ary·WealthVanguard senior wealth exec: Where to turn when you need liquidityBy Matthew FlemingBy Matthew Fleming As a Wealth Advisor Executive, Matt is part of a specialized team viding personalized financial guidance and wealth management to Vanguard’s ultra-high-net-worth clients and their families.
He leads a group of specialists and advisors focused on helping clients navigate a wide range of financial needs.
Matt has nearly 20 years of experience in financial services, holding the ing designations: Certified Financial Planner® and Certified Trust and Fiduciary Advisor.Matt Flemming.Matt FlemmingAs a financial advisor who works closely with wealthy families, I’ve found that financial stress rarely stems from a lack of wealth, but rather, the inability to access it when they need it most.
When opportunity knocks—whether it’s a timely venture, real estate acquisition, legacy-driven philanthropic gift, or family wealth transfer—liquidity is the difference between being ready to act or watching it slip by.
In these scenarios, being nimble isn’t optional, it’s essential. But where does liquidity fit into one’s overall portfolio?
My clients view liquidity as the ability to access funds swiftly and seamlessly, without commising the integrity of their long-term investment strategy.
However, the ability to unlock funds quickly is just one part of the liquidity equation.
Ideally, liquidity also preserves the integrity of your portfolio and opens the door to meaningful tax and estate planning advantages.
Many investors aren’t aware of the variety of liquidity options available or their features.
While there are a range of liquidity solutions available—including equity lines of credit (HELOCs), personal loans, and 401(k) loans—we’ll focus on three my clients commonly use: margin loans, which offer speed and flexibility by allowing borrowing against portfolios without selling assets; intrafamily loans, which leverage trust and relationships to circulate capital within families; and cash equivalents money market funds, which vide low-risk access to cash while earning competitive returns.
Margin Loans: Flexible Liquidity Without Selling Margin loans are similar to a line of credit and allow investors to borrow against their securities without selling them.
These loans offer competitive interest rates, avoid triggering capital gains taxes, and allow continued earnings on the margined assets.
With no loan origination or underwriting, and the ability to draw or repay funds easily, it’s a convenient option for accessing liquidity. In some cases, the interest may even be tax-deductible.
However, rates can vary based on loan size and are subject to change.
There are typically three use cases for margin loans: Common use cases include acting quickly on investment opportunities or covering large, unexpected expenses.
Examples include building, renovating, or acquiring residential or industrial perty, a acquisition or expansion, and an emergency fund.
Periodic use cases involve recurring needs tax payments and tuition bills. Distinct use cases are more strategic—such as diversifying investments or in private .
In each scenario, margin loans offer liquidity without commising long-term investment goals. Beware, however, as they do come with inherent risks.
For example, if the value of the collateral drops, you may have to deposit additional funds or sell your securities at a loss—also known as a margin call.
Intrafamily Loans: Strategic Capital Within the Family Intrafamily loans offer a strategic opportunity to offer liquidity to family members.
Un institutional lending, these private lending arrangements allow families to circulate capital internally—often with compelling financial terms—to support major life events or long-term planning goals.
When structured perly, they can satisfy IRS requirements while preserving flexibility. Interest rates are typically lower than commercial loans, and repayment terms can be tailored to suit all parties.
The value of intrafamily loans goes beyond favorable terms.
They can serve as a tool for wealth transfer, reinforce family values, and create opportunities across generations without disrupting portfolio value.
However, this can become an unattractive liquidity option if the family dynamic shifts negatively.
Intrafamily loans can also lead to unint tax consequences, so it’s important to connect with a tax fessional to ensure you’re implementing to par.
Cash and Cash- Alternatives: Stability and Access with Modest Yield For investors seeking low-risk access to liquidity, cash equivalents offer a stable and predictable solution.
Money market funds remain a choice, viding daily liquidity and competitive yields while preserving capital.
These funds typically invest in short-term, high-quality debt instruments and are designed to maintain a stable net asset value.
Additional options that fall into this category include high-yield-savings and cash management accounts—these typically offer FDIC insurance—bank or brokered certificates of deposits (CDs), and Treasury bills (T-bills).
It’s important to keep the tradeoffs in mind, however. For instance, CDs can’t be accessed prior to their maturity date without a penalty, and selling brokered CDs can introduce market risk.
Remember, liquidity isn’t just access, it’s advantage. In a world where timing is everything, the right strategy ensures you’re ready to move when it matters.
And if you don’t know where to begin, you can always lean on a wealth advisor.
They can help you assess your options, align those options with your goals, and ensure you’re positioned to act with clarity and confidence.
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