Displaying items by tag: advisors

A bad ending can ruin a movie or a TV series, just ask any Game of Thrones viewer. The same applies to any business including financial advisory practices. A great run can be marred by a messy and unorganized ending.

However, it’s easy to understand why an advisor laser-focused on building and operating a business may not put the same intensity or focus into succession planning. After all, there are many heavy decisions that have to be made, and each decision has major implications. So, it’s understandable why succession planning can be neglected.

Nevertheless, it’s clear that succession planning is essential. In the same way that financial planning increases the odds that someone can reach their retirement goals, succession planning can help you maximize the value of a practice, smooth the transition for clients, and give employees peace of mind.

While there are many elements to effective succession planning, the biggest ingredient is transparency throughout the process with clients, employees, and other stakeholders. This will prevent anyone from being surprised by the outcome and will also lead to more understanding especially as it’s likely that the succession plan could have multiple iterations depending on circumstances and developments. 

Finsum: Succession planning is essential for an advisor but an important key is transparency during the process.

When it comes to making clients happy, there is no substitute for a wide variety of offerings given that everyone has their own unique circumstances, priorities, risk tolerance levels, and goals. Ironically, the recent trend in wealth management over the past couple of decades has been the opposite with the rise of ubiquitous 60/40 portfolios and passive strategies.

However, the introduction and ongoing proliferation of direct indexing is an antidote and presents an opportunity for savvy advisors. In essence, direct indexing allows investors to recreate an index within a separately managed account by owning the actual individual stocks. This is now possible due to technology, lower commissions, and fractionalization of shares. 

The major benefit for clients and advisors is that these indexes can be customized as little or as much as clients desire. Thus, it retains the pros of passive investing, while allowing for personalization and the potential to harvest tax losses. 

For example, investors who have strong beliefs about climate change may look to eschew companies who are responsible for emissions or the production of fossil fuels. Instead, they may want to overweight stocks with high ESG scores. With direct indexing, an advisor can theoretically create custom products for each client, leading to greater satisfaction and success for both parties.

Finsum: Advisors should get comfortable with direct indexing given that it allows for personalized products that are more likely to appeal to an investor. 

Within asset management, active fixed income is in a growth boom based on a surge of inflows and new issuances to meet this demand. There are two secular components as ETFs continue to displace mutual funds as preferred vehicles for fixed income investing, and institutions and advisors become more aware and comfortable with the category. 

And, a cyclical factor is the current market environment given the combination of attractive yields and uncertainty about the trajectory of monetary policy. These environments tend to favor active over passive strategies since active managers have more latitude in terms of credit quality and duration.

In recent months, we’ve seen a frenzy in terms of new issues with Vanguard and Blackrock introducing active ETFs that mirror their own active fixed income mutual funds. Now, Capital Group is joining the fray with the launches of the Capital Group Core Bond ETF (CGCB) and the Capital Group Short Duration Municipal Income ETF (CGSM). Asset managers are responding to demand for these products, or otherwise would lose market share to firms who provide ETF versions of popular mutual funds. 

CGCB invests across the entire fixed income spectrum with a focus on capital preservation and generating income. CGSM invests in municipal debt that is exempt from federal taxes and typically short-duration. 

Finsum: Capital Group is launching two new active fixed income ETFs which is a major trend in the asset management world. 

The last decade has seen an intense war in the wealth management space with an assortment of winners and losers. While advisors are the biggest winners due to generous compensation packages, another big winner has been LPL which is now the largest independent broker-dealer with 21,000 advisors.

Part of LPL’s success has been its variety of offerings for advisors given that it has numerous options for incoming talent. This ranges from more structure to giving advisors independence and latitude to run their businesses as they see fit. 

Maybe the best example of this is LPL’s Linsco channel which is designed for younger advisors. It was founded in 2019 and was seeded by the purchase of Allen & Co. which gave it assets under management (AUM) of $3 billion. Remarkably, Linsco now has an AUM of $21 billion and has recruited 49 teams to the group.

Its latest success is recruiting Raanan Pritzker who has been the top-ranked financial advisor at Fifth Third Private Bank over the last 12 years. This marks the first $1 billion+ team to join Linsco. Despite Priztker’s success, he chose to leave Fifth Third as he believes Linsco is better able to provide top-tier services and products to his wealthy clients. 

Finsum: LPL Financial’s Linsco has been a massive success story as it’s gone from $3 billion in assets under management to $21 billion as of October 2023. 

A financial advisors’ long-term success is closely connected to their ability to consistently land new clients. In order to do this, they must build a pipeline of prospects. 

The key to a robust pipeline is consistent effort to make connections and build relationships. It can be challenging in the near-term as results may be inconsistent. The first step is to come up with a repeatable and sustainable prospecting strategy. The goal of your strategy is to simply create interest in your services and offerings. Part of this is to define your niche and target client. The strategy should also be something that you could do on a regular basis and ideally enjoy, since this a long-term game. 

The next step is to get clear on what value you can provide. This requires some introspection about your core beliefs, convictions, and values. It can be helpful to step in your prospect’s shoes to understand their thoughts and emotions in order to figure out what would compel them to take action. 

Finally, the best source of new prospects is through your existing, satisfied clients. Personal referrals remain the most effective form of prospecting and have the highest odds of turning into clients. There are many ways to ask for referrals. Some are direct and transparent, while some advisors prefer a more indirect approach.

Finsum: Building an effective pipeline of prospects is integral to success for every financial advisor. Here are some tips.