Hello how everybody. Welcome to today's insights from Northern Trust Web and R. My name is Katie Nixon an I'm the chief investment officer for wealth management and I'm going to be your host for today's presentation, and I'm so pleased today to be joined by Pam Lucina who's archief, fiduciary officer and leader of our trust in advisory practice for wealth management. I want to make a note that today's presentation is being recorded, so you'll be provided with the details for accessing the recording at the conclusion of today's presentation. If we could move the side please, I want to remind our audience that if you have any questions for the speaker, please submit it through the Q and a widget on your screen or you can send it to contact northern at northerntrust.com. So we will be taking questions and we look forward to to getting them from you. I thought before we transition to Pam I would offer some comments upfront about the state of the markets and share some of our perspective. As you all know, we had quite a historic week last week with continued steep drawdowns in global equities and some wide swings and fixed income with a clear dislocation and market dysfunction, I thought I'd frame the discussion in terms of what we know. What we don't know and what to do, and this is the framework that we've used on prior calls, and it's one that helps to keep us organized around the informational chaos of today's environment. So let's start by talking about what we know. What we don't know, and what action steps are needed. I'm going to say upfront that there are far more unknowns than knowns at this point, and it's extremely difficult to forecast with confidence when there's such a symmetry. You've probably heard a lot of forecast in the media, but the truth is that there's just a lot we don't know. At this juncture, we're in uncharted territory in so many ways. But let's start with what we know, so we know that the global pandemic continues to spread with a number of infections climbing pretty significantly across Europe and in the US, but also cases are growing across the emerging world. in India for example. Social distancing is yesterday's news and now we see major states in the US in countries around the world adopting a more draconian lockdown measure. Ohio is the six state in the US to declare a coronavirus lockdown in France. Spain and Italy remain in lock down mode. We see the growth and infections continuing to grow. We've yet to see that elusive flattening of the curve and we may be many weeks away. In the meantime, we also know that the economic hit from the containment measures will be meaningful. We know that the decline in corporate earnings will be equally meaningful. We know that there's been a substantial global policy response. I mentioned that containment measures which are absolutely critical to address this cause. The cause of the crisis, the virus. So we see the first most important policy response being aimed at healthcare containment and support to the health care system in order to increase capacity, I listened to the head of infectious disease from a large hospital in New Jersey yesterday, and he noted the ers in the maternity wards being converted into icy use. Any extra space in the hospital being converted to patient beds. Our health care system is clearly doing everything possible to increase capacity. We also know that their support from the federal government aimed at increasing the supply of necessary metal. Medical equipment. We know there's been a monetary response. Monetary policy response as well. Major central banks around the world have adopted a whatever it takes mantra. Just this morning we got another announcement from the Federal Reserve that they're going to step in and with more broad support to fixed income markets, and even included a provision designed to support small businesses, they're gonna variety of fiscal policy responses across Europe and investors eagerly await the passage of a physical bill here in the US and the point of these packages is not to stimulate the economy. Rather it is to bridge the gap between now when major parts of the global economy are effectively shutting down. To the post crisis. Bridging the gap and avoiding mass bankruptcies and defaults is really critical. Again, this is a necessary lifeline, not a stimulus package. So what don't we know? First and foremost, we don't know when we will successfully flatten the curve. We can do some modeling and this suggest in April peak in new cases in the US with a potential decline and the June July timeframe. Next, while we know that the economic impact and earnings and Patch will be meaningful, we do not know the magnitude, how bad it will get, or the duration, how long it will last. These unknowns will reveal themselves with time and the more time passes, the more data we have and the better we will be able to forecast. And really measure the impacts. We also don't know the efficacy of the programs that have been put in place. We know that monetary policy acts with a lag. And so does fiscal policy there. Going to take time to take effect, and certainly are very difficult logistically to execute. That said, they are very powerful and scale and scope, so these are absolutely moves in the right direction. Finally, we don't know the extent to which the force selling might be over. This was a major contributor to the market volatility last week. They were leveraged investors or investors who needed to meet redemption requests. And what we observe last week with the unwind of many of these leverage trades across institutional portfolios in particular. In the market experienced a flood of sellers at the same time as it experienced a buyers strike liquidity was significantly