Estate Planning Mistakes Almost Everyone Makes

Estate Planning Mistakes Almost Everyone Makes

Estate planning traditionally focuses on your financial assets. But when you think about what matters most, is it your car, home, or bank account? Of course not. The only reason those assets have any value is you’ve assigned meaning to them. You hope, for example, when you give money to your children, it will be used to improve their lives. Although this outcome can be difficult to direct.

What non-financial things matter most to you? What pieces of yourself do you want as a part of your heritagEe?

When you organize your will, trust, and other legal documents, don’t forget about your memories, values, traditions, and beliefs.

Your assets can be broken into three main categories: 

  1. Character Assets: Your meaningful relationships, values, health, spirituality, heritage, purpose, life experiences, talents, and plans for giving.
  2. Intellectual Assets: Your business systems, alliances, ideas, skills, traditions, reputation, and wisdom.
  3. Financial Assets: Your physical wealth, investments, and possessions.

Financial assets are passed along through proper structuring — such as a trust or a foundation. These structures range from the simple to the complex, depending on your level of affluence and asset protection or tax planning goals. Rarely are your character and intellectual assets taken into account. Often, these assets are lost simply because there is not a structured way to identify them and pass them along.

Passing on non-financial assets is what my team and I specialize in. We’ve found that the process of structuring your character and intellectual assets to pass on to your heirs needs to be just as thought out as the process of passing on your financial assets.

Non-Financial Estate Planning Essentials 

Our Meaning Legacy™ planning process focuses on seven essential components for passing on your non-financial assets to your loved ones. They are:

  • Beliefs, Values, and Vision: Your personal principles and shared family philosophy.
  • Master Stories: Experiences that have shaped your life.
  • Systems for Living: Skills and information your family needs to thrive.
  • Experiential Bonds: Planned family traditions, outings, and bonding activities.
  • Family Heritage: Where your family came from.
  • Community Impact: Your vision for giving back to the world.
  • Public Presence: How you are perceived by the public both off-line and online.

Whether you hire a firm to help you out or decide to document these components on your own, be sure your non-financial assets receive just as much attention as your financial ones. Your family will thank you.

In his book Ethical Wills: Putting Your Values on Paper, Barry K. Baines, MD wrote, “When my father was diagnosed with lung cancer in 1990, I asked him to write a letter about the things he valued. About a month before he died, my dad gave me two handwritten pages in which he spoke about the importance of being honest, getting a good education, helping people in need, and remaining loyal to the family. That letter — his ethical will — meant more to me than any material possession he could have bequeathed.”

I’ve heard many people say something similar. Whether it’s a letter from a loved one, an old journal, or a film, these memories, words of encouragement, and expressions of love — in the exact words of a respected family member — connect at such a deep level that they become a treasure to the family.

Becoming Aware 

The following questions will give you an idea about what character and intellectual assets you should include as a part of your estate plan.

Related: Bringing Mentoring Back to Legacy Planning

Assessing Your Current Status: 

  1. Do you have photos, videos, letters, or other memorabilia that needs to be digitally archived, organized, and sent to family members?
  2. Do you know about your family tree and ancestors? Have you archived this information somewhere so your family can access it?
  3. Have you recorded your favorite memories, either via audio, video, or in writing?
  4. What tasks or skills does your family need to learn in order to pick up where you left off or live productive lives? (e.g. money management, household tasks, business systems, health guidelines, and so on.)
  5. Do you have a philanthropic vision? Have you gotten your family involved in charity work or giving to the community? How have you documented these activities?
  6. Do you have a family mission, a coat of arms, family rules, or other family systems you’d like to document?
  7. What kinds of experiences or traditions have you planned for your family? How do you plan to make them meaningful? How do you document them?
  8. When you google yourself, do you like what comes up? Are you interested in creating an online presence to encourage your family or convey a message (such as your support of a charity or to spread your love of gardening)? What kind of man or woman would you like to be publicly known as? In a world where privacy is disappearing, your online legend will become what you are known for to your friends and acquaintances as well as your family.

Once you’ve considered these questions, the next step is coming up with a plan to package up this information in a way that’s valuable to your family. Too much information can lead to a legacy of minutia. Filtering what gets passed on often becomes the most important part of the process.

Laura A. Roser
Life Transitions
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Laura A. Roser is the #1 expert in meaning legacy planning. She is the Founder and CEO of Paragon Road, a company that assists individuals in passing on their non-financial as ... Click for full bio

Multi-Factor or Not Multi-Factor? That Is the Question

Multi-Factor or Not Multi-Factor? That Is the Question

Written by: Chris Shuba, Helios Quantitative Research, LLC

Let’s pretend you are a US investor that wants to deploy some of your money overseas.  You think international developed market stocks are attractive relative to US stocks, and you also think the US dollar will decline over the period you intend to hold your investment.  Your investment decision is logical to you. But you have choices:  You could a) simply invest in a traditional index like the MSCI EAFE, b) invest in a fund that systematically emphasizes a single factor (like a value fund) that only buys specific stocks related to that factor, or c) invest in a developed fund that blends several factors together, like the JPMorgan Diversified Return International Equity ETF (JPIN).  What is the best choice? 

Investing in a traditional international market capitalization index like the MSCI EAFE is not a bad choice. It has delivered nice returns for a US investor, especially uncorrelated outperformance in the 1970s and 1980s, and helped to diversify a US-only portfolio.

