REITs have had an uneven start to the year due to the outlook for monetary policy becoming less dovish. Many investors are interested in taking advantage of this weakness, given the sector’s solid fundamentals and attractive yields. Yet, they may want to minimize exposure to volatility, which is likely to persist given an uncertain outlook for monetary policy. So, here are two lower volatility REITs for more conservative investors.

W.P. Carey (WPC) owns commercial and industrial properties across North America and has a 6.2% dividend yield. WPC is extremely diversified, as no single industry accounts for more than 10% of its tenants, and its biggest single tenant accounts for less than 3% of total revenue. 

In addition to its diversification, WPC also has less risk than competitors due to being a net-lease REIT. This means tenants cover taxes, insurance, and maintenance. The company also negotiates rental rate increases that are built into contracts, providing another layer of security.  

Digital Realty Trust (DLR) provides exposure to data centers, pays a 3.4% yield, and has hiked its dividend every year since 2005. This segment saw massive growth over the last decade due to the rise of cloud computing and should enjoy another healthy tailwind over the next decade due to artificial intelligence. 

DLR’s data centers enable the distribution of technology to users for consumer and commercial applications. The company has more than 300 data centers in over 25 countries and counts companies like Meta, JPMorgan Chase, and Verizon among its customers.   

Finsum: REITs have underperformed to start the year. Yet, the sector still holds appeal due to attractive yields and solid fundamentals. DLR and WPC are two REITs with lower volatility that may appeal to more conservative REIT investors. 

Nearly $68 trillion in assets are moving to a younger generations over the next 30 years, wealth management firms catering to high-net-worth individuals (HNWIs) are urged to adapt by integrating digital solutions to complement their bespoke services, rather than replacing them outright. 

HNWIs, distinguished by their substantial asset portfolios, require a tailored approach from wealth managers, particularly given their demand for nuanced portfolio guidance across various asset classes, such as real estate and cryptocurrency. While digital tools are reshaping consumer expectations within financial services, HNWIs continue to prioritize the personal touch and customized service that comprehends their unique preferences and financial complexities. 

However, there exists a gap in consistently delivering such personalized service, with over half of surveyed HNWIs reporting a lack of proactive support from their providers. Despite the surge in digital engagement during the pandemic, HNW clients still value personalized experiences, indicating a need for wealth managers to strike a balance between digital convenience and maintaining a human touch.

Finsum: Most clients want a mix of digital and personal service which advisors can use to leverage further business. 

J.P. Morgan Advisors is empowering brokers with increased autonomy over unified managed accounts (UMAs), enabling independent investment selection without explicit client approval, in line with industry shifts. 

Marc Turansky, head of advisory programs, highlights this as a response to evolving standards and client preferences for advisor autonomy. Similarly, Janney Montgomery Scott introduces full discretion options for UMAs, echoing broader industry trends. Janney's advisory accounts hold $73 billion, while J.P. Morgan Securities manages $212 billion.

 UMAs have surged to $2.1 trillion in client assets industry-wide, outpacing other advisory programs. J.P. Morgan Wealth Management, says this change reflects an evolving industry standard and caters to clients who trust their advisors' understanding of their financial objectives, thus comfortable delegating decision-making. 

Finsum: UMAs are giving advisors more flexibility than other accounts, which can translate to meeting clients needs more effectively.

The last 40 years have been defined by lower inflation, creating a generous tailwind for fixed income. Now, AllianceBernstein believes that we are in the midst of a transition to a new regime that will feature lower growth and higher inflation. In this environment, the firm believes that fixed income investors need to make appropriate adjustments. 

It believes that inflation will be structurally higher in the coming decades due to deglobalization and demographics. Deglobalization means that supply chains will be reshored, undoing some of the deflationary trends of the last 40 years, and it will result in higher inflation due to greater manufacturing costs and wages. With an aging population, there is a smaller pool of available workers, which will also contribute to inflationary pressures. Both deglobalization and demographic trends will weigh on economic growth as well. 

