For financial advisors who are serious about growth, the most effective strategy is to simply acquire another practice. Of course, this requires significant resources in addition to a well-thought out plan to integrate the new practice into the existing one. It also means making tough decisions when it comes to headcount, organizational structure, and management. Most importantly, there can be no compromise when it comes to the client experience on both sides of the ledger. 

Advisors should consider this possibility especially as it’s going to be a buyer’s market given that so many advisors are nearing retirement age. Based on research from Cerulli Edge, nearly 40% of advisors will be retiring over the next 15 years. Additionally, advancements in technology mean that overhead costs don’t necessarily have to meaningfully rise with an acquisition. 

According to Bill Williams, the president of acquisitions at Ameriprise, the most important step is to conduct proper due diligence to ensure that no regulatory issues arise, and there is no issue with the financials of the firm being acquired. He also says that a common mistake is to use an acquisition to solve a problem. Instead, the buyer must come from a position of strength which means that you have a thriving, profitable practice with a healthy culture. 

Finsum: While there are many growth strategies for advisors, acquiring a practice can supercharge growth. Here are some important considerations. 

The Bureau of Labor Statistics released the CPI report for August which showed a 3.7% increase in inflation which was above expectations of 3.6%. Core CPI came in at 4.3% which was in line with expectations.

It marks the third straight monthly increase in inflation as July saw CPI at 3.2%. Some of the factors contributing to this were a 5.6% increase in energy prices and a 7.3% increase in owners-equivalent rent. 

Initially, Treasuries weakened on the news as it incrementally increased the odds of another hike by the Federal Reserve. However, the fixed income complex was quickly bid up on the drop as market participants seem willing to look past the hotter than expected inflation data.

Two major components of the inflation report - housing and wages - are softening which spells relief for the market. Rents are already dropping in key markets, while recent labor market data shows that unemployment is ticking higher. Much of this data will take time to be reflected in the CPI. Thus, investors are willing to use the weakness to add to fixed income. 

Finsum: Fixed income was bid up despite a hotter than expected CPI report. This seems to be because investors are increasingly confident that inflationary pressures will continue to recede.

One of the biggest stories in the financial advisor recruiting world has been the exodus of advisors from Merrill Lynch to greener pastures. The big winners of these transitions have been LPL and Morgan Stanley. 

Last month, the Harris Rao Group, who is based in Phoenix moved to Morgan Stanley from Merrill Lynch. The team has a total of $630 million in client assets and generated $3.5 million in revenue last year. 

The group’s lead advisors are Christopher J. Harris and Nihaal M. Rao. Harris and Rao joined forces in 2005 and had been looking for a new home over the last couple of months. Both started their careers with Ameriprise Financial before joining Merrill Lynch in 2008. They were ranked #30 by Forbes in terms of wealth management teams.

According to sources, they wanted a place where there was less pressure to sell banking products and a more complete set of insurance products for their clients. Many of their clients are business owners, and they believe that Morgan Stanley offers better solutions for their needs.

Morgan Stanley also continues to aggressively recruit advisors and has been offering high-end deals to continue gathering assets. Over the last couple of months, they have landed just over $1.2 billion in client assets from Merrill Lynch. 

Finsum: Morgan Stanley continues to poach advisors from Merrill Lynch. The latest is a group from Arizona which produced $3.5 million in annual revenue.

Citigroup conducted a survey of 268 family offices to gather information on their positioning and thoughts on the current market. Overall, the family offices decreased exposure to equities while more than half increased their fixed income allocations. According to Citigroup, it was the most significant change in family office positioning since 2020. 

The bigger trend is that family offices are becoming more conservative given the challenging economic environment. In terms of their biggest concerns, they identify inflation, a hawkish Federal Reserve, and a spike in geopolitical tensions specifically around the US and China.

Currently, the average family office has 16% in fixed income, 12% in cash, and 22% in equities. Even within these allocations, they are focusing on areas with less risk. For equities, it means companies in traditional industries with positive cash flow and attractive valuations. For fixed income, it means a bias towards higher credit quality and shorter duration. 

In total, these family offices that were surveyed control more than $1 trillion in assets. Specifically, the family offices that are adding fixed income exposure have a cumulative total of $568 billion in assets. 

Finsum: Citigroup surveyed 268 family offices to find out their thoughts on the current market. More than half are increasing fixed income allocation and selling equities. 

BlackRock, the world’s largest asset manager with $2.4 trillion under management, is launching a new active fixed income ETF. This marks BlackRock’s 422nd ETF and the second active fixed income ETF to be managed by Rick Rieder, BlackRock’s CIO of global fixed income. 

The launch is also notable because the ETF is similar to its mutual fund offering, the BlackRock Total Return Fund. Both will invest its holdings into a diversified portfolio of fixed income securities. The ETF has an expense ratio of 0.34% while the mutual fund has a 0.45% expense ratio. Notably, the ETF will allow for intraday trading, offer more liquidity, and provide greater transparency of its holdings. 

This is a continuation of a larger trend. Active fixed income ETFs are taking market share from mutual funds and passive fixed income funds. Many asset managers are converting mutual funds into ETFs or dual offerings. 

The primary impetus is increasing comfort with the category from advisors and institutions. Additionally, active fixed income suits the current moment where there seems to be significant opportunity in the space, but headwinds linger due to a hawkish Fed and rising recession risk. The bet is that active managers are better suited to navigate this tricky environment. 

Finsum: Blackrock filed for another active fixed income ETF which is modeled after its very popular BlackRock Total Return Fund.