Selecting Credit and Investment Solutions

Learn more about the key similarities and differences between selecting lending solutions and investment opportunities and the impact of both on your clients' financial success.

As holistic financial advisors, the decisions we make on behalf of our clients can have a profound impact on their financial well-being and long-term goals. Two critical aspects of our advisory role involve selecting lending solutions and investment opportunities. In this comparison, we'll delve into the key similarities and differences between these processes, shedding light on how each decision-making process affects our clients' financial success.

Risk Assessment and Due Diligence

Both lending solutions and investment opportunities require meticulous risk assessment and due diligence. When selecting a lending solution, financial advisors must thoroughly evaluate the client's creditworthiness, repayment capacity, and the purpose of the loan. Similarly, when choosing investments, advisors must carefully analyze the client's risk tolerance, financial goals, and investment horizon to identify suitable asset classes.

Return on Investment vs. Cost of Borrowing

In the realm of investments, the primary focus is on maximizing the return on investment (ROI) while managing risk. Financial advisors strive to construct well-diversified portfolios that align with the client's objectives, aiming to achieve consistent growth over time. On the other hand, when recommending lending solutions, advisors need to consider the cost of borrowing, including interest rates, fees, and potential impact on cashflow. Balancing these factors ensures the selected lending solution aligns with the client's financial objectives.

Time Horizon

One of the crucial differentiators between lending and investment decisions lies in the time horizon. Investment decisions often involve a longer time frame, with clients seeking to build wealth and secure their financial future. In contrast, lending solutions typically revolve around short to medium-term needs, such as funding specific projects, covering temporary cash flow gaps, or managing debt more effectively.

Liquidity and Flexibility

Investments and lending solutions offer varying degrees of liquidity and flexibility. Investments often come with differing levels of liquidity, where some assets may be easily liquidated while others may require a longer holding period. In contrast, lending solutions, such as loans or credit lines, provide a more predictable cash inflow, but may have restrictions on prepayments or early terminations.

Diversification Strategies

Diversification plays a pivotal role in both lending and investment decisions. While diversifying investments can help mitigate risk across various asset classes, diversifying lending solutions can reduce reliance on a single lender and potentially lower borrowing costs. As advisors, we must implement tailored diversification strategies for each aspect of our clients' financial needs.

Tax Implications

Tax considerations are paramount in both lending and investment decisions. Investment returns may be subject to capital gains taxes or dividend taxes, influencing the overall net return for clients. In lending, interest expenses may be tax-deductible in certain circumstances, providing potential tax benefits for clients. Understanding and optimizing these tax implications is essential in delivering comprehensive financial advice.

Selecting lending solutions and investments are fundamental aspects of a financial advisor's role, each with its unique complexities and considerations. While investment decisions focus on achieving growth and long-term financial goals, lending solutions generally aim to address short to medium-term liquidity needs. By thoroughly evaluating risk, aligning with client objectives, and considering tax implications, advisors can deliver comprehensive and personalized financial strategies that empower their clients to achieve financial success.

Selecting Credit and Investment Solutions
Jesse Lewis

Jesse Lewis is a seasoned professional in the financial services industry, currently serving as the Senior Vice President of Client Engagement & Partnerships at UPTIQ. With a career spanning over two decades, Jesse has consistently demonstrated expertise in wealth management. Before joining UPTIQ, Jesse held a prominent position as a member of the executive committee at Advisor Credit Exchange, where he played a pivotal role in shaping the platform experience and driving business development initiatives across enterprises and financial professionals. His leadership and industry insights were instrumental in expanding the company's reach across the wealth management industry.

In 2016, Jesse made significant contributions to Wealthcare Advisory Partners, an LPL Financial Hybrid RIA, as well as their fee-only affiliate, Wealthcare Capital Management. During his tenure, he co-led the financial professional recruitment efforts and facilitated the adoption of their proprietary goals-based planning and investing platform. Prior to his role at Wealthcare, Jesse joined Bancorp, a leading payment services provider and specialized lender in the United States. As the Vice President and Business Development Officer, he represented Bancorp's Securities-backed Lending program within industry leaders such as LPL Financial, AssetMark Trust, SEI, and Kestra.

Jesse's career also includes his long tenure at Pershing, LLC, a BNY Mellon Company where he directed key account management and advisory sales for the Managed Investments Group. Additionally, Jesse contributed to the development and distribution of various fee-based solutions while serving as a member of the Managed Investments Risk Committee.

Throughout his career, Jesse has shared his expertise and insights through his contributions to the financial services industry. He has contributed to three industry guidebooks titled "The Fee-based Conversation: Guiding Clients through an Advisory Relationship," "Seminars and Event Marketing: Creative Ideas to Build and Enhance Relationships," and "Creating a Client Referral Strategy." In recognition of his leadership skills and industry contributions, Jesse was selected to the inaugural class of the Money Management Institute's distinguished Leadership Pathway program in 2015.

Jesse holds a Bachelor of Science degree in Media Communications & Technology from East Stroudsburg University of Pennsylvania. He currently resides in the Greater Philadelphia region with his wife, Jody, and their two children, Jackson and Jocelyn on the family's 55-acre cattle farm. Beyond his professional achievements, Jesse actively contributes to his community as an advisory board member for Overachieve Academy, a youth speed and agility training company, and Graham Media Partners, a Wayne, PA-based marketing company specializing in all aspects of financial services. His involvement in these organizations showcases his commitment to empowering and supporting future generations and fostering innovation in the industry.