In an article for InvestmentNews, Bruce Kelley covers how Goldman Sachs and Citigroup are looking to bolster their wealth management divisions. In this sense, these banking giants are behind their peers like Morgan Stanley and UBS who have been quite aggressive in recruiting financial advisors.

Currently, these efforts consist of recruiting experienced advisors, training younger advisors, and acquisitions of thriving practices. One challenge for Citi and Goldman Sachs is that recruitment of advisors is quite competitive, leading to higher prices and more generous terms. Additionally, technology has also given more tools and capabilities to advisors, shrinking the gap between megabanks and smaller practice. 

Despite this, Wall Street banks continue to see wealth management as an area of growth. On a recent earnings call, Citigroup CEO Jane Fraser said, ““We see a lot of potential for growth in Asia as we fill in the coverage across the full wealth spectrum there. We will be scaling up in the U.S. by building out the investment offering and cross-selling into our existing and new clients across the country.”

Similarly, Goldman sees its future growth opportunities coming from hiring more advisors. It’s looking to add to its stable of 1,000 financial advisors for wealthy clients in the US and internationally.

Finsum: Advisor recruiting has been heating up over the past decade. Goldman Sachs and Citigroup have fallen behind their peers but are looking to increase their efforts in the coming quarters.

In a piece for ProfessionalPlanner, Michael Collins lays out some pros and cons of investing in alternatives. Overall, he takes a positive view of the asset class as it can boost returns and diversification. Additionally, it can allow investors to take advantage of short-term market inefficiencies which is more difficult through conventional investing and the most popular assets like stocks, bonds, or real estate.

Alternative investments are seeing strong growth over the last decade due to regulatory changes, and technology leading to increased access for private markets. In 2022, the asset class performed particularly well especially relative to stocks and bonds which were both down double-digits. 

One challenge is that alternative investments come in many different forms. Some examples include short-selling, a long-short portfolio, global macro, event-driven, arbitrage, private equity, venture capital, and private market investing. 

There are some drawbacks to consider. For one, there is less liquidity and transparency especially relative to more popular asset classes. Additionally, many alternative strategies do employ leverage which can be a double-edged sword during periods of economic or monetary stress. Another challenge is that alternative investments typically have higher fees than traditional investments which can erode returns over long periods of time. 

Finsum: Alternative investments are seeing a surge in interest due to their strong performance in 2022 and wariness about the economy and traditional asset classes.

Elana Margulies-Snyderman of EisnerAmper conducted an interview with Liridon Gila, the Co-CIO of Sawgrass Asset Management, to get his thoughts on active equity and fixed income. 

Gila starts with a broad view by trying to identify where we are in the economic cycle, and how monetary and fiscal policy will move in reaction which causes its own ripple effects for markets and the economy.

Currently, he sees a challenging environment for risk assets as the odds of a recession continue to rise. Despite this, the Federal Reserve is maintaining its hawkish posture and pulling liquidity from the market. Fiscal policy has been a major driver of the economy over the last couple of years, but this is unlikely to continue to be a tailwind given a divided Congress.

While he is wary of equities, he is more optimistic about fixed income. This is primarily because he expects that inflation has already peaked which would be a healthy tailwind for bonds. Additionally, he sees a normalization of inflation and rates over the next couple of years which means that current yields are quite attractive and unlikely to remain at these lofty levels. 

Finsum: Active fixed income is a great strategy for the current market given rising odds of a recession, peaking inflation, and very attractive yields.

Municipal bonds are not exactly the most exciting part of the market. Most investors usually only think of them when there is a crisis or high-profile downgrade.

Yet, in today’s environment it makes sense why there is renewed interest in the category. They are one way that investors can take advantage of higher rates, but they also provide a greater degree of safety given that default risk is much lower.

Todd Rosenblum discusses why the successful resolution of the debt ceiling could be a catalyst for further gains in a blog post for ETFTrends. Prior to the resolution, there was a surge of demand for Treasuries as investors were looking to de-risk their portfolios. 

Now, there is outflow from Treasuries and expectations of more weakness given strength in equity markets and increased supply coming online over the next few months. Thus, there is a rotation into other types of fixed income products. 

Municipal bonds are one recipient of these outflows especially as they offer tax benefits. Investors also can buy a municipal bond ETF which is a diversified, low-cost way to get exposure to the asset class. 

Finsum: Municipal bonds are one way that investors can take advantage of high yields, while also offering tax benefits. They are seeing renewed interest following the debt ceiling resolution.

While ESG investing has boomed over the past decade, there are some drawbacks. One is the lack of clear definition of ESG, and what qualifies an investment to be sufficiently deemed ESG. For instance, some ESG funds have much wider latitude, while others are much more discriminating. In an article for Vettafi, James Comtois discusses why some investors who believe in ESG investing are nevertheless unsatisfied with many ESG investment options.

Another issue is greenwashing which is when a company is deceptive or gives false information about its products or processes. As an example, some ESG funds will contain fossil fuel companies, or companies with a record of pollution.

This also brings up a broader criticism of ESG that asset managers are forcing their views on investors, markets, and companies. For investors who believe in ESG investing but are wary of greenwashing, direct indexing offers a solution.

With direct indexing, any ESG index can be replicated, and any companies can be excluded that merit concern. With direct indexing, investors can ensure that their values are reflected in their investments, while retaining the benefits of investing in a diversified index with low fees. 