challenged across the entire fixed income spectrum, so it's likely that the worst may be over for the forced liquidations, and we think that the recently announced fed facilities, the enhanced fed facilities will help to address the liquidity issues. So that leaves us with what to do? Now I hope I've made it clear that there is a significant amount of variability around possible economic and fundamental outcomes, but we are going to gain confidence with the collection of data and information which will be coming out over the coming days and weeks. With a wide dispersion of possibilities around and uncertain base case, this is not the time to make significant adjustments to your investment strategy. In fact, this is exactly the time when sticking to your plan makes the most sense, although it feels the most difficult. All that said, We do need to be prepared for an extended period of market volatility and even potentially more near term downside as the data will inevitably live up to our concerns about growth. This is an important time to make sure that you have the liquidity in hand to bridge the gap between now and the recovery phase, which we are confident will come. So make sure you have the liquidity resources available during this potentially extended period of market stress. But in the mean time, as we live through this this volatility, there are some other things that we can be thinking about related to planning opportunities and other things that we can be thinking about in terms of our wealth plan. So with that I thought I would hand it off to Pam, Lucina to share some of her insights on things that we should be thinking about during this stressful period. Thank you. I just said that we understand that this is a difficult time for many of the people on this call. We know that you're dealing with a myriad of issues and a lot of these issues that you're dealing with weren't even contemplated. Even a few weeks ago. But we wanted to take the time today to address some of the planning questions that we are receiving. We wanted to make some practical recommendations. What you can do to prepare during this time? But as well as what Katie said it is to recognize that there are some opportunities which were calling Silver Linings as they always do exist in these down markets. And of course, we want to answer any questions that you have, so please send those in as well. So like you Katie, I am going to do this around eight work of three things first. One of the drives to how can families protect and prepare during this time? And then second, how can they make an impact both within their communities and within their families themselves? And then last of course we want to address. How would we optimize the situation? There are things that we're seeing clients do. It's really just take advantage of the current environment from a plant in front. So we want to get to those as well. Having to dive right in. So first of all. Let's address protecting in preparing your family. During this time, you know. One of the gifts that we get right now with all of the social distancing is a gift of time, so why not take that time to review your estate planning documents and just make sure that they reflect the wishes that you have today? I've got my career on the trust in the state planning side, and I know that this isn't a subject that everybody loves to do. But since we're sort of all being forced right now to take kind of this collective pause, it is a prudent thing to do than to just check off your list to be able to give you that Peace of Mind. And you do that. There are certain documents that you ate particulare attention to because they're going to help you in case there's an emergency. You know it does bring a crisis to kind of show that these emergencies sometimes do exist. So they must include looking at documents such as your powers, attorney for property which allow others to take care of business for you. In case you can't. Living well, well that deal was sort of end of life decisions. Is it probably involved? Is your health care power of attorney in health care proxies which allow you to name somebody to help make health decisions for you? And if you look at those documents, you want to look at not just your own, but those of all your loved ones. So for example. Not just your parents, but also maybe your adult children. I have a colleague of mine who has a son who is 20 years old and he can't come home right now because he's got to attend work well. She just realized that she doesn't really have the right to make healthcare decisions for him. After all, he's over 18. And in some instances she might even not be able to get the information that she needs in order to make those health care decisions so. She needs to have these documents. And this is true even if she's paying his medical bills, even if he's on his her insurance. Skype messages. To have what's called a hypocrite. Flower her receive that information to be able to make these kind of health care decisions. Chicken in essence, become his agent. You can and you should also have documents that mean agents for yourself. And as you review these documents, you want to. So first of all, it sounds kind of basic. But you wanna locate them? Oftentimes people have executed these documents when they did their state plan. You want to know where they are and you also want to make sure other people know where they are in case you need them. In an emergency, you don't want to be scrambling looking for them. We've been suggesting it. Come out and just put him in the envelope to give you that Peace of Mind. Once you locate him, take a look at him who is named as your agent and ask yourself for them. Are they actually willing to act if needed, and if they