Your second choice is to invest in one particular factor because it makes sense to you.  Sticking with the example of a value strategy, you might believe a fund or index that chooses the cheapest or most attractively valued stocks based on metrics like Price to Earnings (PE) is best.  

You could go find a discretionary portfolio manager who only buys stocks he deems to be cheap.  Typically the concept of “cheap” is based on some absolute metric that the manager has in mind, such as never buying a stock with a PE greater than 15.  If there are not enough stocks that are attractive, he will hold his money in cash until he finds the prudent bargains he seeks.  This prudence also obviously risks possible underperformance from being absent from the market.

The alternative is to buy a value index or fund that systematically only buys the cheapest stocks in a particular investment universe.  So if there are 1000 investable stocks available, the index ONLY buys the cheapest decile of 100 stocks and is always fully invested in the 100 securities that are relatively cheapest.  This is an investment approach that a discretionary manger may disdain.  The discretionary value manager may look at those same 100 stocks and think they are pricey.  But nevertheless, academic research has shown that always being fully invested in the relatively cheapest percentiles of stocks in the US has produced superior returns over many decades. 

Such a portfolio is called a “factor” portfolio.  Why the name?   In the early 1960s, academics introduced the concept of beta and demonstrated that individual US stocks had sensitivities to, and were driven by, movements in the broad market.  In the early 1990s, academic research began to show that other “factors” such as value and size also drove US stock returns.  Since then, several factors have been identified as driving individual stock outperformance: value, size, volatility, momentum and quality.  Stocks that are cheaper, smaller, less volatile, have more positive annual returns and higher profitability have historically outperformed their peers.  It turns out these factors also work internationally.

Related: Who Gets Sick When the U.S. Sneezes?

Of all the factors, value is the factor that has been the best known the longest (even before it was academically identified as a “factor”), thanks to the books of Warren Buffet’s teacher Ben Graham.   And if you look abroad at an array of developed global markets and create a value index and compare it to its simple market capitalization weighted brother, the historic outperformance of value has been stunning.  Until recently.  

While there was some variability by country, on average from the mid-1970s up until 2005 a value factor portfolio in a developed market outperformed its market cap weighted index by about 2% a year.  That’s a lot. By contrast, since 2005, the average developed country value portfolio has underperformed a market cap indexes by about -40 basis points.  Which is the danger of investing in one factor.  It may not always work at every point in time.

So if investing in one factor like value runs the risk of underperforming, how about a multi-factor international developed equity portfolio?

Below is a breakdown of individual factor portfolios’ performance in international developed equity markets since 2005, an equal weighted factor portfolio as well the performance of the MSCI EAFE as our performance reference.  Note that, for the last 13 years, value has been the poorest factor by far, while the others have handily beaten the EAFE.  An equal weighted portfolio of all 5 factors, while not as optimal as some of the individual factor results, beats the EAFE by 1.6% and has an information ratio, or risk adjusted returns that are superior by 37%.  The equal weighted factor portfolio also has the advantage of not having to predict which factor will work when, so even when a factor like value does not beat the market, the other factors can pick up the slack.

SOURCE: MSCI, Data as of January 31, 2018. Past performance is no guarantee of future results. Shown for illustrative purposes only.

The equal weighted factor portfolio has one other advantage over the market cap weighted alternative. Note in the chart below how well the portfolio outperformed in the 2008 crisis, so it tends to do relatively well in highly volatile sell offs.

SOURCE: MSCI, Data as of January 31, 2018. Past performance is no guarantee of future results. Shown for illustrative purposes only.

While it’s not inconceivable that one or two of these factors could erode, or underperform for a stretch, the fact that you have exposure to multiple factors in a portfolio that seems to do especially well in crises suggest the multi-factor blended portfolio remains the most attractive way to invest in developed markets.

So, when asked the question: Multi-factor or not multi-factor?  The data speaks for itself.

Learn more about alternative beta and our ETF capabilities here.

DEFINITIONS: Price to earnings (P/E) ratio:  The price-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings.

DISCLOSURES: MSCI EAFE Investable Market Index (IMI): The MSCI EAFE Investable Market Index (IMI), is an equity index which captures large, mid and small cap representation across Developed Markets countries* around the world, excluding the US and Canada. The index is based on the MSCI Global Investable Market Indexes (GIMI) Methodology—a comprehensive and consistent approach to index construction that allows for meaningful global views and cross regional comparisons across all market capitalization size, sector and style segments and combinations. This methodology aims to provide exhaustive coverage of the relevant investment opportunity set with a strong emphasis on index liquidity, investability and replicability. The index is reviewed quarterly—in February, May, August and November—with the objective of reflecting change in the underlying equity markets in a timely manner, while limiting undue index turnover. During the May and November semi-annual index reviews, the index is rebalanced and the large, mid and small capitalization cutoff points are recalculated.

Investors should carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full  prospectuses contain this and other information about the ETF. Read the prospectus carefully before investing. Call 1-844-4JPM-ETF or visit to obtain a prospectus.
J.P. Morgan Asset Management
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See how ETFs differ from other investment vehicles, learn how to evaluate them, and discover how ETFs can be used effectively to achieve a diversity of investment strategies. ... Click for full bio