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FinTech Stocks Sample Content

What Makes One FinTech Stock Different from the Next?

Most FinTech companies begin with one main service feature, such as payment processing or lending, and then supplement it with add on services. Payment processing is an easy product for competitors to replicate, however. Companies can also come along and figure out a way to sell the same quality of service more cheaply. If a company intends to attract new business in a quickly changing competitive landscape, then they must differentiate themselves or risk losing business and becoming obsolete.

The companies that thrive have a culture of innovation and a conscientiousness about solving the present-day needs of their target customers. You might ask, “what types problems can they solve?” Fintech companies aim to lessen the strain of accessing financial networks in real time. The focus becomes squarely placed on the user interface (UI) and user experience (UX).

Xero, a New Zealand based company, developed software as a service (SaaS) for small businesses. Companies worldwide can access Xero’s full accrual accounting platform with an associated cash account. The main product line integrates with account data through a bank feed, as well as debtor-creditor invoicing, sales tax, and reporting tools.

The strongest fintech providers will save their customers time and effort with finishing everyday accounting tasks by securely integrating third party providers (TPP). Software engineers develop application programming interfaces (API) that allow the customer platform to connect seamlessly to external organizations and accounts. They understand that business customers desire to make less-desirable tasks frictionless when at all possible.

Fintech ETFs

Like Index ETFs, you can invest specifically in FinTech ETFs. Global X FinTech ETF (FINX) contains 41 stock holdings and Ark FinTech Innovations ETF (ARKF) has a range of 35 to 55 holdings. Check with a wealth manager if you are unsure what the current stock holdings are or what earnings reports indicate about the long-term profitability of the company.

Economics of Underbanked Populations

The main motivation behind the drive to develop new consumer service products is the large underbanked population. People commonly experience geographic, transportation, and economic barriers to accessing banking systems. When basic financial services needs go unaddressed, it affects industrialized and non-industrialized economies alike.

The World Bank has taken the lead in communicating to governments that when the general population has easier access to managing their income and savings, the more likely they are to have spending power and start businesses on their own. Fintech encourages the development of self-sustaining practices in personal finance.

High-Tech Sectors Influenced by Fintech

InsurTech (Insurance technology) and Regtech (regulatory technology) are the spinoffs of FinTech. As their names imply, insurance products have migrated from the traditional broker-, brick-and-mortar service into a full-service online experience.

Government regulations pose a huge challenge as well as legal and business risks to companies who fail to comply. Now, companies can pay for a service which digitizes and automates anti-money laundering (AML) rules. They also have the capability to identify illegal or questionable sources of cash and independently verify the identity of their clients.

Stock Performance Metrics

When reviewing established FinTech companies look closely at revenue growth rates. You can expect for newer companies to have higher leveraged credit. Credit to equity ratio is expected to decrease over time as companies become more profitable and pay down debt. It would be particularly attractive if they pay off loans ahead of maturity or refinance at a lower rate. This indicates that they aren’t burning through cash and management has made a concerted effort to reduce credit exposure.

When you look at gross and operating margins, you can determine how profitable a company’s business model is. How does overall EBITDA compare to net profits per share? Compare these figures to quarterly cash flow reports in form 10-Q filings. You can easily access data on fintech stocks for publicly traded companies. Pay close to any Form 8-K releases as companies are required to use them to report any major organizational changes.

Does the company continue to invest in technological growth? Technology is what originally put it on the map. This budget demonstrates the level of commitment to innovation. Annual meetings are often made publicly and contain research budgets and the like.

Common Risks for FinTech Stocks

  • FinTechs must pass a rigorous FINRA and SEC regulations. Robinhood, for example, was ultimately unable to secure an FDIC designation on it’s high-yield interest (3%) checking account.
  • Larger companies are already consolidating, so depending on which end of the stock merger you’re invested in, this will impact your stock price.
  • Be proactive and check with a wealth manager for advice about trading fintech stocks and ETFs.

Multi-Family Real Estate Sample Content

Unseen Property Potential

Before beginning any search for multi-family real estate, it’s important to know the local market surrounding the property. You also need to know how to identify properties that have the potential to generate a higher income while also increasing its market value. Many of the factors that can shape the return on investment (ROI) of properties long-term are not always visible.

If you don’t have a strong background in reviewing budgets, operating income, and cash flow statements, I would recommend working with someone who is already experienced in multifamily property. It may better to hire a multifamily real estate broker to facilitate your search and purchase of an investment property. Even if you hire a broker, this article will help you to become familiar with many of the factors involved in how to value multi-family real estate.