can act, who can act in their stead? If your estate planning documents are old, let's say there 510 years old or move to a different state, you may actually need to have them revise and named Legion, so reach out to your turning to do so. They are fielding these questions every day. And once you locate them, also look at your living will an ensure that language makes sense to you in light of the particular crisis. It's sort of amazing how some of the stuff it looks like legal jargon when we find them. Have the meeting again. We're not suggesting that you're gonna need these documents, but just one thing to sort of. Give you Peace of Mind in order to protect yourself during this time. I'm gonna switch gears now and still in the spirit of protect I want you to also think about cyber security. Of course, you want to be extra vigilant during this time, unfortunately. Hackers know that people are right now and are working from home. Our cybersecurity experts say that they are seeing increasing phishing attacks are on the rise, so for example. Are seeing emails that will sort of play on the crisis and seem to be coming from respected organizations such as the World Health Organization and the CDC, and they ask you to click on an attachment and provide your login. Take the advice from our cyber security experts. Think before you click it. Better yet, don't click it all. And if you receive an unexpected email or a text message with an attachment, even if it's from someone that you know, just give him a call and ensure that they meant to send that attachment before you open up an. If you're not expecting it, just never provide your login. OK, so let's move on in our framework to point #2. Which is impact. So many people right now want to help. During this time they want to do something. You know this, after all, is not just the health crisis, it's a financial crisis and it's actually a growing at mental health crisis. Many people are out of work, small businesses. Still relying, could that possibly entail? Well, it is an opportunity to provide teachable moments for families and children. You know it's important to acknowledge that, are you know, many of us who have children. They are missing out on activities and we don't want to minimize that for them. But it's also a great opportunity to sort of Reframe the discussion around the impact of this crisis. Population. You know we are all in this together, so it might make sense to take the time to sort of point out what good that we are seeing people do. And for those of us who have set up, donor advised funds or private foundations, this is a great opportunity to get the family now involved. For those funds that we set aside for charitable purposes, some of the applications that we were seeing their removing their existing restrictions from their grants. In order to really pivot to help those that are in need at this time. That's kind of heartening to see. But you don't need a private foundation in order to help. For example, in my neighborhood you know the neighbors had set up a rotating schedule based upon last name in order to take turns ordering in from small businesses and restaurants. It's kind of a way to get the whole family involved and to ensure that these small businesses are hopefully be able to weather the storm. and I know that this is happening in communicate communities all across the nation. If you're wondering how you can help, there is a wonderful interactive map of. The National Center for family. Specifically interested Cope in 19 country. It's actually very comprehensive. It can again be found at the National Center of family philanthropy. At www.ncf.org there are many, many wonderful resources on there and it shows the giving throughout the country. So third, getting back to the framework what Katie mentioned earlier is the opportunity. To look at Silver Linings during this time from a planning perspective. You know, if you take into account everything right, current tax laws is very low. Valuations that we have right now and the very low interest rate it said to create what we call a perfect storm. Many people the opportunity to transfer well, it's very important to state income tax cost. So what are we seeing clients doing? Well, some simple things like making gifts of marketable securities that they believe will appreciate overtime. Don't forget that you can each give up to $15,000 tax free to as many individuals as you want. And that's about $30,000 per couple. And you can do this every single year. So you know we're seeing clients making gift. Take advantage of that, and even more significant give because the valuations are so low. And we you know we saw this back in the 2008 crisis, and those that took advantage of it. Really were able to do quite a bit of wealth transfer planning. But we also understand that some clients are hesitant, especially this time around. You know if Katie mentioned earlier, there's so much that we don't know, and we understand that you may be hesitant to be making any gift right now, and so for those clients, who would say you know, reach out to your Northern Trust Advisor. We are still speaking with clients every single day were having regular meetings. I'll be it virtually. We are open for business and. This is a great time to go back to that. Your goal driven methodology and your team could run scenarios for you to show the impact of that gifting will have under goals, including kind of your core lifestyle expenses. Just to be able to give you the confidence to make some decisions during this time of whether or not you should be taking advantage of any of these gifting after opportunities. That's great, Pam with great suggestions and insights and resources before we move on to the Q and