TIAA, a provider of lifetime financial solutions, has unveiled a new gauge aimed at showcasing the potential income augmentation for recent retirees who integrate an annuity strategy into their financial plans, in contrast to solely adhering to the 4% rule. The TIAA Annuity Paycheck Advantage gives retirees an idea of how their retirement package might differ with annuities rather than the strict 4% rule. 

According to TIAA's calculations, a 67-year-old retiree in 2024 could potentially witness a 32% upsurge in their initial retirement income by designating a third of their savings to lifetime income through the TIAA Traditional annuity, coupled with a 10-year guarantee period and withdrawing 4% from the remainder. Kourtney Gibson, TIAA's chief institutional client officer, described the TIAA Annuity Paycheck Advantage as a guiding principle for new retirees, offering the promise of elevated guaranteed payouts and heightened certainty regarding retirement expenditures. 

TIAA intends to annually revise its Annuity Paycheck Advantage index to reflect the contemporary influence of lifetime income on the financial well-being of Americans.

Finsum: While the 4% rule can be a good benchmark, a slightly more complicated strategy can lead to better retirement outcomes for clients

There have been constant rumors swirling that UBS intends to sell its US wealth management unit. In part, it’s due to the bank’s North American wealth management unit delivering lower returns than its peers and UBS’ wealth management units in other geographies. 

Another factor is that European regulators are reportedly looking to impose increased capital requirements for banks with foreign subsidiaries. The unit has also been underperforming, with profit declining by 31% in Q1 and its cost-to-income ratio more than 20% above UBS’ other geographies. Advisor headcount also declined from 6,147 to 6,079. 

During UBS’ Q1 earnings report, CEO Sergio Ermotti dismissed reports that a sale was on the horizon despite these challenges. He sees a presence in North American wealth management as integral to UBS’ ambitions of being a global bank, adding that “shrinking back to greatness is not a strategy.”

Instead, UBS plans to keep investing in its North American wealth management business, identifying it as a ‘key… growth market’. It believes that over the next 3 years, UBS can shrink the profitability gap with its competitors. Part of its growth strategy is to more aggressively refer investment banking customers to wealth management. 

Finsum: Despite middling results from its North American wealth management unit, UBS dismissed speculation that the unit could be sold. Instead, it plans to invest in the unit and hopes to narrow the profitability gap with peers over the next 3 years.

A feature of separately managed accounts (SMAs) is that investors directly own securities, compared to an ETF or mutual fund. This makes them more tax-efficient, as investors have more opportunities to harvest tax losses and capitalize on volatility. In contrast, mutual funds, or ETFs, offer much more limited opportunities.  

With SMAs, tax losses can be harvested even in years with positive returns, as securities that are down can be sold. These losses can be used to offset gains and reduce an investor's overall tax bill. Positions can be rebought after 30 days to avoid wash sale restrictions, or stocks with similar factor scores can be purchased instead. 

Unlike mutual funds, SMAs are not subject to embedded capital gains. Embedded capital gains mean that an owner of a mutual fund is liable for capital gains depending on a position’s cost basis. This means that an investor in a mutual fund could be liable for capital gains, even if they have a loss on the position. 

In stressful markets, mutual funds can see distributions of capital gains if there is a surge of redemptions, adding to the risk of a capital gains tax bill in concert with a losing position. With SMAs, this risk is nonexistent since securities are directly purchased. Instead, there is more flexibility to pursue the most tax-efficient strategy.

Finsum: Separately managed accounts offer certain tax advantages to investors over investing in ETFs or mutual funds. Over time, the boost to after-tax returns can be quite significant, especially for high-net-worth investors. 

Recent fluctuations in the market have fueled investors' desire for strategies that mitigate risk. Defined-outcome exchange-traded funds, also known as "buffer ETFs," have emerged as a solution, aiming to protect investors from losses on a designated index. 

The proliferation of these funds has been remarkable, with assets ballooning to over $22 billion from under $200 million in 2018, with 169 offerings available presently. These ETFs typically offer index returns while mitigating downside risk, achieved by sacrificing a portion of potential upside gains. 

By employing various options structures, such as funds with upside caps or partial upside exposure, investors can tailor their risk-reward profiles according to their preferences. Despite operational nuances and fees, most of these ETFs have demonstrated their ability to shield investors from market downturns while offering competitive returns.

Finsum: These last five years have been critical examples of why many investors need buffer ETFs to both capture gains and hedge losses. 

Monday heralded the unveiling of a new investment suite by the firm, iCapital Model Portfolios, aimed at elevating advisors' asset-allocation strategies to a new echelon of diversification. 

Lawrence Calcano, iCapital's Chairman and CEO, voiced enthusiasm about the debut, highlighting its innovation in integrating alternative investments into client portfolios. Among the offerings stands the iCapital Multi-Asset Portfolio (iMAP), strategically engineered to blend income and growth through a selection of top-tier private equity, private credit, and real asset funds. 

