Grow Wealth: Liquidity

Learn the importance of liquidity to wealthy clients and how financial institutions typically meet those needs. Examine the basics of client credit analysis, loan structures and regulations governing lending in the US and find out how credit is used to leverage other wealth generating instruments.

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CPE CREDITSCFP CREDITS
14.014.0
New Private Bankers, New Wealth advisers, Brokers who are going to cover broader wealth solutions, Portfolio Managers and other Product Specialists requiring an in-depth overview of wealth management, Individuals working in the finance arena
No advance preparation required.
Students will be able to:
  • Understand the importance of liquidity to wealthy clients
  • Understand the basics of client credit analysis
  • Understand the basics of loan structures and regulations governing lending in the US
  • Explain how credit is used to leverage other wealth generating instruments.
Margin I: Introduction to Margin Regulations – Online & Margin II: Advanced Margin for Options – Online, or equivalent knowledge.
Session 1: Credit Analysis and Creating a Risk Evaluation Framework
  • Who uses analysis and why
  • Obstacles to introducing new credit products
  • Credit products as a proactive marketing tool
  • The importance of credit analysis
  • Credit Cycle
  • - Where are we?
  • - Analyzing the credit cycle
  • Credit Risk Framework
  • - 5 Cs and 5 Ps
  • - Financial Condition
  • - Collateral
  • - Client Profitability
  • - Recommendations
  • - Basic approval principles
Exercise 1: Creating a Risk Evaluation Framework Exercise 2: Calculate Economic Benefit to Client

  • Identifying the true borrower – Know Your Customer
  • - Who borrows
  • - Dealing with PIKs and trusts
  • - Partnerships
  • - Potential danger signs
  • - Money laundering
  • - The Patriot Act
  • Risks of a poor credit process
  • Identifying the true purpose of the loan
  • Identifying how and when repayment will happen
  • - Sources of repayment
  • - Risks of repayment (understanding the macroeconomic environment; understanding the client’s business)
Exercise 3: Loan Purpose

Session 2: Security and Documentation
  • Borrowing documentation
  • Security agreement
  • - Types of collateral
  • - Documentation
  • - Documentation
  • - Verifying the existence of the collateral, physical possession of the collateral
  • Regulations
Exercise 4: Identifying Primary & Secondary Sources of Repayment

  • Structure & pricing

Session 3: Credit Products and Uses
  • What are typical credit products?
  • - Overdrafts, revolving loans, term loans, etc.
  • Kinds of loans
  • - Demand
  • - Revolving
  • - Line of Credit
  • - Term
  • Major types of loans
  • - Real Estate
  • - - Residential
  • - - Commercial
  • - Business Finance
  • - Insurance Premium Financing
  • - Margin Lending
  • - Standby letters of credit
  • - Commercial letters of credit
  • - Foreign exchange
  • Credit with derivative
  • - Interest rate swaps, caps, floors, collars
Exercise 5: Credit Products Exercise 6: Borrowing in Yen

Session 4: Analyzing Personal Financial Statements
  • Statement of Financial Position
  • - Assets – estimated fair value
  • Statement of changes in net worth
  • - The difference between net worth and cash
  • - - The effect of leverage
  • - - How to calculate liquid and adjusted net worth
  • Estimating future cash flows
  • Warning signs/creative accounting & other risks
Exercise 7: Personal Financial Statements – Cash Flows

Session 5 - Lending against marketable securities
  • Purpose
  • Borrower
  • Repayment & Risks
  • - Primary source: personal cashflows (portfolio income vs interest expense, cashflow generation from other sources)
  • - Secondary source: value of other investments (net worth), ability to liquidate, impact on relationship
  • - Types of marketable securities
  • - Advance Rates
  • - Publicly traded shares
  • - - What exchange
  • - - Volatility
Exercise 8: LTV Shares

  • Fixed income instruments
  • - Advance Rates
  • Mutual funds
  • Cross currency risk
  • Lending against cash
Exercise 9: Cash-Secured Lending Exercise 10: Role Play: Leveraging marketable Securities

Session 6: Lending against hedge funds
  • Definition of a hedge fund
  • - Qualified investors
  • Hedge funds vs. mutual funds
  • - Hedge fund styles
  • Risks & mitigants
  • Due diligence on the fund
  • Where to find non-public information
  • Reviewing recent hedge fund debacles
  • - The emergence of the SEC
  • - Peter Chabot from Mississippi
  • - David Mobley from Florida
  • - A word on LTCM - When Genius Failed
Exercise 11: Hedge Fund Styles & Volatilities

Session 7: Lending to Operating Companies
  • Purpose
  • Porter model
  • Business cycle
  • Borrower
  • Repayment & Risks
  • - Primary and secondary sources: cashflows vs. income (analysis of corporate cash flow statements, profit and loss statements)
  • - Corporate balance sheet: current and fixed assets, current and long term liabilities, equity, assessing the true value of the assets and liabilities
  • - Cash flows
Exercise 12: Balance Sheet Recognition

  • Security
  • Structuring
Exercise 13: Matching Loan Purpose and Tenor

Session 8: Lending against property
  • Purpose: Personal property loans, Commercial property loans
  • Borrower
  • Repayment & Risks
  • Primary source: rental cashflow/interest cover (project feasibility), cashflow generation from other sources
  • Secondary source: value of other investments (net worth), ability to liquidate, impact on relationship
  • Security
  • Understanding the cycle
  • The appraisal - which one is right?
  • - Cost
  • - Income
  • - Market
  • Risks in collectability
  • Structure (tenor, currency, loan to value)
Exercise 14: Residential Real Estate Exercise 15: Commercial Real Estate

Session 9: The Written Proposal
  • Objectives
  • 6 rules
  • Principles

Summary

    Loan Scenarios

Clients who register for this course will receive a complimentary 4-month subscription to FT.com. The Financial Times is the world's most respected financial newspaper, providing a broad assessment on finance, business and the industrial sector. The move to the electronic version follows an ongoing review of our environmental responsibilities as a global business and as part of the Pearson group. FT.com also has features that are not available in hard copy, such as: Special Reports, Alphaville, editor blogs, education sections and much more! Subscriptions will start within 6-8 weeks of the start of class and are limited to one subscription per client. (Please note: as of May 1, 2011, the electronic subscription replaces the hard-copy 3-month Financial Times subscription.)

Lunch is included for all students taking day classes.