a portion the listeners are going to see a survey on the side of your screen to help us with future events. We would really appreciate your feedback on today's event. Now. We've already got a number of questions already, but if you do have a question for the speaker, please submit it through the QA widget on your screen or send it to contact northern at Northerntrust.com. So Pam, I'm going to start with the first question here. Uhm, you were talking about low valuations. Make gifting more attractive. And then you also said low interest rates are beneficial for gifting. Can you expand on that? Sure, yeah, they're beneficial in a couple of ways. So first of all, In addition to making just drink gifts. Another thing that we're seeing clients take advantage of is what's called Grantor retained annuity, trust or grabs grants lot offer there. Another gifting strategy that allow you to transfer access returns to others and to be able to do it with little or no gift pack. The reason interest rates are important here is that Grant Heart. Active when interest rates are low. You know, just in simplest terms that allows you to transfer assets in exchange for an annuity, and that annuity is based upon the hurdle rate that is tide to the side interest rate. So in short, when the lower the interest rate, the more appreciation you can transfer tax free. Some people say grads are two headed coin. Their heads you win tails you win in that. If the stock rises in value, you're able to transfer preciation dear beneficiaries. And if they don't, if this fact doesn't rise, you simply get that asset back. Now again, you have to be comfortable transferring appreciation and then it's something that definitely can run scenarios for you to ensure that that doesn't impact your core lifestyle expenses. But it is a technique that is incredibly attractive right now. Given the low interest rates. Clients do is just simply make loans to family members. They like grabs, allow you to transfer any appreciation to those family members, or if they have made loans to them in the past, you know they're looking at it now. The interest rates have dropped. How much and determining whether or not that they should now refinance those loans. So that's another strategy that is compelling right now when interest rates are low. Excellent Pam, so let's actually I'm going to take the the next question and we've gotten a number of questions on the line about money market funds more than a number of questions, so let me. Let me try to unpack what's been going on in the money market space over the last week. As you may know, we there was a big announcement out of the Federal Reserve last Sunday night and then some following announcements during the week related to money market funds and one of the one of the issues has been liquidity. As I mentioned in my upfront comments and liquid in the short term funding market was very, very stressed, very stressed and in response to that the Fed has really stepped in. Anne has. Vowed to support prime money market funds. Now these are the funds that invest in things like commercial paper and it's in the Fed's best interest really to keep the liquid in the commercial paper market flowing. This is how companies are funding themselves on a short-term basis, so it's very important to have that market healthy so the Fed stepped in to support prime money market funds. the Fed also stepped in to support municipal money market funds. Munis were added last week's support and then even this morning, but the announcement by the Fed. Included variable rate demand notes, which are very commonly used in municipal money market funds. So the Fed has really come in to support the money market complex and to help us stem this fear of illiquidity come across not just government funds but crime and muni funds, so the support is there. Pam, let's turn it back to you. I'm here, here's a really good question. I heard that due date for income tax returns is delayed. do I have to file something to take advantage of this or request an extension? Or is it automatic? Yeah, that's a great question and this is. This is something that is fluid because we receive several notices last week that pertain to this and the answer to the question is no, you don't have to file anything to take advantage of that extension to back this up for everyone. But you know, this is obviously changing rapidly, but at the end of the. It shouldn't. Filing income tax returns for the well is the payment, and there was a confusion whether that it applies to both. It does apply to both. It is moved from April 15th, July 15th and there is no limit on the amount of payment that can be deferred. The original Mona's had a limit. There's no limit to the amount of payment that can be deferred, and this applies to both the filing and the payment as well as. Your estimated tax payments that were due April 15. This is a practical accommodation for many people. However, the concern is is that state tax returns. Originally were not awful extended. You know if you ever gonna return, you know you have to file your whole Pedro return just to do the state return so it doesn't do people. A lot of good unless the state return is also extended and many states are now stepping up an awful extending their filing date. So you want to check with your state to ensure that that's not due April 15th, right? Will probably be hearing more news about that in the in the coming week or two weeks. Pam, here's another very practical question. Come from a client. And this is, I think this conversation is coming up a lot related to clients have already made significant gifts in this question is I've done a significant gift into a trust. Can I unwind these gifts or make changes to take advantage