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- Wealth manager JR Gondeck says he zeroes in on his clients' "wealth return," not simpler numbers like investment returns, to help his clients grow their wealth and get vitally needed context.
- He's one of the highest-ranked millennial wealth managers in the US according to Forbes. He's a managing director and partner at the $1.3 billion Lerner Group, part of HighTower Advisors.
- While monitoring investments is critical, he says minimizing mortgage and insurance payments, tax strategies and asset titling are also key components of improving wealth.
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You don't have to choose between focusing on the big picture and getting the clearest view.
Wealth manager JR Gondeck is a managing director and partner at the $1.3 billion Lerner Group. Forbes named him as the No. 4 next-generation wealth manager in the US, which makes him one of the most acclaimed millennials in the business.
Gondeck says that since his clients can track their investments on their phones and have so many avenues to study the market, he's not emphasizing investment returns alone. He's instead focusing on giving them clarity and tracking a broader measurement of they're doing financially.
"Millennials as investors have access to more research and data from a transparency standpoint than ever before. it can be somewhat overwhelming," he told Business Insider in an exclusive interview. "We like to talk about the wealth return of their overall net worth as opposed to just the investments."
In other words, he's aiming to make sure they're getting as much as they can from their assets, even if that wouldn't show up in an investment return.
"The wealth return will include your interest on your mortgage, your insurance premiums, your life insurance and other insurance products," he said, explaining that tracking those items shows his clients when they have opportunities to save money with steps like refinancing their mortgages.
That helps them build more wealth. Another critical component of that wealth return involves knowing what his clients' financial position might look like in the future.
"Many millennials are likely to inherit wealth from either their parents or grandparents, or there's already vehicles that have been set up for their benefit," he said.
While they don't control those assets now, the wealth in them could have enormous effects on their finances later.
As an example, Gondeck says that someone who expects to inherit money might save for retirement by using a Roth 401(k) plan instead of a standard 401(k).
Savers put after-tax dollars into typical 401(k)s, which means that they have to pay taxes when they withdraw from that their retirement accounts. But the Roth version is funded with after-tax dollars, so withdrawals are tax-free for people who are older than 59 1/2 or meet certain other criteria.
That means people who expect to inherit money can contribute to a Roth 401(k) at their current, lower tax rate, and they won't owe additional taxes when they withdraw that money later on even if they're considerably wealthier.
"The Roth is a better long-term option in our opinion, but your per-paycheck is going to be less because you're paying the tax upfront," he said.
He adds that tax planning, including retirement and tax-related gifts, are also critical components of improving wealth. And anyone who's thinking about passing wealth to the next generation needs to make sure their assets are titled properly to avoid legal complications that can get costly.
Achieving the right portfolio mix
Another critical task for Gondeck is keeping his clients comfortable. Many of them, he notes, were getting ready to graduate college or had just started their careers when the financial crisis struck, and as a result they're hesitant to invest.
He says he eases them into the market with a fixed-income heavy portfolio that focuses on the long term. When they see it's working, they feel better about investing overall. However he says his,,, firm maintains that focus on income.
"Roughly half of our our portfolio are in growth stocks and the other half are income assets, whether it's high dividend stocks, municipal assets or corporate bonds," he says.
In a twist, though, Gondeck says he doesn't put any money into bond funds - just individual bonds. That's because the funds are required to buy up a lot of assets that have extremely low yields. He says picking and choosing delivers a much better return without sacrificing safety.
"With higher coupon individual bond positions it's much easier to outperform the index or the underlying exchange traded fund or passive index fund," he said.