Operational Inefficiencies

Every multifamily property has its own business model. That operating model comes from the property management firm or whoever happens to oversee managing the property. Some properties get managed much better than others. As a buyer, your goal for purchasing existing property is to identify present-day operational inefficiencies and changes which will reduce and eliminate them if you successfully purchase the property. For example, you can begin by reviewing monthly expenses, service contracts, and maintenance agreements. Get quotes from new service providers to see how they compete. Pay close attention to the cost of deferred maintenance. Bringing the property up to date addresses one of the factors that add value to the property. If there is a large difference between the actual budget vs. budgeted, the apartment representative should be able to describe why.

Cap Rate vs. Market Cap Rate 

The net operating income (NOI) is the monthly income expected to be generated by a property minus the expenses and taxes. The NOI divided by the purchase price (PP) is the cap rate.

CAP Rate = NOI / PP

A more realistic measurement for future cap rate calculations is the NOI divided by the current market value (CMV).

CAP Rate = NOI / CMV

This CAP rate will decrease if the property value goes up at a faster rate than rental income does. Some say this a more accurate cap rate measurement. Therefore, it’s important to get the “value add” adjustment accurate at the start of a new project. Make sure that rent increases will exceed those of the property market value with capital improvements.

Multi-Family Property Investment Strategies

Is the property located near an urban center or transportation hub? Wherever there are jobs, there are people looking for housing in convenient locations. Look for quality retail chains such as Trader Joe’s, Whole Foods, and REI stores. Making major improvements would factor into an income model which calls for increasing annual rates which still compete with other properties in the area. As the rates of real estate market values have been increasing, it has become more challenging to locate properties with enough upside value factors to improve.

The ground-up multifamily development route targets empty or underused lots in desirable areas. The management first plans and develops the property. Once it’s full of tenants and generating income, the managing partner can then sell it and return the principal investment and profits to general partners.

If going at it alone seems too expensive or too risky to execute on your own, consider joint-venture investing as an option. As an investment partner, you can increase your buying power alongside other qualified investors and have more options for properties and deals.

Pro-Forma Calculations

You will need to break out the purchase property value per square foot. Also, take the average price per unit. Calculate the initial Cap-Rate and Pro-forma Cap rate, which is like the PP and CMV cap rates, which I mentioned earlier. Here account for any rate increases in expenses from taxes, insurance, payroll/personnel, and other general operational maintenance.

Proforma apartment rental rates are based on improvements to the property. Both per square foot and unit size. It’s important to have both types of metrics to consider which units will generate the best-increased income year-over-year. Also, consider parking rate increases and have these individual calculations roll into a summary page. These are one of the annual additional income totals.

The loan down payment will require a debt service expense to be added as the levered portion. The loan principle constitutes the unlevered portion and, of course, also has an interest expense from debt service. Major capital expenditures will take place upfront to reposition the property as a higher-end multifamily apartment.

International Tax Planning Sample Content

Adventures of Working Abroad

Working overseas for your company presents opportunities for career growth and exciting new life experiences for you and even your family. Chances are you have previously traveled abroad to visit the foreign office or plant, maybe even on multiple occasions. In your case, international travel is nothing new. However, knowing how to manage your assets and taxes beyond payroll income properly can easily become a challenge, especially if you are living abroad permanently with your family.

You probably went through orientation with HR where seemingly every detail was handled for you, from direct deposit, foreign banks and, of course, living arrangements. If you have children, companies will often assist with applications, enrollment, and tuition in American schools as part of your relocation compensation package. What HR cannot guide you on is international tax planning strategies and investments while you live overseas.

While living abroad and working for a US company you will pay taxes to the US government. However, if you make investments in foreign assets such as property, as a US citizen, you will most likely be responsible for paying taxes to the country of residence. Even though the assets are held on foreign soil, as a US citizen, you will need to report to the IRS what you possess and show a record that you paid taxes on them.

Paying Taxes on Foreign Investments as a US Citizen

Purchasing securities in foreign companies has been made very simple because publicly traded companies contract with banks to act a brokerage for shareholder accounts. These are called American Depository Receipts or ADRs. So, whether you live in the US and want to invest in foreign entities or live abroad as a US citizen, you can invest in many companies around the globe without a hassle. Since the banks are also acting custodians, they calculate what’s called foreign tax withholding. Taxes on capital gains are deducted from your account and periodically paid. The IRS also has a step-by-step interactive guide on how to pay taxes for US citizens living abroad.

Hiring a Wealth Professional

If you want to invest in multiple asset types in a foreign country, it’s best to seek the assistance of a finance professional on how to manage them best. A great wealth advisor stateside will help you to connect with a financial services firm in your country to act as a qualified intermediary (QI). Purchasing assets in a foreign country must meet the appropriate reporting requirements to record the assets you hold on your US tax returns. The administrator or custodian for your foreign assets are familiar with US reporting requirements and typically prepare reports which meet US accounting standards. However, I would recommend advisors who willingly work together in tandem concerning your foreign assets to put an investment vehicle in place which will protect your assets.