of the depressed values? Yeah, that is a great question and you know you when you make a gift it's era vocable. If you unwind it that would cause gifting back and forth so you can't really unwind it. But what you could do which effectively can't? Why? Trust. They appreciated in value and you have depressed, depressed aquatis right now. Consider whether or not you want to swap the assets out for each other. Mini trucks are drafted so that you can have that flexibility, so I would encourage you to work with your advisor. Just do what flexibility can be accomplished to in order to take advantage of the current market environment right. Pam, here's a here's a question that you are more than qualified to answer. As the person responsible for our advisory practice across northern. But what are you seeing across the your client base? Are you seeing people make larger gifts, even maybe up to the point of their lifetime exemption? You know, it really depends on the individual circumstances. And as I said, You know it makes sense to go back and look at your plan and see how this impacts your correlate 10 expenses. So that you have no uhm. Larger states are now kind of looking at this thing. You know the exemptions are high, those exemptions are over 11,000,000 right now. We know that it's going to snap back in 2026 or in the current laws and really looking at kind of the political uncertainty with that. And what is happening in terms of spending an hour actually pulling the trigger right now to start to use up that exemption and shift that appreciation where they really kind of been sitting on the sidelines in the past, but. Again, it depends on the plan and you know how this sort of impacts and why it's so important to kind of go back and look at your goals. Ensure that your assets are in line. Wow. Great, OK, we had. Here's another one. And this one is this one is also a very good question. So many of our clients are private business owners. This one is have you seen an impact on from the coronavirus on our clients who own their businesses? Are you seeing a slowdown in M and a activity for example? Yeah, so I mean of course this is still fresh and you know the full impact won't be known. As you pointed out earlier for awhile, but our experts in business advisory are saying that they are seeing a slowdown in everyday activities deals that were running their course. Just even a few short weeks ago have been either postponed or cancelled due to the current virus. Get out. Tellers demand that I hurt you is more about performance targets 'cause they're just uncertain as to how this is going to impact them. Alt learning right now. What we learned in Law School, which are force majore clauses which basically say contracts. Are impossible to an act of God. We all thought that was sort of theoretical, and now we're kind of seeing the practical aspects aspects of that when it comes to business deals. In the telling me that they're going to see that you know in the future, you'll probably see purchase contracts that now it's more specifically deal with coping 19 and the risk associated with that rather than leave it too. More ambiguous sort of force majore clauses, but everything that we're seeing around business partners is, you know, this crisis as it does, is it kind of puts their own longevity. And in the question, and more about putting a plan together for business succession, right? Advantage of the current kind of the current market. Great thanks Pam. Thank you so much for great insights. An, uh, a wonderful discussion. Unfortunately we have run out of time. If you missed if you missed any part of today's remarks, you can access the replay beginning tomorrow, March 24th at northerntrust.com backslash financial market updates. For further information on any of the information discussed at today's webinar, please contact your relationship manager and I would just reiterate what Pam said around this being a great opportunity because of low rates and depressed values to really reconsider. Some important wealth planning opportunities, but in order to do that, you need to be confident that you have enough assets to to meet all your other financial goals. So please get in touch with your Northern Trust Advisor if you have any questions about that or want to a refresh of that analysis. I'm now is the perfect time to do that. I want to just thank everyone again for joining us today. I reiterate what Pam said. We understand this is a very stressful time. Personally, financially, because of the market volatility, we really appreciate your confidence in your participation today. We understand also that the sound was not very clear during parts of today's event, and we really apologize for that poor experience. We're going to continue to work to deliver the highest quality event possible. We will reconvene on what we can do better next time and I thank you very much for your understanding. Speaking of our next event, our next event is going to be held Friday, March 27th at 10:00 AM. Were gonna have Bill Broski, Chief. Information risk officer Pam tied this up perfectly with her comments on some of the increased cyber security fraud that we're seeing in the current environment. And now that we have families sitting together working at home together, we have children working on our laptops. It's all the more important that we're very aware of how we can protect ourselves in our family, so please join us on Friday and thank you very much again for joining us today. _1596974381101
Title:Insights From Northern Trust
Date: Monday, March 23, 2020
Time: 10 AM CT
Duration: 30 Minutes
Tune into the Insights From Northern Trust webinar to hear updates, analysis and advice surrounding the global response to coronavirus.