For Financial Planning, Tobias Salinger talks with Dominique Henderson, the founder of DJH Capital to share tips on growing a financial advisor brand. Henderson is a financial advisor, planner, coach, and content creator who just released an ebook on tactics to grow a financial advisor practice. 

His main advice centers around boosting leads, targeting a niche, and creating a long-term relationship. Henderson is a big believer in finding the ‘right room’ where you can be yourself. Here, your message and advise are more likely to resonate. 

Henderson also focuses on advisors who are in the early stages of their careers and shares advice on making the right connections, finding the best events to attend, and how a real practice works. Henderson sees an increase in the number of people who considering becoming financial advisors and planners. 

He believes that the initial difficulty of cold calling and taking meetings all days dissuade many from the career path. Therefore, Henderson wants to highlight alternative methods of getting started in the business. 

Rather than the focus on gathering assets, he believes that advisors should think about how thier advice and planning will help an individual and their families over the long-term in multiple facets of their life. 

Finsum: The financial advisor industry has too much of a focus on asset-gathering. Instead, there should be more focus on how the right advice can improve a client’s life trajectory

Direct indexing is gaining adherents at a rapid pace as it proliferates from solely high net worth investors to investors with much smaller sums and is now available through most wealth management platforms. Direct indexing allows investors to capture the benefits of index investing such as low costs and diversification but allows more personalization. Its most well known benefit is that it can help lower taxes due to its unique ability to harvest tax losses which can offset gains in other parts of the portfolio. 

Another is that it allows customization of indexes because many investors may want to reduce exposure to a certain stock or sector. This can be because they have substantial exposure to the stock or industry through their other holdings or because of personal preferences. 

The latter is a reflection of the rise of values-based investing which is increasingly popular among younger investors. This entails making investments that align with one’s own personal values. For instance, an investor may choose not to include fossil fuel companies in their index because of concerns around the environment. These holdings are then replaced with a different stocks that have similar factor scores. 

Prior to direct indexing, investors with strong values would be limited in terms of investment options. Now, they are able to essentially create their own fund that aligns with their values. 

Finsum: One of the major benefits of direct indexing is that investors can customize their holdings to align with their personal values. 

In an article for WealthProfessional, Noelle Boughton covers Caldwell SEcurities’ strategy to support older financial advisors in their succession planning. This is due to the aging nature of the workforce in addition to the firm’s desire to maximize retention during the transition process. Senior advisors work with junior advisors in handling clients and then slowly phase out of the business with fewer responsibilities every year.

While junior advisors are focused on growing their business and adding clients, senior advisors are thinking about their retirement and maximizing the value of their practice. Many shops will have advisors sell their business to a junior advisor and then quickly move on. 

Caldwell Securities sees an opportunity by having a more formal and longer transition period that caters to the needs and ambitions of both junior and senior advisors. It’s also a value add for clients as they initially work with both advisors before the junior advisor slowly takes the lead. 

Senior advisors can be satisfied that their clients will continue to be satisfied and that they are being handed to someone who is caring, capable, and competent. They can also continue to draw a paycheck in addition to selling their business while easing into retirement.  

Finsum: The financial advisor industry is aging with a big chunk expected to retire over the next decade. Here is how Caldwell Securities is handling this matter.

In an article for Vettafi, Ben Hernandez discusses why intermediate-term Treasuries could be the best option for fixed income investors given the current market environment. In recent months, long-term Treasuries have considerably weakened as it’s become increasingly clear that the Federal Reserve is not close to pivoting in terms of its rate policy.

This is primarily due to the economy continuing to avoid a recession, while data like the jobs market and consumer spending continue to indicate the economy is expanding. At the same time, the short-end offers generous yields but would underperform in the event that the Fed cuts rates. Another factor is that there is going to be high levels of Treasury supply hitting the market later this year as the government looks to fund its deficit.

Given that both ends of the curve have high levels of risk and uncertainty, investors should consider intermediate-term Treasuries to take advantage of elevated yields while reducing duration risk. 

Historically, these periods of ‘pause’ when the Fed is deliberating its next policy move tend to be volatile. This is even more the case this year given the runup in yields and uncertainty in political and macro arenas. 

Finsum: Intermediate-term Treasuries could be the best option for investors given the risks and uncertainty surrounding the short and long-end. 

One of the biggest long-term issues affecting the energy sector is the growth of electric vehicles. According to the IEA, 50% of new vehicles sold will be EVs by 2030 with EV sales completely displacing traditional internal combustion engines (ICE) by 2050. 

In Q2 of 2023, there was a new record in terms of sales in the US with nearly 300,000 EVs bought which comprises about 7% of the total sold. A big contributing factor is the Inflation Relief Act which offered subsidies for up to $7,500 for select EVs with many states offering additional subsidies.  

Of course, this has major implications for gasoline demand which is a major component of crude oil use. And, it’s one reason why many are betting that global oil demand is peaking and set to decline over the coming decades.

This narrative is even affecting the supply side as many producers are using excess cash flow to pay off debt, distribute dividends, and strengthen their balance sheet rather than invest in new production. However, if this narrative turns out to be preemptive or incorrect, then there is likely going to be major upside for the energy sector.

Finsum: EV sales hit new record highs in Q2 of 2023 in part due to subsidies from the Inflation Relief Act. Whether EV sales keep rising is a major storyline in the energy market. 

In an article for AdvisorHub, Lisa Fu covers Prudential moving $50 billion in client assets from Fidelity’s custody to LPL. As a result, starting late in 2024, 2,600 Prudential brokers will start using LPL as their broker-dealer instead of Fidelity.