Finsum: Direct indexing solves one of the major concerns about ESG investing which is that it includes many companies with poor environmental records who are engaged in greenwashing. 

Private equity: you have a meeting with center stage.

With the space -- as well as other alternative investments -- expected to gross $20 trillion by 2025, it’s thumbs up for the expansion of private equity, according to an industry data report from Prequin, an alternatives data firm, reported daily.financialexecutives.org.

Within the past decade, the private equity terrain’s changed seismically. What’s more, the industry’s lighting quick expansion is paving the way to a lucrative market, leading to new leadership.

Meantime, last year prompted investors to pick the minds of their financial professionals for help making their way through the constantly changing financial landscape, according to thestreet.com.

While a survey conducted by the Financial Planning Association and the Journal of Financial Planning showed the interest in alternative investments was stronger among professional predating the pandemic, the issues of liquidity and cost didn’t vanish in the wind.

"As traditional stock and bond asset classes suffered from losses and volatility in 2022, it's not surprising that interest in alternative investments increased among financial professionals,” 2023 FPA President James Lee, CFP, CRPC, AIF, said in a press release. “However, overall use of alternatives remains relatively low,”

Someone say ‘yeesh?’

Well, it wouldn’t exactly come out of left field considering how difficult it is to conceive of more challenging circumstances for fixed income investors, according to lazardassetmanagement.com.

After all, bear in mind the cocktail of incoming fire it’s facing: burgeoning inflation, spikes in the rates, shutdowns. On and on it goes, sparking volatility and forcing returns for broad fixed income market indices into negativity,  

Sure, with volatility comes risk. But it also can kindle opportunity. So, instead of ducking it, it could be that by facing it, eye to eye, investors in fixed income will reap the benefits.

Meantime, among the ultra rich, it’s not just about feasting on caviar and chugging the finest wines. They’re also fretting about a possible recession, according to barrons.com.

So, what are their advisors doing in turn? According to a survey of family offices conducted by UBS, they’re moving toward more defensive holdings, like high quality, short duration fixed income. A total of 239 family offices were surveyed by the wealth manager. The family offices had a net worth of $2.2 billion.

In an article for SmartAsset, Patrick Villanova clarifies some misconceptions about annuities and whether they are protected in the event that the insurance company which issued the annuity goes out of business. 

Annuities are essentially an insurance contract that offers a guaranteed income in exchange for payment. These can only be issued by insurance companies which means that there is regulation at the state level and protection for buyers. Unlike bank deposits, there is no federal guarantee.

In essence, each state has a guarantee organization, composed of insurance companies operating in the state. In the event of an insurance company going out of business, the organization will make sure that outstanding claims are good. 

However, it’s important to understand the exact amount that is protected. In most states, it’s up to $250,000 per person. More often, the failing insurer’s claims would be bought by competitors who would make good on the contract. 

Investors interested in an annuity should also check how various insurance companies stack up in terms of ratings by authorities. Typically, insurers with lower ratings will offer higher yields, reflecting the greater risk. 

Finsum: Annuities are seeing a surge in interest given higher yields and market volatility. Here are some points to understand about various risks and protections. 

A financial advisor practice’s long-term success is dependent on building a pipeline of prospects given that attrition and turnover is a given. While there are many paths to accomplishing this goal, one of the most effective is social media. In an article for WealthManagement, Doug Wilber shares some tips on how advisors can leverage social media.

This is especially true for advisors looking to connect with Generation Z and Millennials as these demographics are more comfortable and receptive to messages on these platforms relative to traditional media. Social media also gives advisors an opportunity to share their expertise, personality, and build trust with potential prospects.

On social media, authenticity is the most important metric. Over time, an advisor can build relationships with potential clients. According to surveys, about half of investors say social media influences who they choose as their financial professional. 

Another benefit of social media is that these channels are on 24/7 which means that these interactions can happen at any time. These platforms also have infinite scale which means that the effort of producing content is the same with a small or large audience. 

Finsum: Having a social media strategy is essential for financial advisors who want to bolster their pipeline of prospects and/or connect with Millennials and Generation Z.

In remarks at the BNY Mellon Pershing Institute covered by InvestmentNews’ Jeff Benjamin, former SEC Chair Jay Clayton shared his thoughts on the current regulatory environment, and why he believes that the SEC is doing many investors a disservice by preventing them from investing in private markets.

Clayton served as SEC Chairman under former President Trump between May 2017 and December 2020. He drew some differences from his tenure and the current administration, noting that “it’s pretty clear we’re in a very highly business-skeptical and commercial-skeptical regulatory environment.” Currently, Clayton serves as the nonexecutive chair at Apollo Global Management. 

Clayton also sees alternative investments as another area where the SEC is being overly restrictive, and it’s hurting retail investors by depriving them of opportunities that are available to institutional and high net-worth investors. He said that it’s hypocritical that retail investors are able to buy leveraged ETFs or options but not private investments that have significantly less risk.

In order to make alternatives available to all investors, he said that regulators would have to change their approach, and asset managers would also have to introduce appropriate products. 

He did acknowledge a conflict of interest, since Apollo has a major presence in private markets.

Finsum: At a recent conference, former SEC Chair Jay Clayton shared his thoughts on the current regulatory environment, and why he believes alternative investing needs to be further democratized.