We are seeing a flurry of active fixed income ETF launches over the past few months. While it’s nearly settled that with equities, passive tends to outperform active strategies, active fixed income strategies have performed better than passive fixed income especially in recent years. 

Further, there is considerable uncertainty around the economy regarding rates, inflation, and a potential recession which could lead to more opportunities for active managers. Additionally, active managers have more latitude in terms of duration and credit quality.

Therefore, money is flowing into active fixed income ETFs from mutual funds and passive bond funds. For Barron’s, Lauren Foster discusses whether these inflows into active fixed ETFs will continue or is it just a short-term fad. 

Money is likely to also flow into active fixed income ETFs from active fixed income mutual funds given that the ETFs offer several benefits such as lower fees, more transparency, and intraday liquidity. The younger generation of investors also tend to favor ETFs rather than mutual funds due to higher comfort levels and an understanding of how high fees can impact long-term performance. 

However, the ultimate factor is whether these ETFs will continue to deliver strong returns relative to passive fixed income ETFs and active fixed income mutual funds. So far, they seem to be offering the best of both worlds to investors. 

Finsum: A major theme in 2023 has been the rise of active fixed income ETFs. But, there is considerable doubt whether these will gain traction and are better than passive fixed income ETFs or active fixed income mutual funds.

Strive Asset Management, an upstart competitor to Blackrock and Vanguard, is launching its first fixed income ETFs. Strive is based in Ohio and was founded in 2022 by Vivek Ramaswamy who is now running for President in the Republican Primary. Ramaswamy resigned from the firm earlier this year to focus on his political ambitions, but Strive’s mission and his political campaign clearly have some overlap.

Ramaswamy and Strive are both defined by their opposition to ESG investing and believe that it’s a detriment to investors and the country. Therefore, he’s been critical of asset managers like Blackrock and Vanguard who use their passive stakes in companies to encourage management teams to consider ESG factors when making decisions.

In contrast, Strive and Ramaswamy believe that companies should focus on maximizing profits rather than other factors. Its first 2 fixed income ETFs are the Strive Enhanced Income Short Maturity ETF (STXT) and the Strive Total Return Bond ETF (BUXX). STXT provides total exposure to fixed income with a cost basis of 49 basis points, while BUXX is designed to generate yield for investors by investing in short-duration bonds and charges 25 basis points.

Finsum: Strive Asset Management is launching its first 2 fixed income ETFs. The company differentiates itself by eschewing ESG and rewarding companies that don’t use these metrics.

Remember when LeBron James declared his intentions to take his talents to South Beach?

Well, that emphasis on talent is no less significant in the financial services industry, emerging as a primary observation of Q1 of the year, according to kaizenrecruitment.com.au.

“It was interesting to note that salaries had noticeably stabilized, and an increasing number of clients are now striving to compete on culture and values as well as through enhancing their broader Employee Value Proposition offering,” the site stated.

Meantime, with the significance of the talent set omnipresent, the more things change….the more financial firms have to adjust their game plan in order to, well, remain competitive in the game, according to empaxis.com.

The impetus behind it all? You might lay it on the usual suspects, including these days following COVID and a terrain seemingly technology centric.

Now, when it comes to recruitment, several obstacles must be overcome in financial services. For one, the numbers tell a story. Staffing’s a concern for four out of five financial institutions, Then there’s age; the average financial advisor’s 55; while one fifth are longer in the tooth at over 65.

Get in line?

By adding direct indexing capabilities to its arsenal, LPL Financial Holdings recently joined the crowd of wealth management firms to take the plunge, according to zacks.com.

Direct indexing, of course, is a strategy that enhances tax efficiency and tailors outcomes for clients. It’s a formidable one two combo given its high degree of promise for advisors and investors.

"Financial advisors are always looking to help improve client outcomes and deliver personalized investment solutions," said Rob Pettman, the executive vice president of Wealth Management Solutions at LPL Financial. Investors today seek strategies that enable customization, helping them achieve diverse goals such as tax reduction and sector-specific preferences, he continued.

Mention direct indexing to advisors and, well, a few ears might perk up given the interest its stimulated among them, according to thoughtfulfinance.com. 

Direct indexing, of course, is hardly a one trick pony. The ability to simultaneously address multiple ESG area, not to mention flexibility and a choice on shareholder voting just begin to describe the benefits offered to investors by direct indexing.

It’s often remarked that demographics are destiny. Like most developed countries, the US has an aging population with about 10,000 Americans reaching retirement age every day. And over the next decade, more than 20% of the workforce will reach retirement as well.

The issue is even more stark for the financial advisor industry with the average advisor in the 50s. For advisors in this age group, it’s necessary to start thinking about succession planning for multiple reasons. 

For one, a successful exit requires the same type of planning and intention that an advisor helps clients with in order to reach their financial goals. Second, proper succession planning can ensure that you will maximize the value of your practice when you are ready to retire. Finally, it’s an important signal to prospective and current clients that you are committed to their success even if you may no longer be an active part of it. 

The first step is a continuity plan which details what happens to the practice in the event of a death or disability. The second step is to investigate various options. Recently, a popular option for smaller firms is to sell but then continue to work as an employee for a couple of years to ensure a smooth transition. 

Regardless of what you choose, it’s important to keep your clients updated about succession and continuity plans. Ideally, you can meet with your clients and their new advisor multiple times before the final transition. 

Finsum: The financial advisor industry is approaching a demographic cliff. For a variety of reasons, it’s important for advisors to start succession planning.