In an article for GoBankingRates, financial advisors shared some of their top tips for onboarding new clients. While every client has unique circumstances and their own goals and definition of success, there are still some universal rules that apply for effective financial planning. 

One of the first tips is to understand a clients’ cash flow with a full accounting and understanding of each dollar that goes in and out. This is the first step in any sort of effective financial planning. Only once this is complete does it make sense to move onto other components of planning like investments or an estate plan. Cash flow analysis tends to be tedious for advisors and clients, but it creates a solid foundation and is necessary for success.

Another tip is to gain clarity around financial goals in the short and long-term. This creates a roadmap and rules that will lead to better decision and behavior. For most clients, their success comes down to more effectively managing their finances and increasing allocations to savings and investing.

Finally, plans should be written down and frequently read and revised. Having a written plan leads to increased compliance especially in terms of sticking to a budget and an investment plan regardless of market conditions. 

Finsum: Onboarding clients is a delicate mix of universal processes and customized service. Here are some tips from advisors on more effective onboarding.

Model portfolios have seen rapid adoption over the past decade as it allows advisors greater flexibility and resources to grow and manage their practices. In an article for Schroders, Gillian Hepburn discusses the growing demand for white labeling model portfolios that in some cases involves increased customization. 

For many advisors, the appeal of white labeling is to show their clients that they remain involved with the investment management process. However, there are some complications to white labeling and important considerations for advisors.

For one, it undermines the primary advantage of model portfolios which is to tap into the investment expertise and resources of asset managers so that advisors can spend more time with clients on financial planning. In the case of customized portfolios, advisors still have to ensure that portfolios are being rebalanced, results and trades are being reported, and regulations are followed.

Advisors should also think about what value is being generated by white labeling and whether clients are being charged extra fees. With increased regulations and the fiduciary rule, there needs to be a firm value proposition for clients to justify placing them in a white labeled model portfolio with higher fees.   

Finsum: Many advisors are looking to whitelabel model portfolios. However, this comes with certain considerations and may lead to additional complications. 

Tony Davidow, the Senior Alternatives Strategist at Franklin Templeton, recently penned a piece for the firm’s Beyond Bulls and Bear blog about how alternative investments are seeing renewed interest, and how they can help portfolios reduce volatility and increase income and growth prospects.

2022 was the first year in the past century that stocks and bonds were both down double-digits. And, the last time that both asset classes had negative returns was in 1931 and 1969. Of course, 2022 was a unique year as the global economy battled with rising rates, spiraling inflation, growing recession risk, and a myriad of geopolitical threats. 

It was quite painful for most investors and advisors whose portfolios are in stocks and bonds. But, it’s led to a surge in interest for alternative investments. Many outperformed in 2022 and led to reductions in portfolio volatility while helping boost portfolio income and serving as a more effective inflation hedge. 

Until recently, many alternatives were only available to large institutions. However, access to these investments has been democratized due to technology and regulatory changes. Therefore, advisors should be open to these investments especially if economic and market conditions continue to be challenging. 

Finsum: Following the events of 2022, advisors and investors should consider including alternative investments in their portfolio given their ability to reduce volatility and boost income. 

In an article for Bloomberg, Anchalee Worrachate covered a recent note from Goldman Sachs’ Della Vigna who was critical of the ESG movement and said that it is leading to underinvestment in energy production. In turn, this would lead to higher prices down the road and hurt the energy security of developed countries as was briefly experienced in the months following Russia’s invasion of Ukraine.

He believes ESG has focused too much on divesting from fossil fuels rather than investing in renewable energy. Over the last 10 years, capital expenditures on energy production have fallen short of what’s necessary. Vigna notes that spending on renewables is rising, but it’s not close to enough to make up the gap.

Another criticism of ESG is the focus on absolute emissions rather than the carbon footprint of emissions. Vigna says this is misguided, because it simply means less energy production rather than boosting zero emission energy production.

Vigna is worried that the US and Europe have lost the urgency that they felt in the spring of 2021 to expedite the energy transition process given its numerous secondary effects. He warns that the equilibrium remains very tight, and there is the risk of another surge in prices. Despite this threat, the momentum to transition has slowed, and ESG proponents have gone back to a focus on emissions rather than new sources of energy. 

Finsum: Goldman Sachs’ Della Vigna believes that the energy transition to renewable sources needs to be expedited, in part, due to ESG’s focus on reducing emissions.

In an article for ETFStream, Theo Andrew discussed how bond market liquidity has improved in recent years due to increased electronic trading and fixed income ETFs. Bond ETFs have gone from $729 billion in assets under management to $1.7 trillion between 2017 and 2023. By the end of the decade, it’s projected to reach $5 trillion which would equate to 5% of the global bond market.

In some smaller markets, ETFs are accounting for an increasing share of trading volume. Institutions are increasingly getting comfortable with these instruments especially to manage credit risk. Trading in ETFs is also less costly than individual bonds. 

Due to increasing liquidity, there is increased price transparency and tighter spreads. It also is enabling more portfolio trading, where asset managers can automate rebalancing and quickly implement changes in the portfolio. 

Growth in portfolio trading and fixed income ETFs has been symbiotic as a deeper and richer fixed income ETF market makes portfolio trading more appealing. In turn, more allocations to portfolio trading inevitably boost inflows into fixed income ETFs. 

Finsum: Fixed income ETFs are leading to an increase in bond market liquidity. In turn, this is leading to more adoption of portfolio trading.