These portfolios, actively curated by iCapital's research team, aim to deliver total returns with diminished volatility compared to traditional assets, assuaging client concerns during market fluctuations. With aspirations to broaden the lineup and accessibility to over 100,000 financial advisors, iCapital aims to perpetuate the simplification and enrichment of the investment experience for advisors and clients alike.

Finsum: Model that can capture uncorrelated returns a necessary niche in the evolving landscape.

As the 2024 golf season kicks into gear and the warm weather sets in, financial advisors and businesses might want to consider planning for fall golf outings now. Summer and Fall offer ideal conditions with well-maintained courses, pleasant weather, and peak performance after a summer of play. 

The season also presents excellent deals at golf destinations nationwide or even abroad for those seeking Caribbean getaways or links golf in the UK or Ireland before their season ends. 

For advisors and businesses opting to stay stateside, prime golf destinations like Myrtle Beach, Scottsdale, Orlando, Las Vegas, and Alabama's Robert Trent Jones Trail offer diverse experiences to cater to various preferences and budgets. With fall golf trip bookings already on the rise, early planning ensures securing preferred travel dates and tee times for a successful outing.

Finsum: Lifestyle and activities can deepen relationships for advisors on both sides of their business, structuring more than legs but also business  potential.

In the past few years, the bond market has experienced increased turbulence as the U.S. Federal Reserve embarked on an unprecedented tightening cycle, successfully driving down inflation from 9.1% in June 2022 to 3.4% by the close of 2023. Despite the Fed's efforts to maintain stability since July 2023, fixed-income markets remain volatile, particularly in the 10-year U.S. Treasury yield. Throughout 2023, bond yields underwent significant fluctuations, reflecting market instability despite ending the year close to where it began.

Looking forward, uncertainties persist regarding economic growth and interest-rate policies, emphasizing the need for active management within fixed income. Prioritizing high-quality investments remains crucial amid mixed economic indicators and narrowing high-yield spreads, suggesting a prudent approach to portfolio diversification. 

Furthermore, strategies involving duration positioning and sector rotation offer opportunities for active managers to capitalize on shifting market dynamics, highlighting the importance of adaptability and responsiveness in navigating bond markets.

Finsum: Fund managers can lean into historical analysis and precedent in volatility and factor selection could lead to more robust returns for active management.

When transitioning between custodians, advisors need to be on the lookout for options that could improve their practice. One of the first things to look out for is discussions around a pricing strategy rather than resorting to fixed rates marking the inception of our the plan. RIAs should look for custodians that understand their unique business before proposing a suitable pricing structure. 

A good custodian will seek insights into operations before tailoring pricing. Personalized solutions will consider a variety of factors that lead to custom solutions such as growth stage and client dynamics. By embracing flexibility and collaboration, RIAs can feel empowered when navigating custodial transitions effectively, ensuring a prosperous future for their businesses.

Look for custodians that are open to this flexibility when it comes to this sort of pricing structure and make sure they understand your business when changing providers. 

Finsum: Clients are seeking flexibility and understanding with their advisors and RIAs should look for a similar approach when it comes to custodians. 

Direct indexing, via separately managed accounts, is rapidly gaining traction as an investment strategy in the United States, particularly beneficial for those with significant holdings in company stocks, and is already proving to be major movement among prominent investment firms in 2024.

This approach allows investors to replicate index performance while retaining control over individual securities, utilizing automated programs for systematic trading. Once limited to the ultra-wealthy, recent technological advancements have made direct indexing accessible to investors of varying levels, with assets projected to reach $2 trillion by 2024.

Direct indexing offers customization, diversification, and risk mitigation, enabling investors to tailor portfolios to their preferences and goals while reducing reliance on specific stocks. With its tax efficiency and customization benefits, it’s easy to see why it’s so appealing in an SMA format and companies like Goldman Sachs are already making huge strides in this subsector. 

Finsum: The hybridization of products has been one of the defining features of the 2020’s and integrating vehicles like SMAs with direct indexing will continue the rest of the decade. 

Cerulli Associates' recent report predicts substantial growth for structured notes, debt securities linked to underlying assets, in the upcoming year, prompting advisors to take heed of this emerging trend. 

Despite their reputation for being illiquid, inaccessible, and costly, structured notes are gaining traction, with only about 22 percent of advisors currently incorporating them into their strategies, but the landscape is changing, with roughly 8 percent of advisors planning to adopt structured notes within the next year matching industry standards with the likes of hedge funds and private debt. 

While alternative investments pose challenges for many clients, Cerulli's findings reveal advisors' concerns about the lack of liquidity and product complexity associated with structured notes, alongside hurdles related to expenses and subscription/redemption processes. Nonetheless, asset managers are adapting by targeting retail investors and partnering with advisory firms to introduce structured notes capabilities. Advisors could be missing out on a key alternative to improve the performance of clients portfolios. 

Finsum: Liquidity concerns should come down as the interest rate schedule becomes more certain and advisors should consider assets that are traditionally less liquid such as structured notes.