Wealth Management
Financial advisors intuitively grasp the importance of planning to help their clients reach their financial goals. As business owners, advisors need to apply the same principles with succession planning to maximize the value of their practice. A succession plan should provide a contingency plan for unforeseen circumstances in addition to detailing how the practice will transition in the future. Here are some common mistakes to avoid.
The first mistake is to not have a proper understanding of the value of your practice. This includes financial as well as other considerations such as the impact on your clients, the organizational structure of your firm, and how the firm will function without you.
Another mistake is to be unclear clear about your needs and wants in order to determine the ideal successor. With this selection, it’s important to find alignment in terms of investment philosophy, location, mission statement, and how they will continue to serve your clients effectively.
Many advisors also err by not sharing their succession plan with key stakeholders like employees, clients, family members, etc. Rather, the succession plan and any iterations should be shared with everyone to ensure that there is no lack of clarity. It can also help with client retention and recruitment.
Finsum: Succession planning is quite important for financial advisors for several reasons. Here are some mistakes to avoid.
A well-crafted value proposition details how your services will solve client’s problems and improve their financial situation, what benefits it will deliver, and why your target prospect should choose you over a competitor. Defining this value proposition can help improve your odds of success in recruitment and operating your practice. It can also help you build trust with clients.
An important step in the process is to determine your ideal client profile. Some characteristics to consider are their financial goals, challenges, and demographics. This will help you decide how to serve these clients, to address their needs and differentiate yourself from competitors.
Value propositions are necessary in an industry where success is based on trust and relationships. Some things to avoid are complicated language, a lack of focus on clients, and not sufficiently identifying what makes your services unique.
Lastly, value propositions should be updated regularly to reflect changes in the practice, industry, and your clients. It should continue to highlight your value and uniqueness while remaining relevant in terms of addressing your clients’ pain points.
Finsum: Defining your unique value proposition can help your firm attract clients and refine its purpose. Here’s how to get started.
Despite a brutal selloff in fixed income, Vanguard sees upside for parts of the asset class given the opportunity to lock in high rates and likelihood that we are in the final stages of the Fed’s hiking cycle. It anticipates a shallow recession in the middle of next year and believes that bonds once again offer diversification and positive returns for investors.
It favors high-quality IG corporate debt due to the strength of corporate balance sheets, as many companies took advantage of ultra-low rates in 2020 and 2021. In recent months, the category has endured significant selling especially as long-duration assets have been hit hardest. 10-year Treasury yields recently exceeded 5% which is the highest level since 2007 amid a spate of positive economic data.
Vanguard is neutral in terms of exposure to lower-grade corporate debt since many of these companies will need to raise capital in a high-rate environment and deal with increased competitive pressures in some sectors. It also sees opportunities in mortgage-backed securities due to its low default risk, diversification, and liquidity. It also favors longer-duration municipal bonds rated below AAA.
Finsum: Vanguard believes that investors should stay the course when it comes to fixed income despite the recent selloff. It sees more opportunity in particular segments.
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The steady stream of brokers exiting Merrill Lynch continues as the Ruccio Group, based in Miami and managing $1.37 billion, left for RBC Wealth Management. The team is led by Jeremy J. Ruccio and is composed of 2 advisors and 6 client associates.
In a statement, Ruccio attributed the decision to wanting to retain the group’s personalized attention and smaller firm feel with the resources, leverage, and insights of a global financial institution. Ruccio started at Merrill Lynch in 2008 and was ranked #24 on Forbes’ best in state wealth advisors list this year and #29th on the America’s best next generation wealth advisors list in 2021.
Currently, RBC has around 2,100 brokers and has $544 billion in client assets. Although its wealth management division is smaller than many of its peers, it’s had success in recent years luring brokers from larger firms. To compare, Merril Lynch and parent company, Bank of America, have over 19,000 advisors across its wealth management division.
Last week, it lured a $450 million team from Morgan Stanely which was based in Philadelphia. In September, it recruited a 41-year Merrill broker who managed $340 million in assets. In the prior month, RBC landed a UBS team based in Atlanta which had $5.5 billion in client assets and $22 million in annual revenue.
Finsum: RBC is having success luring brokers from larger competitors. It recently landed the Ruccio Group, based in Miami which manages $1.37 billion in client assets.
Financial markets are increasingly complicated these days given the uncertainty regarding inflation, monetary policy, and the economy’s trajectory. For investors, the challenge is heightened as both equities and bonds have become increasingly correlated. In a piece for Pension & Investments, MFS Investment Management shared why active fixed income makes sense in this environment and detailed the firm’s approach.
According to Pilar Gomez-Bravo, the co-CIO of fixed income at MFS, “With this macro backdrop and the uncertainty around central bank policy, alpha generation from active management will be a more important factor for most fixed-income investors going forward.”
With increased volatility, MFS recommends that fixed income investors ensure that they are sufficiently diversified to minimize risk by properly balancing duration and default risks. Its active management strategy is based on collaboration between its investment teams, consistency in its investment process, a focus on generating alpha throughout the cycle, and conviction in taking action when there are dislocations in the market.
Some other elements of the firm’s active fixed income approach is to manage and structure the portfolio to express a broad view and diversity of thought. Each portfolio is stress tested to ensure resilience, while the fixed income team stays connected to the equity team to get a holistic view of the markets and economy.
Finsum: Active fixed income is seeing a substantial increase in inflows given relatively high yields, while there is considerable uncertainty about the economy and monetary policy.
Model portfolios can help many financial advisors save time and focus more energy on their clients. They are based on the research, experience, and work done by asset managers and have been shown to offer better performance with less volatility during periods of market turmoil.
The category is rapidly expanding with 18% growth over the last 5 years and expectations that total assets will exceed $10 trillion over the next 5 years. These offerings can also be customized according to every client’s circumstances.
In terms of the best way to introduce model portfolios to clients, WisdomTree’s research shows that the best results are with smaller and tax-exempt accounts, where there may be less hesitancy when it comes to trying a new approach.
The research also indicates that younger clients who are more open to risk will be quicker to embrace model portfolios. In contrast, clients who are closer to retirement age are less likely to change course. However, more than 50% were willing to use model portfolios if properly explained.
The research also suggests that clients will be more willing to use model portfolios if the experience and credentials of the asset manager are emphasized.
Finsum: Model portfolios offer many benefits to advisors. The primary one is it frees up more time for client service.