According to a new report, advisors may be missing out if they are reluctant to target next-gen investors. Research from Fidelity Institutional Insights found that investors under the age of 40 are inheriting more than $540 billion in the United States every year, 30% of the total wealth transferred. In addition, data from Cerulli Associates shows that the demographic will control three-quarters of $84 trillion in inherited wealth by 2045. The Fidelity report is a wake-up call for advisors that shy away from young clients due to higher debt, fewer assets, and generational differences. Fidelity Investment’s vice president of practice management and consulting, Anand Sekhar, said the revenue-weighted age of the average Fidelity advisor’s client is 65. According to Sekhar that creates a huge problem for advisors in the future. With older client rosters, advisors could see widespread drawdowns and not enough clients to take their place. Making matters worse is that only 13% of advisors are engaging with clients’ children and grandchildren, which puts billions currently managed at risk. Fidelity’s data suggests that if firms can reduce the revenue-weighted age of clients by just seven years, from 69 to 62, it can increase a firm’s growth tenfold. The research also suggests that establishing those relationships now could produce greater returns as investors under 40 are investing earlier than their parents and are willing to pay for advice.

Finsum:With the average revenue age of clients nearing 70, many firms could see soon see massive withdrawals with no clients waiting in the wings, which is why advisors need to start engaging with clients’ children and grandchildren now. 

After struggling under deficits for two decades, pension funds are now flooded with cash due to soaring interest rates. The surplus at corporate defined-benefit plans means managers can now reallocate to bonds, which are less volatile than stocks. This is called “derisking” in the industry. Mike Schumacher, head of macro strategy at Wells Fargo, said the following in an interview, “The pensions are in good shape. They can now essentially immunize — take out the equities, move into bonds, and try to have assets match liabilities.” That explains some of the rallying of the bond market over the last three or four weeks.” Last year’s stock and bond market losses actually helped some benefit plans, whose future costs are a function of interest rates. When rates rise, their liabilities shrink and their funded status improves. For instance, the largest 100 US corporate pension plans now have an average funding ratio of about 110%. According to the Milliman 100 Pension Funding index, that’s the highest level in more than two decades and great news for fund managers who had to deal with low-interest rates and were forced to chase returns in the equity market. Now managers can unwind that imbalance with most banks expecting them to use the extra cash on buying bonds and selling stocks to buy more bonds.

Finsum: Due to stock and bond losses and rising rates, pension fund managers now have a surplus of funds that they plan on allocating to bonds. 

Portfolio management and trading platform Vestmark recently announced that it has launched six separately managed account investment strategies, the firm’s first asset management offering. The strategies, called "Focused Index Portfolios,” follow S&P Dow Jones Indices, but in an SMA wrapper to allow for some customization and tax-loss harvesting. Robert Battista, senior vice president, and managing director of Vestmark Advisory Solutions said that the firm sees the launch as a first step toward a fully personalized direct indexing investment platform which Vestmark expects to roll out later in the year. The portfolios have minimums as low as $100,000, with fees comparable to an ETF. Three of the Index Portfolios are based on custom indices Vestmark built with S&P Dow Jones, including the S&P 500 Focused 100 VAST Portfolio, the S&P 500 Focused 50 VAST Portfolio, and the S&P 500 Catholic Values Focused 100 VAST Portfolio. The other three strategies are based on existing indices such as the Dow Jones U.S. Dividend 100 VAST Portfolio, the S&P 500 ESG Elite VAST Portfolio, and the S&P Developed Markets 100 ADR xUS VAST Portfolio. For now, the new strategies are available in the Vestmark Manager Marketplace, but Vestmark plans to distribute them to broker/dealers, independent advisors, and RIAs via a new sales team dedicated to the company's direct indexing services.

Finsum:Trading platform Vestmark launched six index portfolios as the firm's first step towards a fully personalized direct indexing investment platform which is expected later in the year.

Alternative investment platform CAIS recently announced that a selection of Reverence Capital’s funds and education courses will be available to RIAs and independent broker-dealers on its platform. Reverence Capital Partners is a private investment firm focused on financial services-focused private equity and structured credit. Mercer will provide third-party due diligence on the funds. As part of the announcement, Milton Berlinski, managing partner at Reverence, stated, “Through our experience across asset and wealth management, we’ve seen the challenges associated with accessing and selecting quality private market products. CAIS is uniquely positioned to provide the technological and educational resources to help tackle these concerns.” The partnership is taking place during an opportune time as a recent CAIS/Mercer study found that approximately 88% of financial advisors intend to increase their allocations to alternative asset classes over the next two years. Matt Brown, founder and chief executive officer of CAIS added, “With allocations to alternatives expected to continue rising in 2023, we believe that adding additional quality alternative products on the CAIS Platform is essential to empowering advisors to gain confidence in meeting client expectations.” CAIS serves more than 7,400 advisory firms and teams overseeing a total of more than $3 trillion in assets. Reverence Capital has about $8 billion in assets under management.

Finsum:With more than 88% of advisors intending to increase their alternative allocations, a selection of Reverence Capital’s funds will now be available to RIAs and independent broker-dealers on CAIS’s alternative investment platform.

After 16 years with Merrill Lynch, a Bank of America company, Winston-Salem, N.C.-based advisor Christy Campbell has joined Thrive Advisory Group, a unit of Alex. Brown, the St. Petersburg, Fla.-based division of Raymond James. The 21-year veteran, who has about $112 million in assets under management, will be a vice president and senior institutional consultant at the new firm. She will continue her focus on offering financial planning, wealth management, and customized strategies to a variety of clients including individuals, institutions, and small businesses. According to the website, Cambell will primarily concentrate on plan sponsors and investment committees to optimize their defined benefit, defined contribution, and non-qualified plans through tailored strategies that fit each business and its employees. Before Merrill, she previously held positions at BB&T (now Truist Financial Corp.) and Citigroup Global Markets. As part of the announcement, Campbell stated, “The decision to move my practice to Alex. Brown has allowed me to truly focus on individual and institutional client needs, which drives the investment and fiduciary process.” She added, “The systems, data security, technology, efficiencies, and expansive investment platform enable me to build customized strategies that prioritize my client’s goals.”

Finsum: Christy Campbell, a 21-year industry veteran, made the move from Merrill Lynch to Alex. Brown due to the firm’s expansive investment platform that will allow her to build customized strategies that prioritize her client’s goals.