Navigating Tax Treaties

Recently, the EU has introduced anti-avoidance directives, which are specifically aimed at investors that don’t want to pay taxes on investments. Skilled advisors are knowledgeable about current US income tax treaties with the EU and other countries and can help to make sure that what you do pay in taxes is not more than you need to only because you’re living abroad. They can also help you avoid the pitfalls of capital losses from repatriating cash if you need to liquidate foreign assets when you return to the States.

If you are overseas working diligently, growing your earnings, and exploring new opportunities to park cash, be keen about having international tax planning strategies as well. Seek the advice of a wealth manager that can help you to develop a plan for managing all your assets, including taxes on foreign investments.

Delaware Statutory Trust Sample Content

What Are Delaware Statutory Trusts?

The concept of Delaware statutory trusts have been used for legal and business purposes for centuries. The most common application of this legal statue is visible in bank lobbies. You can see that the bank is a national association (N.A.). NAs have trustees appointed to them to oversee the organization. The trustors are all the people and organizations that have interests in the bank because of deposits and other accounts held there.

Families and individuals commonly create trusts to give legal designation for the purposes for which the trust was formed. The trustee is legally responsible for administering the assets held within the trust according to a set of predefined rules written into it. For example, trustors receive payment distributions beginning at a certain date if they meet a set of conditions.Delaware statutory trust advantages allow you to include the real estate you want into the trust with the benefits for deferred capital gains taxes.

Delaware statutory trusts (DSTs) are an important option for people entering retirement that no longer want to manage their rental property. In addition, they recognize that if they sell, they’ll be subject to capital gains taxes. Yes, they gain the proceeds of liquidating the property but lose years of property value appreciation in the process.

How Can DSTs and 1031 Exchanges Work in Tandem?

Fortunately, there are ways around incurring such losses. You can remain a real estate owner and combine the sale of your property with a 1031 exchange into an institutional-grade asset. A 1031 exchange will allow you to defer capital gains taxes in perpetuity while earning income from your property. Plus, by selecting a larger property or even multiple properties, you reset to zero the depreciation clock from your old property.

If you choose to stay in the business, how you handle the management side is a personal preference. A property that generates a strong income stream absorb management costs, and for tax purposes, your participation is passive. However, if you want your family to own real estate that generates an income stream which lasts decades, then you should consider Delaware statutory trust advantages for building and preserving wealth.DST properties are usually commercial real estate, including:

  • Shopping malls
  • Office buildings
  • Industrial parks
  • Standalone businesses

Property purchases and tenants need to meet specific qualifications to maximize chances of the DST being successful long-term. The property needs t  be purchased with n n-recourse debt. If for some reason the owner can’t make mortgage payments and the property gets foreclosed on, then the lender can’t seek damages beyond the principal failed investment. A 1031 exchange purchased with full or partial recourse debt alone doesn’t offer the same protections.

How Triple-Net Leases Work

It’s also advantageous to gain access to triple-net lease properties for your DST. It will be a professionally managed Class “A” property. Rent for triple-net (NNN) leases is lower because they are responsible for more than just rent. Bondable net leases also extend for much longer periods, anywhere from five to 15 years or more. Tenants carry the burden for everything below:

  1. Property taxes
  2. Insurance
  3. Maintenance
  4. Utilities
  5. Rent

Rent can go up; however, the rate of increase is built into the contractual agreement. Tenant creditworthiness is a major consideration, which will help you to determine what to charge for the lease rate. If you go this route, the best practice is to calculate the tenant portion of insurance and property tax to include it with the rent. It becomes easier for the trustee to maintain a record of property taxes being paid in full and on time. You do need to have verified income of at least $200,000 annually or a minimum net worth of $1 million to write lease agreements under a DST. If you don’t meet these qualifications, don’t walk away just yet. You can still invest in the commercial real estate market by choosing a real estate investment trust (REIT) whose main holdings are NNN properties.

FBAR Filing Requirements Sample Content

Account Declarations and Reporting Requirements

The FBAR reporting threshold is rather low, only $10,000. Not only that, if an account exceeded $10,000 at any point during the year, these accounts must be reported to FinCEN electronically through the BSA E-Filing System. FBAR requires that legal entities report foreign-held assets as well. The IRS website states that individuals and domestic entities must check the requirements and relevant reporting thresholds of each form and determine if they should file Form 8938 or FinCEN Form 114, or both. The due date is April 15th, but it can be filed as late as October 15th without penalty. You are also granted an automatic six-month extension but do not need to request it. You only file Form 8938 with your federal tax return, not FBAR Form 114.