Due to these factors, AllianceBernstein forecasts that 2% inflation is now the lower bound rather than a target. It believes that frequent spikes in inflation, as experienced from 2021 to 2022, will also become commonplace. This is a consequence of governments with large amounts of debt and future liabilities. Policymakers will be incentivized to ‘inflate’ away the debt rather than make painful cuts to spending. Additionally, lower rates will help contain financing costs.

Finsum: The last 40 years were great for fixed income due to inflation trending lower along with interest rates. AllianceBernstein believes this era is over, and we are moving into a new period defined by lower growth and higher inflation.

When it comes to recruiting deals, there is much to analyze and understand beyond the upfront figure. In fact, how the deal is structured can be even more important in the long term, as this will dictate longer-term outcomes like growth, portability, succession planning, and compensation. 

Typically, the upfront payment is calculated based on 125 to 175% of trailing 12-month production. This portion is guaranteed and taxed at lower rates, so it’s understandable why so much attention is paid to this figure.

Many firms still offer back-end bonuses, which are generally around 25 to 50% of trailing 12-month production, although these are being phased out. These bonuses are only paid out if advisors successfully transition and achieve pre-defined metrics. Unvested deferred compensation replacement is another element becoming less common as this is increasingly folded into the overall package. However, this represents the amount that an advisor would lose out on by switching firms.

Finally, many deals will also include a ‘sunset program’ so that a retiring advisor can cash out of the business at market value. With this, there are many factors to consider, such as terms, requirements, and financing. For younger advisors, this might be less relevant, but it could be a deciding factor for those closer to the end of their careers. 

Finsum: There are many components of a recruiting deal that go beyond the headline amount. In fact, the structure of a deal can be more important when it comes to making the right choice.

According to Bloomberg senior ETF analyst Eric Balchunas, there is only a 25% chance that the SEC approves a spot ethereum ETF. He points to the lack of SEC engagement on the topic and the absence of any positive signs or chatter on the subject, which is a departure from the lead-up to bitcoin’s approval. Balchunas believes this lack of engagement is ‘tactical’ rather than ‘procrastination’. 

The crux of the issue is how ethereum should be classified. There are indications that the SEC is leaning towards treating it like a security based on subpoenas to crypto companies that have interacted with the Ethereum Foundation. 

However, there are some dissenting voices who are more optimistic about approval. Craig Salm, Grayscale’s Chief Legal Officer, says the SEC’s reticence is due to most issues already being cleared up during the bitcoin ETF approval process. He believes both ETFs are nearly identical, except for the underlying asset. He also pointed to the approval of an ethereum futures ETF and its classification as a commodity future as a favorable sign. 

Currently, several asset managers have filed for approval for an ethereum ETF, including Blackrock, VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, Grayscale, Franklin Templeton, and Hashdex. The most immediate deadline is May 23 for VanEck.

Finsum: Over the next couple of months, the SEC will decide on an ethereum ETF. Reading the tea leaves, Bloomberg’s Eric Balchunas is not optimistic that it will be approved. 

Oil prices have continued to defy Wall Street analysts. Last year, the consensus view was that prices would weaken as the US economy slipped into a recession, with the rest of the world facing a sharper contraction in economic growth. While growth did slow, the US economy continued to expand, and global oil demand increased more than expected. In Q1, the IEA upped its forecast for US oil demand by 110,000 barrels per day due to stronger than expected economic data. 

Additionally, despite predictions from EV boosters, there has been no material impact on oil demand from increased adoption. Similarly, China’s economy has been mired in a slump, yet Chinese oil demand also defied expectations and increased more than expected. In fact, a major lesson of the post-pandemic period is the inelasticity of oil demand. 

On the supply side, US production also surpassed forecasts and made up for any production cuts from OPEC. A major factor is increasing well productivity due to newer drilling techniques. 

