When Clients Freeze, Wealth Disappears

You ever spend more time scrolling through Netflix than actually watching something?
Too many options. Too much second-guessing. And in the end… nothing gets picked.

Real estate decisions feel the same way for clients. Keep, sell, exchange? Refinance now or wait? Without a framework, they freeze. And when they freeze, wealth slips through the cracks — liquidity gets locked up, tax bills pile up, opportunities disappear.

That’s where advisors make the difference: turning endless options into clear action.

This month’s insights:

• 1031 to DST: Why the hottest trend in tax-deferred exchanges could actually preserve your AUM

• Macro Watch: What September’s rate decision really means for your real estate clients

• 3 Essential Conversations: The discussions that separate strategic advisors from order-takers

Let’s dive in!

1031 to DST: The Trend Advisors Can't Ignore

Property owners are aging out. And they're tired.

A long-time landlord client of one of our partner advisors had managed a portfolio of single-family rentals for decades. Nearing retirement, the burden of tenants and maintenance was wearing thin.

That's where the decision point hit: keep the properties, sell outright, or 1031 exchange. Traditionally, a direct 1031 meant swapping one set of landlord headaches for another — and often moving assets outside the advisor's management.

But in recent years, a growing number of clients are choosing Delaware Statutory Trusts (DSTs) as their exchange vehicle. Why? DSTs allow fractional ownership in institutional-grade properties — with no management responsibilities — and, when custodied on platforms like Schwab, advisory fees may continue as usual.

The trend is real:

• Since 2004, investors have placed over $20 billion into securitized 1031 structures, mostly DSTs.

• More than $2.4 billion in equity has been raised for DSTs this year alone.

• Rising interest rates have slowed traditional investment property sales, making quality 1031 replacements harder to find.

DSTs aren't a silver bullet. Investors forfeit voting rights, and these real estate holdings aren't liquid in a day, week, or even month. But for some clients, the trade-offs are worth it.

There's also legislative pressure. The Administration's FY 2025 "Green Book" again proposes capping 1031 gain deferrals at $500,000 per taxpayer per year. Whether or not it passes, the direction is clear: the rules around 1031 exchanges are under scrutiny.

The advisor takeaway: traditional 1031s often pull assets off your platform. DSTs, when appropriate, can help clients reduce landlord fatigue without pulling you out of the picture.

Tools like Leveridge help you model them. Keep vs. sell vs. exchange. That way, when your client faces their biggest real estate decision, you can guide it inside the plan — not lose it outside of it.

Macro Watch — Fed Cuts Don’t Equal Cheap Mortgages

Markets are pricing in an 87% chance of a 0.25% rate cut when the Fed meets in September. But here's the catch: mortgage rates aren't following the Fed like they used to.

The Disconnect

• Rate Reality Check: The average 30-year fixed mortgage sits around 6.5–6.6%, a 10-month low — but still far from the 4% mortgages clients remember. Why? Mortgage rates track the 10-year Treasury yield, not Fed moves. Translation: A Fed cut doesn't guarantee lower mortgages.

• Economic Crosscurrents: Early August jobs data showed weaker hiring, while July's core PCE inflation held stubbornly at persistent levels. The Fed is walking a tightrope — cut too soon and risk inflation, wait too long and risk jobs.

• The Planning Baseline: Fannie Mae projects mortgage rates around 6.5% by year-end and 6.1% in 2026. That's the "new normal."

Why It Matters for Advisors

Clients will hear the headline — "Fed cuts rates" — and assume cheap mortgages are back. If you don't reframe that narrative, they'll delay action waiting for rates that may never return.

This is where advisors create leverage:

• Reframe expectations → 6–7% is the baseline, not the anomaly.

• Model scenarios → "What if rates hold here for 5 years?" beats waiting for 4% that never comes.

• Tie decisions to the plan → A refinance or purchase at today's rates may still improve liquidity, flexibility, or tax outcomes.

Bottom line: Fed cuts are noise. Planning is the signal. The advisors who help clients act on reality — not headlines — stay indispensable.

3 Conversations That Separate Strategic Advisors from Order-Takers

Headlines will keep bouncing between inflation, Fed cuts, and market timing. But clients don't need more noise — they need clarity. Here are three conversations worth leading before year-end:

1. Liquidity vs. Leverage

When clients use cash for property purchases, every $500K locked in real estate traps $1.6M in future liquidity. That's capital that could otherwise fund retirement, opportunity, or buffer against volatility. The right question isn't just "Can they afford it?" — it's "What does this decision do to long-term flexibility?"

2. The 1031 Fork in the Road

For aging property owners, the choice is rarely black and white. Direct 1031s can preserve tax deferral but often move assets outside custody. DSTs, for the right client, solve for management fatigue and can keep the advisor relationship intact. The advisor's role is to surface all three paths — keep, sell, exchange — and guide the trade-offs.

3. The "New Normal" Rate Environment

Fannie Mae projects mortgage rates at 6.5% by year-end and 6.1% in 2026. Clients waiting for 4% mortgages may be waiting forever. Advisors add value by stress-testing plans at today's levels — and shifting the conversation from "when rates drop" to "what we can control now."

Bottom line: the best advisors don't predict the future — they prepare clients for it.

Want to see how these strategies fit your client conversations? Book a call — we’ll share how other advisors are framing them this fall.