You must keep records for each account you must report on an FBAR that establish:

  • Name on the account,
  • Account number,
  • Name and address of the foreign bank,
  • Type of account, and
  • Maximum value during the year.

The timeline for FBAR record retention is five years. If you do not file an FBAR, you become subject to increasing penalties, the longer a violation takes place. Here are some specifics about what accounts you need to report, and the information requested when you file.

FBAR Aggregate Account Balances

FinCEN requires you to report on the aggregate balances of your foreign assets. That means that it doesn’t matter how many accounts you hold; if the cumulative total exceeds $10,000, then you are required to include account information on all of them. You must also include the maximum value the accounts reached at any point for the prior year in US dollars. Assets held by legal entities, including trusts, estates, LLCs, or LPs, for example, must be reported.

Form 8938 Reporting Requirements

Form 8938 requires reporting as an individual and married, but the thresholds are higher. As an individual, you need to file if your foreign-held balance exceeds $50,000 on the last day of the tax year or exceeded $75,000 at any point during the year. If you are married, you can have up to $100,000 on the last day of the year and up to $150,000 at any point during the year without having to file. These are specifications for people living in the US. Living outside of the US has higher limits. Domestic legal entities only need to reach $50,000 for the filing requirement. The IRS website provides a user-friendly table that describes the types of financial institutions that require reporting. Foreign held accounts at US banks with branches overseas do not need to be reported. What is not the easiest conclusion to reach is when you will need to file both forms. I would seriously recommend consulting with a tax expert to help you to compile statements and other documents for your accounts for all your foreign-held assets when they prepare your taxes.

Net Unrealized Appreciation (NUA)

Sample Content

Actively Manage Your Tax Liability

Managing your tax liability year after year is a major factor in successful investing and should be a key wealth strategy for your entire portfolio of assets. When you receive a stock distribution from your employer, whether in the form of an employee stock purchase plan (ESPP) or non-qualified stock options (NQSOs), it’s important to plan out the tax treatment of net unrealized appreciation (NUA) you will gain in the market.

Portfolio Asset Class Allocation

If you don’t already have a desktop application or online service to track all your stock, it’s probably a good time to get one. Come up with a convenient way to review all your equities at once. Some websites may even offer free ticker tracking in real time, suitable for casual stock research. However, it would be better to know how your company stock position is performing compared to your other equities and the rest of the market. This becomes especially true if your investments are custodied among by several brokerage firms.

Start with each asset class:

  • Cash (money market and cash)
  • Fixed Income (credit & treasury holdings)
  • Equities (stocks and other equities)
  • Commodities & Real Assets (investment property)
  • Alternative Assets (hedge funds, derivatives, and private equity

It’s important to remember that how your assets are proportioned within your portfolio can affect tax planning and investment strategy. A qualified advisor can help set this up for you if you like.

Maximizing Net Unrealized Appreciation

Net unrealized appreciation is the margin between the average price you paid for your company stocks and its current market value. If it’s tax filing time, you will be looking at the recorded end-of-year market value. If you hold stocks from multiple employers, it’s important to compare the average cost basis of the stocks you purchased (or were granted) and the numbers of shares you attained. Focus first on the lowest cost shares for NUA planning.

NUA is unique because although your capital gains rate will be lower than your regular earnings income tax, you must immediately pay ordinary income tax on the cost basis of your employee stocks. The downside of NUA is that you wouldn’t have had to pay ordinary income taxes until you sold your stock positions however many years into the future.

You can only then rollover the appreciated market value into a 401(k) or IRA to defer capital gains tax. ROTH vehicles cannot be used for this purpose. However, you may simplify the evaluation of your NUA decisions by rolling your all your appreciated capital gains into an account separate from your 401(k). Any of your brokerage accounts are already being taxed at either long-term or short-term capital gains rates, so you are not allowed to combine assets from stock grants into these accounts.

The IRS Guide on NUA Considerations

The IRS provides instructions on how to transfer or rollover your employer stock benefits to defer capital gains tax:

  • Defer tax on the taxable part (capital gains) of the distribution by requesting your employer to directly roll over the stock distribution into an IRA.
  • Defer taxes by rolling it into an IRA within 60 days after receipt.
  • Special tax treatment isn’t applicable to all employer bonus compensation.

Review your 1099-R forms. They should detail how much of your investment income is applicable for the capital gains rate. An experienced tax advisor can help you to determine what tactical offsets to make after a year where you have had unexpected losses as well as extraordinary gains. Remember though, once you leave a company, you must distribute the entirety of the vested balance held in the stock plan, including all remaining assets sponsored by that employer.

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