In 2023, municipal bonds showed a recovery after a tough 2022, largely due to late-year rallies and shifts in Federal Reserve policy. However, the market has not fully rebounded, indicating ongoing opportunities in 2024. 

First, strong credit fundamentals are expected to persist, supported by substantial federal spending post-pandemic, leading to record tax receipts and rainy-day balances.

Next, strategically positioning across the yield curve offers chances to secure historically high yields, particularly in the long end, where steepening curves and higher yields prevail compared to U.S. Treasuries. Anticipated recovery in demand may see mutual fund inflows resume, especially for long-term funds and ETFs. Separately managed accounts (SMAs) are likely to remain popular among investors seeking customization and tax efficiency.

Finally, despite recent tactical investor decisions, municipal bonds continue to offer tax-free income, solid credit quality, and promising long-term returns, making them a strategic allocation option. Given current market conditions, entering the municipal bond market now may prove compelling for investors.

Finsum: Muni’s are leaving lots of options for investors on the table to tactically deploy in 2024. 

Direct indexing offers solutions for complex financial challenges but isn't suitable for every investor. Identifying which clients may benefit involves considering factors like tax-loss harvesting, ESG preferences, factor investing, and managing large positions or capital gains. 

High-net-worth clients with significant capital gains and taxable equity holdings stand to gain the most from daily tax-loss harvesting, potentially doubling their harvested losses. For clients passionate about ESG criteria, direct indexing allows for precise customization, albeit with a slight fee premium and potential tracking error. Factor investing via direct indexing suits clients with specific customization needs beyond prepackaged ETFs, although advisors must weigh the added complexity against potential benefits. 

Transitioning large existing positions into diversified portfolios using direct indexing offers tax efficiency, particularly for clients with concentrated holdings or restrictions on selling.

Finsum: Advisors need to gauge their clients benefits from direct indexing strategies, and the costs and concerns aren’t always a net positive. 

Understanding the evolving landscape of women's financial influence is crucial for advisors, as women are increasingly controlling wealth and making key financial decisions. With studies projecting women to control $30 trillion in U.S. assets by 2030 and their wealth growing faster than men's, this demographic shift presents significant opportunities for advisors to tailor their approach. 

Women often have different financial goals, risk tolerances, and longevity considerations, emphasizing the need for advisors to understand their unique needs and priorities. Building trust and establishing personal connections are essential for long-term client relationships in the women's market, as women value communication and partnership with their advisors. 

To effectively engage with female clients, advisors should focus on education, empowerment, and holistic financial planning, addressing their specific concerns and objectives. Tailoring strategies, asking meaningful questions, and using storytelling techniques can help advisors connect with women clients and build successful, lasting partnerships.

Finsum: Better understanding the financial needs of female clients will help you be more strategic in growing your platform. ad

Building and maintaining meaningful relationships with plan participants is an ongoing challenge for 401(k) advisors. Demonstrating their value is vital. One powerful strategy lies in the skillful use of managed accounts, which showcase their investment expertise and enhance participant engagement.

Managed accounts allow advisors to personalize their investment guidance at scale. By collaborating with the right recordkeeping partner, advisors can craft the portfolio allocations within the program, thus affecting the allocations within individual accounts. This partnership enables both parties to highlight their value propositions: advisors provide strategic investment guidance, while the recordkeeping platform facilitates participant access to this invaluable services.

Ed Murphy, President and CEO of Empower, recently shared insights with planadviser.com on the strong demand for discretionary, personalized managed portfolios. He also commented that nearly 9% of their participants are enrolled in their managed account program, underscoring its value and appeal. Murphy's observations reflect a broader industry trend where participants seek personalized financial strategies, highlighting the importance of advisors integrating managed accounts into their service offerings.

Finsum: Implementing manage accounts within a 401(k) plan is an effective and scalable way for plan advisors to demonstrate value to participants.

As financial advisors contemplate retirement or transitioning away from their practice, preparing their book of business becomes increasingly important. This preparation, sometimes called "cleaning up the book," is a strategic move to enhance the ultimate sale price of the practice and ensure the quality of care their clients will receive after they move on.

A typical client-level profitability analysis often uncovers a familiar pattern: the 80/20 Rule, where 80% of profits come from 20% of clients. However, at the lower end of the profit scale, some advisors discover that some clients are actually costing them money after they account for all expenses and lost opportunities of their time.

Such revelations are particularly significant for advisors seeking to transfer their practice to another organization. Top-tier firms, which prioritize client interests, are reluctant to acquire a practice with unprofitable accounts and certainly not at a premium.

This insight is crucial for advisors as it also allows them time to adjust the service set they provide their least profitable clients, thus improving the profitability of their practice. By doing so, advisors not only secure the well-being of their clients for the future but also justify a fair valuation for the practice they've worked hard to build.

Finsum: By starting early, advisors looking to transition out of their practice can improve their chances of a profitable succession by cleaning up their book of business.