Looking ahead, many were skeptical that OPEC+ would remain disciplined, given individual countries’ incentives to increase revenues by boosting production. So far, the cartel has managed to successfully reduce production, which is contributing to the current tight market and a major factor in oil’s upward move YTD. 

Finsum: Last year, many analysts got it wrong when it came to oil. Overall, they were too bearish on the economy and overestimated how much a weak economy would impact oil demand. 

Annuity sales in 2023 were up 22% compared to the previous year, reaching $355.4 billion. The biggest contributor to this growth was the independent sales channel, which now accounts for 40.6% of all annuities sold, totaling $156.2 billion. In 2022, independent agents and brokers accounted for 38.7% of sales. They also accounted for 74% of all fixed indexed annuity sales.

The growth in total annuity sales is due to rising interest rates and the large number of Baby Boomers who are entering or nearing retirement. In terms of categories, income annuities saw the largest increase in sales, at 45% for single premium immediate annuities and a 97% increase for deferred income annuities. 

While most categories saw growth, traditional variable annuities were an exception, as sales dropped by 17%. In contrast, registered index-linked annuities displaced some of these sales as the category had a 15% jump in sales. These annuities offer investors downside protection and limited upside and total $47.4 billion in sales in 2023. 

Keith Golembiewski, the head of annuity research at LIMRA, believes that RIAs are a source of future growth for variable annuity sales. These annuities offer upside potential and allow for deferral of taxes, making them ideal for older clients. Currently, RIAs are a small but growing source of annuity sales. 

Finsum: Annuity sales hit new record highs in 2023. Some major reasons are an uncertain economic outlook, Baby Boomers nearing retirement, and high interest rates. 

Robert Mitchnick, Blackrock’s digital asset lead, believes that bitcoin is more like ‘digital gold’ rather than a ‘risk-on’ asset, despite its strong correlation to equities in recent years. Throughout bitcoin’s existence, there has been a constant debate about its true nature. Some argue that bitcoin is like gold given that there is a fixed supply, which means that it should provide protection against inflation. 

While this may be true in theory, in reality, bitcoin has largely moved in the same direction as equities, which undermines the argument that it offers diversification. In 2022, bitcoin tumbled as the world dealt with the highest levels of inflation in decades. Notably, equities were also down 25% in 2022. In the following year, as equity markets made new highs, bitcoin also followed and made new highs as well. 

Despite this relationship, Mitchnik believes that historically, bitcoin has demonstrated very little correlation to stocks. He attributes the recent rally to excitement around the launch of bitcoin ETFs in the US. In terms of allocation, he recommends between 1 and 3% for investors to provide diversification and differentiated returns. The argument about bitcoin’s nature is germane for investors who want to understand whether it will make their portfolio more risky or more diversified. 

Finsum: There are two camps when it comes to bitcoin. One sees bitcoin as an asset that is closely correlated to equities; while the other believes that bitcoin is more like gold and can help diversify portfolios.

In today's interest rate climate, holding a significant cash reserve is a prudent strategy. While long-term investors may benefit from stock investments, individuals requiring immediate access to funds or building emergency savings find value in holding cash. With high-yield savings accounts offering rates of 5% or more, real returns on cash savings are attractive. However, for those seeking to optimize returns while maintaining liquidity, there are two fixed income ETFs that offer advantages. 

Two ETFs, iShares 0-3 Month Treasury Bond ETF (SGOV) and JPMorgan Ultra-Short Municipal Income ETF (JMST), offer different tax strategies to potentially enhance after-tax returns without significant additional risk.

Short-term Treasury bonds provide state tax exemption on interest earnings, making them appealing for residents of high-tax states, while municipal bonds offer federal tax exemption and may also be exempt from state and local taxes. Investors should assess the trade-offs between tax advantages and lower yields to determine the best fit for their financial situation.

Finsum; When accounting for tax advantages, fixed income ETFs could provide a more secure and efficient outlet for mitigating risk.