re prepared to ride out the ups and downs in market volatility because we absolutely know this isn’t the last rodeo of market volatility. I think that’s one of the things that’s different versus working for a large publicly traded company or a private equity owned company.
We are entirely partner and shareholder led and owned. We have the ability to make that kind of long-term plan and structure our business in the same way we tell our clients to plan.
Speaking of looking forward, what’s your vision for Leo in 2023? As a company, what do you want 2023 to bring and what do you want to accomplish?
For 2023, one of the silver linings for us, when you have a disrupted market or a market downturn, there is good talent that comes onto the market. Banks often make deep cuts. There’s an opportunity for us to grow our team and add talent, and I think that’ll be the case in 2023.
Some of the banks like Credit Swiss have already had to make some pretty deep cuts. There’s going to be good people coming onto the market whom may be a fit for our vision and values. So I expect 2023 to be a growth year for us. More specifically, this year we’ve opened an office in Tokyo. We are shortly going to have a presence in Singapore.
Expanding the markets that we serve across Asia-Pacific is an exciting goal and opportunity for us in 2023. We’ve also been adding to our global tax capabilities, and expect to be able to do more returns and in more jurisdictions and to continue to build that part of the business.
Any parting message you’d like to leave for us as we near the end of 2022?
The messaging would be for everyone, whether you work for us, you’re one of our clients, or you’re a business partner. It is really to take advantage of the opportunities that are there to be had.
Anytime there is disruption in markets, that creates opportunity for businesses that know what they are looking for. Individuals and families would do well to review planning, financial objectives, and goals early in 2023.
Next year is an exciting space for us to really be able to grow the number of clients we serve, and to deliver that integrated planning and support on an increasingly global basis.
Thank you so much for taking the time to share your professional journey and the insights of your global planning practice!
DISCLAIMERS & DEFINITIONS
The information provided is for educational purposes only. The views expressed here are those of the author and may not represent the views of Leo Wealth. Neither Leo Wealth nor the author makes any warranty or representation as to the accuracy, completeness, or reliability of this information. Please be advised that this content may contain errors, is subject to revision at all times, and should not be relied upon for any purpose. Under no circumstances shall Leo Wealth be liable to you or anyone else for damage stemming from the use or misuse of this information. Neither Leo Wealth or the author offers legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. Past performance is no guarantee of future results.
Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Please contact us if you wish to have formal written advice on this matter.