Wealth Management
According to LIMRA’s U.S. Individual Annuity Sales survey, U.S. annuity sales increased 16% to $79.4 billion during the second quarter. The top selling annuities were fixed-rated deferred annuities, which posted their best quarterly sales result ever. Sales came in at $28.7 billion, a jump of 79% from the prior year’s quarter. In fact, all fixed annuities showed positive growth. Fixed-rate deferred annuities are contracts that offer investors a fixed annual percentage yield with tax-deferred growth. They typically offer a higher rate of growth instead of an income stream over a specific period. The massive jump in sales can be attributed to the volatility in the markets this year and rising interest rates. The current average yield on a fixed-rate deferred annuity is around 3% or higher. Sales for traditional variable annuities didn't fare so well, falling 27% year over year to $16.5 billion, the lowest quarterly sales since 1995 due to market volatility. Variable annuities are tied to the market with no downside protection.
Finsum:Driven by market volatility, sales for fixed-rate deferred annuities had their highest quarter ever.
Direct indexing will now become available to teens and young adults after the gig economy platform PettyGigs and financial API Atomic announced a partnership. PettyGigs is a two-sided platform that connects young adults with local businesses and busy professionals. Teens can perform small tasks to earn money in their free time. Atomic provides fintech companies the ability to integrate wealth management and trading into their products. This includes capabilities such as conscious investing, direct indexing, and tax-loss harvesting. Through the new partnership, users of PettyGigs, also known as "Giggers," can allocate their earnings from each Gig into a fully diversified curated portfolio with benefits including direct indexing, tax-loss harvesting, and ESG investing. The portfolio has no account minimums. The partnership will also introduce socially responsible investing to young investors.
Finsum:A recently announced partnership between Atomic and PettyGigs makes direct indexing and ESG investing available to teens and young adults.
According to a survey conducted by Schroder Investment Solutions, more financial advisors are outsourcing investment management to model portfolio services. The survey, which was conducted in May, suggested that the shift towards third-party portfolio management is continuing, with 17% of advisers stating that they have increased their use of outsourced solutions over the past twelve months. The number of advisers that reported outsourcing more than half of their client’s assets had risen from 21% in November to 31% in May. The factors influencing advisor outsourcing include, in order, access to investment expertise and resources, effective volatility management, spending more time with clients, and improved operational effectiveness. For some advisors, investment expertise in sustainable investing has led to outsourcing. Volatility management as a factor reflects an emphasis that advisors have placed on active management during the current market turmoil.
Finsum:Based on the results of a recent survey, more advisors are outsourcing investment management to third-party model portfolio providers due to their investment expertise and volatility management.
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Single security ETF launches have been all the rage this summer, but regulators are now sounding the alarm. Broker-dealers that sell single-stock ETFs in Massachusetts are being investigated by regulators according to Massachusetts Secretary of States William F. Galvin. Galvin has directed his Securities Division to investigate Mass-based registered broker-dealers that sell single stock ETFs to retail investors. He believes that the leverage used to magnify gains and losses in single stocks is not suitable for "Main Street" investors. This follows a statement by SEC Commissioner Caroline Crenshaw earlier in the summer in which she stated that the approval of single-stock ETFs posed a “greater risk” for investors than index-based leveraged and inverse ETFs. She also stated it would be difficult for advisors to recommend these products while meeting their Reg BI obligations.
Finsum:Regulators are sounding the alarm on single-stock ETFs, indicating that advisors may be in breach of Reg BI for recommending them.
Fund giant BlackRock is warning regulators that the SEC's new proposed rules to fight greenwashing by fund managers could create more confusion and lead investors to think their holdings are more socially conscious than they are. Specifically, the firm is concerned over a key detail in the proposal that would require managers to say how ESG issues fit into strategies that also consider other factors. It sent a letter to the SEC arguing that the detail could mislead investors about how much environmental, social, and governance issues factors into stock and bond decisions. The SEC had proposed new regulations for ESG funds in May, which are expected to be finalized in the coming months. BlackRock’s argument has been echoed by industry trade groups such as the Investment Company Institute and the Managed Funds Association. However, these arguments are unlikely to stop the SEC’s crackdown on ESG labels.
Finsum:Blackrock sent a letter to the SEC warning that the new proposed rules on ESG labels will only muddy the waters.
iCapital, a leading global fintech platform, announced today that it agreed to acquire UBS Fund Advisor LLC, UBS’s legacy proprietary US alternative investment manager. The agreement also includes the feeder fund platform that UBS manages. The platform, which is also referred to as “AlphaKeys Funds,” represents more than $7 billion in client assets. It includes private equity, hedge fund, and real estate feeder funds. iCapital will now manage and operate the platform, while UBS Financial Advisors continue to serve their high and ultra-high net worth clients that hold feeder funds. UBS became an investor in iCapital in 2017 and entered into a strategic relationship to structure new feeder funds going forward. It also integrated iCapital’s proprietary technology into its private fund operations. In 2021, the partnership was enhanced to further digitize the UBS Advisor experience. The transaction is expected to close sometime this year.
Finsum:iCapital, which has had a long-standing relationship with UBS, is acquiring its Alternative Investments Feeder Fund Platform which represents more than $7 billion in client assets.