Displaying items by tag: advisors

According to a report conducted by Hearts & Wallets, high net worth (HNW) investors are favoring separately managed accounts (SMA) over mutual funds. The report surveyed 6,000 people. About 22% of US households were invested in an SMA, which is a significant gain from 13% in 2020. In the same timeframe, mutual fund ownership increased from 38% to 39%. 

Among HNW investors with investable assets of $3 million or more, SMA ownership went from 22% in 2020 to 41% in 2022. In terms of portfolio allocation, SMAs climbed from 22% in 2020 to 29% last year. 

At one time, mutual funds were the only way for retail investors to get access to many markets and the expertise of portfolio managers. Now, there are a multitude of products that offer these features, often with more liquidity and lower costs. 

One reason for the growing popularity of SMAs is that they are becoming more affordable and now require lower account minimums. Another factor is the growing interest in personalized investing which is more easily facilitated with SMAs rather than mutual funds. For instance, an investor passionate about protecting the environment could avoid fossil fuel companies in their holdings. 

Finsum: Separately managed accounts are gaining traction among high-net-worth investors and are displacing mutual funds.

In an interview with Bloomberg, Salim Ramji, Blackrock’s global head of iShares and index investments, spoke about the growth of model portfolios, and why he believes that assets under management (AUM) are projected to more than double over the next 5 years from $4.2 trillion to over $10 trillion.

Ramji commented that “It’s going to be massive. It’s the way in which more and more fiduciary advisers are doing business, and, as a result, that’s the way in which we’re doing business with them. It’s really just changed from being a cottage industry to being something that’s a real force for every fiduciary wealth adviser in the United States.” 

Model portfolios are typically composed of ETFs and other funds that are bundled into pre-built strategies. An indication of the growth of model portfolios is that changes in allocations can be seen in trading volumes and fund flows data. For iShares, model portfolios comprise more than half of flows, while they accounted for a third of flows 2 years ago. The company expects similar traction for model portfolios in its international markets as well.

Blackrock’s bullishness on model portfolios is noteworthy as it is the largest asset manager in the world with $9 trillion in AUM and also the largest ETF issuer. 

Finsum: Blackrock is forecasting that assets under management for model portfolios will exceed $10 trillion over the next 5 years. 

There are many reasons why an advisor might decide to switch their broker-dealer or custodian: better culture, a more supportive environment, or innovative solutions for their clients, to name a few. While these are valid reasons to consider a change, advisors who prepare for their clients’ questions will be thankful they took the time to do so if or when the time comes to move.

A helpful guide is the FINRA post “What to Ask When Your Registered Financial Professional Changes Firms,” published less than a year ago. It recommends questions an investor should ask their financial advisor who is moving firms.

At the top of the list are “Could financial incentives create a conflict of interest for your registered professional?” and “Can you transfer all your holdings?” These are understandable questions your clients might seek answers to, and having transparent and well-thought-out answers will go a long way to easing their concerns, if they have any.

If you are considering a move, check out this article and use it as a guide to prepare your communication with your clients.

Finsum: Considering switching firms as an advisor? Be ready for client questions with insights from FINRA's guide. Clear communication is key!

Demand for annuities has soared along with rising rates. Owners of annuities, prior to 2021, would be very happy if they purchased variable annuities which increase along with inflation, while those with a fixed annuity would see the purchasing power of their income diluted by inflation.

Despite the risks, annuities are a great option for clients with low levels of risk tolerance and who value the certainty of having an income. The biggest benefit is for clients who don’t want to worry about not having enough income, or how the financial markets are performing. 

According to Kirsty Anderson, the pensions specialist at M&G Wealth, “An annuity gives absolute certainty. You know exactly how much income you’ll receive, and you’ll receive this for the rest of your life – unless you’re purchasing a fixed term annuity.” Currently, the average annuity rate is 6.7%. This is nearly 50% more than the average rate since the financial crisis. 

There is a wide variety of annuities to fit the needs of clients. Some options include varying durations, flexibility, and protection against inflation. Many clients will opt for a blended approach, when they use annuities to cover basic living expenses while keeping the remainder of their money invested in the markets. 

Finsum: Annuity sales are strong due to high rates and nervousness about the economy and inflation. Here are some considerations for annuities in retirement planning.

Natixis Investment Managers conducted a survey with CoreData Research of more than 11,000 global investors in March and April of this year. It found that individuals invested in portfolios overseen by professional asset managers had less stress, were more trusting of advisors, and more financially confident. 

Overall, the survey revealed that only 11% of model portfolio investors were stressed, while 23% of non-model portfolio investors were stressed. Additionally, 45% of model portfolio investors were confident about their finances while only 24% of non-model portfolio investors were. 

The survey also revealed that 78% of model portfolio investors saw volatility as an opportunity. In contrast, only 47% of non-model portfolio investors felt the same. 70% of model portfolio investors felt that inflation meant it was time to invest more, in contrast to 40% of non-model portfolio investors. 

For advisors, it’s particularly relevant that 97% of model portfolio investors trusted their financial advisors when making decisions in contrast to 73% of non-model investors who said the same. 

However, only 51% of wealth managers and advisory practices in the US plan to offer third-party model portfolios. 

The survey also revealed that model portfolios free up time for advisors by outsourcing portfolio management. This means more time for client services, financial planning, and prospecting. 

Finsum: Natixis conducted a recent survey about model portfolios. Here are some of the major findings.