Displaying items by tag: advisors

In an article for GoBankingRates, financial advisors shared some of their top tips for onboarding new clients. While every client has unique circumstances and their own goals and definition of success, there are still some universal rules that apply for effective financial planning. 

One of the first tips is to understand a clients’ cash flow with a full accounting and understanding of each dollar that goes in and out. This is the first step in any sort of effective financial planning. Only once this is complete does it make sense to move onto other components of planning like investments or an estate plan. Cash flow analysis tends to be tedious for advisors and clients, but it creates a solid foundation and is necessary for success.

Another tip is to gain clarity around financial goals in the short and long-term. This creates a roadmap and rules that will lead to better decision and behavior. For most clients, their success comes down to more effectively managing their finances and increasing allocations to savings and investing.

Finally, plans should be written down and frequently read and revised. Having a written plan leads to increased compliance especially in terms of sticking to a budget and an investment plan regardless of market conditions. 

Finsum: Onboarding clients is a delicate mix of universal processes and customized service. Here are some tips from advisors on more effective onboarding.

Model portfolios have seen rapid adoption over the past decade as it allows advisors greater flexibility and resources to grow and manage their practices. In an article for Schroders, Gillian Hepburn discusses the growing demand for white labeling model portfolios that in some cases involves increased customization. 

For many advisors, the appeal of white labeling is to show their clients that they remain involved with the investment management process. However, there are some complications to white labeling and important considerations for advisors.

For one, it undermines the primary advantage of model portfolios which is to tap into the investment expertise and resources of asset managers so that advisors can spend more time with clients on financial planning. In the case of customized portfolios, advisors still have to ensure that portfolios are being rebalanced, results and trades are being reported, and regulations are followed.

Advisors should also think about what value is being generated by white labeling and whether clients are being charged extra fees. With increased regulations and the fiduciary rule, there needs to be a firm value proposition for clients to justify placing them in a white labeled model portfolio with higher fees.   

Finsum: Many advisors are looking to whitelabel model portfolios. However, this comes with certain considerations and may lead to additional complications. 

In an article for Kiplinger’s, Jerry Golden discussed how running out of money is an investor and retiree’s worst nightmare, and how annuities can help address these fears. Retirees do face challenges such as uncomfortably high inflation, soaring healthcare costs, and concerns about the viability of social payments. 

Therefore, investors need to have a solid plan to ensure that there remains steady and sufficient income on top of Social Security and other potential pension payments. The goal should be to have a growing and guaranteed income that continues throughout all types of economic circumstances. 

One suggestion for retirees with these fears is to use a more conservative withdrawal rule rather than the standard 4%. This will give an increased margin of safety and boost your portfolio’s resilience. 

This is difficult and not practical often in reality. A better approach is to integrate financial products in the portfolio which reduce risk and dampen portfolio volatility such as income annuities. 

Having an income reduces the odds of money ‘running out’ by a significant degree while also allowing retirees to let their portfolios continue to work and grow. Often, fear is an impediment for retirees from achieving their financial goals, because they are unwilling to stick to the plan through difficult conditions.

Finsum: Running out of money is every retiree’s worst fear. Annuities are one way that retirees and advisors can address these fears.

In an article for Vettafi, Todd Rosenblum covers the growth of active equity and fixed income funds, and how they are taking an increasing share of the ETF market. 

The category has seen 50% growth in assets over the last 3 years and now comprises 6% of the total ETF market. In response to this demand, there has been an increase in the issuance of active ETFs. 

It’s particularly relevant for fixed income as active funds can take advantage of opportunities unavailable to passive funds. One example is the Blackrock Flexible Income ETF which is designed to give investors opportunities for yield in more obscure markets. 

Blackrock is a major presence in the active ETF market and also recently launched the BlackRock Ultra Short-Term Bond ETF and the BlackRock Short Maturity Bond ETF. Overall, Blackrock is looking to create a comprehensive ‘active ETF platform that complements its existing lineup of passive ETFs and active mutual funds. It gives advisors and investors access to its investment resources and management while retaining the benefits of an ETF. 

Finsum: Active ETFs are booming, and Blackrock is looking to capitalize with several recent offerings in the space.

For banks, the last couple of years have brought significant challenges due to higher rates. For Main Street banks, they are forced to pay higher rates on deposits, while they have made loans at much lower rates. Wall Street banks are facing an environment where IPOs, M&A activity, and corporate issues are at low levels, in part due to the Fed’s hawkish stance according to a Bloomberg article by Sridhar Natarajan.

However, one area of growth for Wall Street-centric banks has been in wealth management. For Morgan Stanley, its wealth management division produced $6.6 billion in pretax profits in 2022. However, it recently set a goal of $12 billion in pretax profits for its wealth management division in the coming years. 

It sees growth in the division coming from more assets, an increase in lending, and markets growing in size. It also is targeting $1 trillion in net new assets over the next 3 years. 

For the full year, it’s expected to earn $10.8 billion in net income which is a drop from $11.4 billion last year. Most of the decline is due to investment banking fees which are projected to be about 40% of their 2021 levels. 

Finsum: Morgan Stanley is projecting that its wealth management’s pretax profits will nearly double over the coming years with asset growth a key driver.