In an article for InvestmentNews, Jeff Benjamin discussed the need for succession planning especially as there are about 100,000 advisors that are expected to retire over the next decade. In total, they are estimated to control $10 trillion in assets. 

Of this group, 45% intend to transfer ownership to employees or a family member. Around 30% are looking for an external transition, while 25% do not have a firm succession plan. According to industry insiders, this is a major challenge for the industry especially as succession plans take time to prepare. Additionally, there needs to be guidelines for alternative scenarios especially as fewer young people are entering the industry.

Even in the event of a sale, there are complications and contingencies that need to be considered such as your clients’ comfort and the financing of such a transaction. With internal transitions, unexpected events can also arise such as relationships souring with prospective owners that result in a shift of strategy or advisors being recruited away to other firms. 

Finsum: Financial advisors need to have a succession plan. This is especially critical given the wave of retirements that is expected to hit over the next decade. 

In an article for MarketWatch, Morey Stettner discussed various options for alternative investments including non-traded real estate, private debt, venture capital and hedge funds. The asset class delivered strong returns in 2022 especially compared to stocks and bonds. 

Looking ahead to the next decade, alternative investments are expected to fare better especially as they offer diversification to investors with the potential for higher returns. The traditional 60/40 allocation does not seem sufficient for a higher-rate, higher-inflation regime, and alternatives could be one solution for advisors to help clients reach their goals. 

There are also some additional considerations about alternatives that advisors need to understand. For one, money isn’t immediately deployed especially in private equity and venture capital. Additionally, money often cannot be immediately redeemed, while there is less transparency about pricing in less liquid markets. 

Many investors see opportunities in private real estate and venture capital especially as savvy managers will be able to take advantage of the dislocations in these arenas. Many also believe the asset class would outperform in a recession or inflation scenario which would likely continue to be a major headwind for stocks and bonds. 

Finsum: Alternative investments continue to attract interest especially due to stocks and bonds coming off a poor year in 2022.

Fixed income: yer up.

While it was hardly a go to when rates were south, they’ve rediscovered their mojo, with a hefty infusion of capital, according to prominent investors at a recent major industry conference in Beverly Hills, reported money.usnews.com.

Fund managers at the Milken Institute Global Conference said among popular products are bond funds.

So, what’s going on? Well, given the uncertainty over interest rates, a potential recession and U.S. debt default, stocks and  real estate are getting the cold shoulder.

"Things are very different now," said Elizabeth Burton, a managing director and client investment strategist at Goldman Sachs.

"You get a good sense of consensus at these conferences," noted Katie Koch, president and CEO of investment firm TCW. "And I think people are still feeling a little too good."

Heading into the second quarter, Principal Financial Group indicated there were opportunities for investors in fixed income; that is, if they’re up to brooking rocky times in the short run. The tradeoff? Results in the long run, according to seekingalpha.com.

Financial practices have an opportunity.

And it’s golden.

According to Tim Gerend, executive vice president and chief distribution officer at Northwestern Mutual, his firm’s annual Planning & Progress Study found that more than half of U.S. adults are anxious about their finances, reported thinkadvisor.com. This was part of remarks he made at the recent 2023 LIMRA Distribution Conference in Orlando.

On top of that, as for their financial future, they feel far from certain.

Fortunately, to help them prop up their security, Americans embrace the idea of seeking the help of financial advisors to help them formulate financial plans.

While that means the opportunity is ripe for the industry to build its impact and assist those who need it, Houston, we have a problem: the dearth of financial professional to handle the load.

That said, advisors should bear this in mind: If they’re not leveraging social media, you have company     according to blackrock.com.:

Forty four percent of financial advisors don’t indulge. Okay, so that might not prevent you from succeeding, ask yourself a question: how will  your growth remain on track given that among young investors, social media’s their “go to” when considering and choosing financial professionals among service providers.

In an article for Reuters, Mike Dolan discussed the widening gap between market volatility which has been trending lower since October of last year and headlines of various geopolitical, financial, and economic risks that are increasingly dominating headlines. The Federal Reserve is expected to hike rates despite signs that the economy continues to decelerate, considerable stress in the banking system, increasing chatter of a ‘technical default’ for the US Treasury if the debt ceiling is breached, and important data points in the coming weeks in the form of earnings from tech giants and the April jobs report. 

Despite these potential threats, the VIX, which measures stock market volatility, reached its lowest levels since November 2021. The stock market is also nearing a 20% move rise from its October lows, which many market participants would define as a new bull market. Volatility is similarly depressed in the Treasury market and the currency markets despite upcoming central bank meetings, indicating that this divergence between the VIX and headline risk is not unique to equities.

Finsum: There is a widening gap between various headline risk and market measures of volatility which are at multi month lows. 

In a Barron’s article, Lauren Foster discussed some ESG recommendations for 2023 from TD Cowen. The bank sees upside for ESG in 2023 due to an increasing focus on energy security, long-term decoupling from fossil fuel, and government-led investments in energy infrastructure. They identify six companies that offer the best combination in terms of ESG metrics and traditional investing factors: Air Products & Chemicals; Norwegian start-up FREYR Battery (FREY); Hannon Armstrong Sustainable Infrastructure Capital;Itron (ITRI), Piedmont Lithium (PLL); and Stem (STEM).