It continues to indicate that LPL is focused on growing its broker-dealer business in addition to having the largest network of advisors in the country. The deal is expected to result in around $125 million in costs for LPL but is expected to contribute $60 million in accretive earnings when the transition is completed. 

LPL is boosting its broker-dealer business at the same time that many asset managers are outsourcing these functions to reduce costs. Currently, LPL’s custody unit has $230 billion in assets and has agreements with nearly 1,000 institutions. The firm sees an ultimate opportunity of $5 trillion in custodial assets. 

Fidelity’s agreement with Prudential had an early termination clause which was triggered with the decision to move. It’s expected to be between $6 million and $8 million. Some other perks that Fidelity provided included revenue sharing, research, and preferred pricing. 

Finsum: LPL Financial is growing its custodial business and recently landed $50 billion in client assets from Prudential who is shifting away from Fidelity. 

In recent weeks, fixed income drifted lower due to concerns about Fed Chair Jerome Powell’s upcoming Jackson Hole speech, where he was expected to strike a hawkish tone given the economy continuing to expand at a moderate pace and inflation remaining well above desired levels. 

Powell did lean hawkish in his remarks but not enough to fuel further selling in bonds. Notably, he warned that the FOMC was prepared ‘to raise rates further’. However, he did temper this with constructive comments on the economy’s resilience and inflation’s path lower. Equity markets experienced strength following the remarks as the speech was less hawkish than expected.

The ultimate takeaway is that the Fed is still hawkish, considers inflation too high, and further hikes are on the table if necessary, but it’s less hawkish than a few months ago. Additionally, it sees the resilience of the economy and progress on the inflation front as reason to remain patient in its current stance which delays the idea that rate cuts are going to happen anytime soon. 

Thus, it’s not surprising to see odds for a rate hike later this year edge lower in addition to the odds of a rate cut in the first half of 2023. So far, the ‘higher for longer’ camp continues to be correct which is leading to weakness on the long-end and creating attractive opportunities on the short-end. 

Finsum: Fed Chair Jerome Powell gave his much awaited speech at Jackson Hole. He struck a relatively hawkish tone which was broadly in line with expectations.

In an article for SmartAsset, Patrick Villanova CEPF covers a recent note from Schwab which discusses why this is a favorable time to purchase an annuity. It’s not entirely a contrarian position given that annuity sales hit record highs during the first-half of 2023 which saw a 28% increase from strong sales in the first-half of 2022.

Annuity sales tend to spike during periods of economic uncertainty and attractive rates. The last time there was a similar spike in sales was during the 2008 financial crisis. Currently, there is considerable uncertainty about the economic and monetary outlook while rates are at their highest level in decades. These purchases would perform especially well if inflation and rates return back to levels that were commonly experienced over the past couple of decades, while they would underperform if current conditions persist. 

Currently, most fixed annuities are paying yielding between 6.5% and 7%, adjusting for various factors. In contrast, the yield on a high-quality corporate bond ETF is about 5%. However, the corporate bond ETF provides more upside in the event that bonds strengthen especially if rates normalize but have more downside if rates stay elevated or rise further. 

Finsum: Annuity sales are at record levels in 2023 and offer more yield than corporate bonds. Here’s why they continue to remain a good buy according to Schwab. 

Most advisors and investors are familiar with the benefits of diversification when it comes to asset classes. However, there‘s less understanding about the importance of risk factor diversification. In ETF Trends, Scott Welch CFA of Wisdom Tree Investments shares the importance of this concept, and why advisors need to intuitively understand it.

There are some parallels between asset class and risk factor performance and diversification. Both are nearly impossible to forecast especially on shorter timeframes. But over a longer period of time, certain conjectures can be made with confidence. For instance, there tends to be mean-reversion over longer time periods. 

Last year exemplified the risks of not being sufficiently diversified in terms of factor risk, growth was crushed, while value outperformed for the first time in decades. Yet, this has nearly completely inverted in the first-half of 2023 due to the rollicking bull market in stocks linked to artificial intelligence. Thus, this demonstrates the importance of factor diversification and rebalancing, similar to what is done for asset classes. 

Currently, one risk for investors overexposed to growth factors is valuations that are historically elevated. In contrast, value factor stocks are quite cheap from an absolute and relative basis. Thus, it could favor some rotation from growth to value once again. 

Finsum: Asset class diversification is an elementary part of portfolio management and construction. Another important concept is risk factor diversification.

A gaggle of financial advisors will assign clients to a pre built mode portfolio, according to smartasset.com.

Why, pre tell? Well, given that pinpointing which investments will abet your ability to hit your financial goals isn’t exactly a walk in, say, Central Park, instead of building a portfolio of investments from ground zero, they’ll opt instead for a model portfolio, already built.

Why invest in a model portfolio:

Diversification

Research and Professional Analysis

Rebalancing

Affordability

Don’t want to tackle a do it yourself approach to investing? Model portfolios can be your ticket. But prior to sinking your bread into it, it’s incumbent upon you to not only grasp how it works, but to compare fees.

And a reminder: if you’ve been putting dollars in ready made curated portfolios, it’s a good idea to check the type of registration offered by the managers the curated portfolios have with market regulator Sebi, according to livemint.com.

Registered as a research analyst? Well, that means that offering model portfolios is off the boards, based on observations of Sebi’s settlement, which was order dated in May,

Ultimately, all the curated portfolios offered by research analysts in the market’s likely to be impacted.