Wealth Management
While leads are the lifeline for any advisor, having a great selling proposition can help put advisors over the top. One advisor, in particular, realized fixed income was becoming a key part of his growth. RBC financial advisor Aaron Howe, who’s known among his colleagues as “the equity guy,” found that getting more involved with fixed income is helping him to develop and strengthen relationships with clients. The timing certainly makes sense as yields on bonds have risen with the Fed pursuing a tighter monetary policy. Howe even leads with fixed income as he talks to prospects. He believes that it’s a “win-win.” His clients are more engaged when they hold bonds from the cities and states in which they live. It has also provided him with more touchpoints with his clients. Howe stated, “People often love buying a school bond because they feel a personal connection to the investment.” Fixed income has also allowed him to take advantage of the market. He stated, “Any opportunity you have with your client to show them you are doing something for them to take advantage of the current situation– whether it’s rebalancing or tax loss selling – that’s what they’ll remember down the road.”
Finsum:A financial advisor was able to grow his practice and get more engagement with clients by getting more involved with fixed income.
Based on the results of a recent Invesco retirement income study, 83% of people with defined contribution savings plans expect it to be their largest source of income during retirement. However, some data is showing retirement portfolios were down as much as 23% last year. When you add in inflation, which is making everyday costs expensive, investors may not be able to rely on their 401k for income this year. That’s why John Faustino, the head of Broadridge’s Fi360, is recommending advisors and their clients consider the use of annuities as guaranteed income solutions in DC plans through Broadridge’s retirement income consortium. The consortium includes leading annuity providers such as Allianz, Nationwide, and TIAA, as well as data and analytics firms that work with advisors, such as Fi360, Cannex, and Fiduciary Insights. In an interview with planadviser, Faustino noted that the consortium recently “published criteria for comparing retirement income solutions contained within what we call our prudent practices, which is a collection of legislation, regulation and case law.” He also mentioned that they’re launching a software tool based on this methodology later in the year. The criteria are “designed to help advisers document their reasoning for selecting a particular retirement income solution for a plan and to help them monitor their selections and the overall process.”
Finsum:Broadridge’s retirement income consortium, made up of annuity providers and data firms, published criteria for comparing retirement income solutions such as annuities.
Much has been talked about regarding the failure of the 60/40 portfolio last year, but Vanguard analysts recently suggested that investors shouldn’t abandon a balanced portfolio strategy. Roger Aliaga-Diaz, portfolio construction head for Vanguard, and his team said in a recent note that “A balanced portfolio still offers the best chance of success.” Aliaga-Diaz noted that while the negative correlation between stocks and bonds broke down last year, “longer term, however, the data support balanced portfolios.” The firm noted that “The policy response to higher and more persistent inflation and the subsequent repricing of risk in global capital markets has led to a dramatic shift in our time-varying asset allocation (TVAA) outlook.” The TVAA looks to harvest the risk premiums for which the Vanguard thinks there is modest return predictability. Based on the firm’s current outlook, Vanguard’s optimal TVAA portfolio “calls for a 50/50 stock and bond split, and favors bonds and emerging markets.” Specifically, Vanguard’s TVAA allocation suggests 30% U.S. stocks, 20% international (divided equally between developed and emerging markets), 22% international bonds, and 27% U.S. fixed income (mostly in U.S. intermediate credit bonds). The firm noted that the interest rate tightening cycle in 2022 raised its expected bond return forecasts by more than the equity sell-off raised expected equity returns.
Finsum:While the 60/40 portfolio failed last year, Vanguard believes a balanced portfolio still offers the best chance of long-term success and recommends a 50/50 stock and bond split.
More...
In a recent interview with ESG Clarity, Morningstar CEO Kunal Kapoor offered his thoughts on direct indexing and how custom features could lead to more people being interested in investing. Kapoor mentioned that while separate accounts were always touted as providing customization, in reality, most separate accounts did not provide much customization. That’s why he is so excited about direct indexing. He stated that, “the cool thing about building a direct index is that at the start, the adviser’s having this conversation with the client, not only about the risk profile, risk tolerance, time horizon – but suddenly the conversation is about preferences.” He believes that these preferences get clients engaged with their advisors. He said, that it can “allow an adviser to really drill into an individual’s preferences in an educated way – really walkthrough for the individual what the pros and cons are of implementing those preferences in a portfolio.” Kapoor also compared direct indexing to passive investing. He believes that while passive investing can be good for most people, it can take the fun out of investing. Direct indexing, on the other hand, has many of the benefits of passive investing, but it brings back the fun of making choices.
Finsum:Morningstar CEO Kunal Kapoor believes that direct indexing creates more engagement between advisors and their clients since it requires them to discuss preferences.
In a recent article for U.S. News & World Report, Cameo Roberson, founder of Atlas Park Consulting, offered six networking tips for advisors to get great results. Her first tip is to make a good impression to win prospects. She wrote that “Networking can happen when you least expect it,” which means it's important to be friendly, but not be too intrusive in determining whether a person wants to discuss their financial plans. Her second recommendation is to offer value to networking partners. She wrote, “Be a good resource and keep your word to people in your network. As time goes on, you'll build up a reputation as someone they can count on.” She also recommends normalizing the sharing of referrals by creating a system such as writing a note to share with colleagues that clearly describes who you'd like to be introduced to. Roberson also recommends growing your network through business partners. This includes developing a short list of firms that you have built relationships with. This creates a path to possible future referrals since some clients aren't a great fit for every firm. Her fifth recommendation is to build a clear strategy. Roberson recommends thinking outside the box and beyond traditional contacts such as accountants and attorneys. Her final tip is to move with intent and be consistent, meaning that you must implement any plan you create.
Finsum:Advisor consultant Cameo Roberson offered six tips for networking, including making a good impression, offering value to networking partners, normalizing the sharing of referrals, growing your network through business partners, building a clear strategy, and moving with intent and being consistent.
After a tough year for the markets, asset managers are bracing for cost-cutting in 2023. Revenues were down across the industry last year as falling markets hit both management and performance fees. In the U.S., total assets in mutual funds and ETFs dropped 17 percent between the start of 2022 and the end of October, according to data from the Investment Company Institute. This will force asset managers to cut costs and make tough decisions this year about how to grow. Some asset managers are predicting that the downturn will accelerate the shift by clients from mutual funds and brokerage accounts to other ways of investing, such as ETFs, separately managed accounts, and model portfolios. Martin Small, head of BlackRock’s US wealth advisory business and the firm’s incoming chief financial officer, told Financial Times, “Whenever there are super shocks in the market, people make big changes to their portfolios. This is when people do deferred maintenance. In U.S. retail markets, there is a move from brokerage accounts to fee-based advisory, which means more model portfolios and more ETFs.”
Finsum:After a tough year in the markets, some asset managers are predicting a shift towards model portfolios, ETFs, and SMAs for clients.