Air Products & Chemicals is the largest of these companies with a $66 billion market cap. TD Cowen notes its critical role in terms of boosting hydrogen production capacity which is a priority for the Biden Administration. It sees the company as being a potential leader in this space given its multiple projects throughout the Middle East and North America. 

Notably, many of the companies on Cowen’s list are down considerably given the underperformance of growth stocks since interest rates started moving higher. While there are some headwinds for ESG investing due to a more polarized political climate, Cowen sees the long-term drivers of demand as only strengthening in the coming years. 

Finsum: TD Cowen sees ESG picks as having upside in 2023. Here are 6 of its top selections.

In an article for InvestmentNews, Bruce Kelley discussed some of the collateral effects of First Republic’s troubles. Since these issues began in early March, around a third of the company’s advisors in its wealth management division have left the firm.

Following JPMorgan’s takeover of the bank, filing show that 150 advisors remain at the firm, while there were around 230 at the beginning of the year with about $271 billion in total assets. According to JPMorgan, many of the 150 advisors intend to stay on and transition to JPMorgan’s wealth management division. 

The bank also revealed that it plans to honor any recruiting deals that were struck by First Republic. Notably, First Republic had been quite aggressive in recruiting clients from banks and smaller firms. Ironically, it had recruited about 40 advisors from JPMorgan since 2010. 

JPMorgan’s acquisition should stem the tide of advisors leaving First Republic. In April, a team of First Republic advisors, managing $10.8 billion in assets, departed for Morgan Stanley. Prior to this, another team, which managed $2.3 billion in assets,  was picked off by Rockefeller Global Family Office.

Finsum: One of the consequences of the failure of First Republic bank is that many advisors are leaving for greener pastures. But, the JPMorgan acquisition may put a stop to this.

In an article for IFAMagazine, Meg Brantley discusses how active fixed income ETFs staged a turnaround in early March. The asset class was moving lower as it seemed that the economy would continue growing at a rapid clip, adding further fuel to inflation.  However, there was a negative shock to the economy as Silicon Valley Bank and Credit Suisse had to be rescued. In turn, risks to the financial system climbed, and there was a stunning turnaround for fixed income. The 2-year Treasury note dropped 119 basis points in three days which was the largest drop since 1987. 

For financial markets, it was a major sea-change, and it seems to have marked the bottom in bonds which have been steadily trending higher. Odds of a recession and rate cuts in the first half of 2024 also climbed higher which further contributed to strength in fixed income. 

These events have contributed to volatility but also led to opportunity for active fixed-income managers. The forces of a hawkish Fed and raging inflation which dominated 2022 created a negative backdrop for fixed income. Now, the macro backdrop for fixed income has gotten more constructive especially with inflation and rates trending in the right direction. 

Finsum: In March, the landscape for active fixed income shifted dramatically. Looking forward, the asset class is offering some compelling opportunities. 

In an article for ETFTrends, Ben Hernandez gave some reasons why there is still opportunity for fixed income investors in high-quality bonds, and some ETFs to consider. 2023 has seen a strong rebound for bonds after an abysmal 2022. 

The major factor is that inflation expectations have turned lower, while many see an endpoint to the Fed’s hikes later this year. Additionally, increasing odds of a recession have also resulted in inflows into fixed income ETFs. 

While the Fed is expected to hike one or two more times, this headwind is more than offset by slower economic growth and increasing risk of a credit crunch given the inverted yield curve and damage to the banking system. Another positive for fixed income ETFs is that yields are at their highest level in decades. 

Fixed income investors can take advantage of this favorable backdrop by investing in a  high-quality, short-duration ETFs. One example is the Total Bond Market ETF, which is composed of a variety of government, corporate, mortgage-backed securities, and international bonds. Another option is the Vanguard Short-Term Inflation-Protected Securities Index Fund. This is comprised of short-term, inflation-protected Treasury bonds. 

Finsum: 2023 has featured a strong rebound for fixed income ETFs. The major factors are a slowing economy, ending of the hiking cycle, and cooling inflation.

In an article for SmartAsset, Eric Reed discussed how artificial intelligence tools will affect financial advisors. Clearly, it’s hard to definitively predict how the technology will evolve, but it will have the most immediate impact on improving the customer experience. Already, chatbots are capable of engaging with customers, booking appointments, and dealing with administrative issues. For instance, advisors could use a chatbot to immediately respond to customers to low-level inquiries. This would result in more time for advisors to spend on higher-value issues. 

Beyond customer service, AI tools can also be an asset in terms of portfolio construction and research. AI will allow advisors to leverage considerable computing power to discover opportunities in the market and provide more insight to clients. 

For instance, AI can allow advisors to scrape and process massive amounts of data to deliver customized recommendations. This type of analysis can also be applied to a clients’ financial situation, inputting such items like income, spending habits, demographics, and risk tolerance. 

AI tools are bound to disrupt nearly every industry on the planet. Financial advice is no different. As of now, the main benefit is that it will provide additional value to clients, while allowing advisors to focus on higher-value work.

Finsum: AI is a disruptive force, and advisors need to embrace it. Currently, these tools can help with low-level tasks, data analysis, and enable advisors to spend more time on high-value tasks.