Utah is booming with the second-highest state GDP growth in the U.S., a strong startup community and one of the youngest and fastest growing populations in the nation. The city is experiencing expansion across multiple industries, and as our clients and prospective clients grow their wealth, the sophistication and complexity of their needs grow as well.
Complexity like deciding on the most effective wealth strategy and how important news and trends may impact your life. Or where to find investment opportunities, how to plan for the future, establishing a legacy that will last beyond your lifetime. We sat down to talk about these challenges, and why Utah is one of the greatest markets to solve them in.
Q: Forbes recently named Utah the No. 2 Best State for Business, the state has received a ton of accolades in recent years as a business-friendly state. Why did J.P. Morgan choose to invest in Utah’s business community?
J.P. Morgan has been front and center to see the growth across Utah, and now we’re proud to be able to call Salt Lake City and Utah our home. Entering this high-growth market for global families and businesses with a physical location in early 2019 was a natural next step for the Private Bank.
The tech sector is booming across the country, but in particular, here in Utah which is why the state has earned the reputation as one of the most entrepreneurial places in the U.S. Establishing a permanent team here allowed us to participate directly in Utah’s incredible growth story. Utah’s economic growth comes from various sectors and industries resulting in diversified wealth creation, and within its growing business ecosystem there’s an enormous opportunity for its citizens to grow their wealth. We’re here to help amplify that growth and navigate that process.
Q: With all the opportunity and optimism surrounding Utah, what are your clients most concerned with heading into 2020?
Heading into the New Year and new decade, a lot of our clients have been asking about trust and estate planning – there are questions as complex as “how do I plan for three generations into the future?” and foundational as “let’s reexamine my will.” Even with clearly defined goals, transitioning significant wealth is rarely simple. It takes a thoughtful plan and a smart strategy to manage it.
It is important to review estate plan documents to make sure they truly reflect your wishes, and that you’re taking advantage of every opportunity to make it easier and less costly to transfer your wealth. Each plan is complex and will be different depending on who you are and how much of that money is controlled by you, your parents or grandparents. Still, the effects will be far-reaching and will create opportunities for everyone. A good estate plan is one that clarifies your wishes and balances them against the practical requirements that need to be met. It also makes the objectives and process clear to your beneficiaries and the professionals you’ve selected to help put the plan into action.
Additionally, we’ve been working with many of our clients on maximizing Qualified Small Business Stock (QSBS) optimizations. Qualified entrepreneurs and others who invest in many early-stage private companies can realize significant tax savings on QSBS capital gain up to the greater of (a) $10 million or (b) 10 times your cost basis. Depending on when the stock was acquired, you may be able to exclude from 50% to 100% of the gain from capital gains tax.
Q: In 2019, there were a ton of headlines whiplashing between tariffs, domestic politics to markets swings. Investors may have difficulties interpreting the chatter. What do you see on the horizon for market risks?
We don’t see a recession in 2020. An economic cycle typically moves through four phases: from contraction to recovery, expansion and, finally, slowdown. Despite the risks, we believe the economy will continue to grow in 2020, avoiding recession for an 11th year. Manufacturing is stabilizing, the consumer is strong.
Sometimes, investors think they can outsmart the market; other times, fear might push them to make emotional, rather than logical, decisions about their portfolios.
As the below chart notes, “Six of the 10 best days occurred within two weeks of the 10 worst days.” Fear may push investors out of the market during bouts of volatility, but by missing some of the market’s best days, investors can lose out on critical opportunities to grow their portfolios.
Q: We saw part one of a trade deal, but discussions are continuing to drag on. What are the wildcards approaching an election year?
Binary wildcards like the trade war and upcoming election deserve respect and can be important market catalyst, but trade war and the 2020 election are not enough to derail a well thought-out plan. Don’t be distracted by the election, history tells investors not to overreact to presidential candidates.
In 2016, many people thought President Trump’s election would usher in a global recession. Previously, many thought the Obama presidency would crush equity markets. Investors who acted on these fears would have missed returns of over 60% (from Trump’s election), over 150% (from Obama’s second term), and over 400% (from Obama’s first inauguration).
This election year a few progressive candidates are vowing to re-make American capitalism. Their campaign rhetoric suggests such potential risks to the markets as higher taxes, a more stringent regulatory environment and policies that work to elevate labor relative to capital.
These risks are real, but we don’t think that the likelihood of the policies being adopted is high enough to derail long-term investment plans. And, while a snapback from Trump to a Democratic president would likely generate volatility, it is unlikely to last.
About J.P. Morgan Private Bank in Utah
Managing Director Brian Swenson and Executive Director Eric Smith of J.P. Morgan Private Bank in Salt Lake City co-lead a team of local professionals who provide wealth management advice, strategies and services to successful individuals, family offices, foundations and endowments throughout the region. J.P. Morgan Private Bank has been serving clients in Utah for nearly 20 years and established their local office in 2019.
J.P. Morgan Private Bank provides customized financial advice and solutions to help wealthy clients and their families invest, borrow and bank with intent. Leveraging global capabilities in investing, philanthropy, family office management, credit, fiduciary services and special advisory services, the Private Bank brings clients’ investments and financial assets together into one comprehensive strategy to help them achieve their goals and secure the legacy they envision.