J.P. Morgan Advisors continues to boost its advisor headcount with the latest addition of a Boston-based Merrill Lynch team that generates $2 million in revenue. The team is led by Andrew Parvey and Maureen Wilson who oversee $200 million in client assets. They moved to J.P. Morgan along with support staffers Victoria Steele and Ko Dong. Parve started his career at Olde Discount Corp. in 1996 and also worked at Gruntal & Co., and Citigroup’s Smith Barney before joining Merrill in 2008. Wilson started her career as a personal banker at Bank of America in 2003, and worked at Chase between 2005 and 2007, before restarting her brokerage career in 2015 at Merrill. They will report to Rick Penafiel, regional director for Boston, Miami, and Palm Beach. This marks the second Merrill team to join J.P. Morgan Advisors in as many months. Another team led by Marc Karstaedt in New York City joined in January. The Advisors unit, which JPMorgan acquired from Bear Stearns during the financial crisis, has around 450 advisors. In July 2021, the group announced a plan to double its headcount over the next five to seven years. J.P. Morgan ended last year with 5,029 total advisors, up 6% from the prior year.

Finsum:J.P. Morgan lured away its second Merrill Lynch team in as many months in a bid to boost its advisor headcount.

For decades, the wealthy have been able to see huge tax savings. Over one hundred years ago, investors could take tax deductions on wash sales, which involved selling a security at a loss and then buying back the same security. While Congress outlawed that technique in 1921, investment firms have continued to help billionaires save on taxes through other techniques such as tax-loss harvesting, which allows an investor to sell an investment for a loss and replace it with a reasonably similar investment. Direct indexing, which continues to gain steam among advisors, provides the perfect strategy to employ tax-loss harvesting. In a recent article, ProPublica authors Paul Kiel and Jeff Ernsthausen reported on the tax savings techniques of billionaires. The authors were able to reconstruct the tax-loss strategies of some of the nation’s wealthiest people using IRS data. For instance, they estimated that from 2014 through 2018, Goldman Sachs was able to generate tax savings of $138 million for Steve Ballmer, former CEO of Microsoft and current owner of the Los Angeles Clippers, without changing his investment portfolio in any meaningful way. In the year 2017, Ballmer’s direct indexing accounts posted over $100 million in tax losses through 15 loss-harvesting transactions, while the performance of the indexes it tracked, was way up. Tax records also show that Goldman Sachs routinely made trades for direct-indexing clients like Ballmer.

Finsum:Based on recent reporting by ProPublica, billionaires such as Steve Ballmer have been able to save billions through tax-loss harvesting in direct indexing accounts.

There’s no question that 2022 was a tough year for investors, but even with all the volatility, investors remain confident in their advisor’s abilities. That is according to the results of State Street Global Advisors’ ETF Impact Survey: Advisor Edition. The survey found an overwhelming majority of investors who work with an advisor remaining confident in their insight and guidance. The percentage of U.S. investors indicating they value their financial advisors’ knowledge and guidance even more during uncertain times held steady at 89% compared to June 2022, when it was 91%. In addition, 81% indicate their advisor has helped them remain confident during this period of rising inflation and market volatility, compared to 86% in June. The survey also revealed that investors are listening to their advisors and not requesting panic-induced trades as 57% of U.S. investors plan to keep their money ‘as is’ and stick to their long-term strategy. Brie Williams, head of Practice Management at State Street Global Advisors had this to say about the survey results, “Helping clients remain confident and committed during times of volatility can be a challenge for advisors whose clients may have a kneejerk reaction to abandon their investment strategy if markets get choppy. Our survey found 86% of investors have discussed market volatility with their financial advisor and 83% say their advisor has informed them of how volatility will affect their long-term financial goals.”

Finsum:A recent SSGA survey found investors remain confident in their advisors’ guidance amid heightened market volatility and rising inflation.

There are numerous ways advisors can generate leads for their business such as word-of-mouth marketing or cold-calling, but social media can provide them with a much larger landscape in which to work and is less time-consuming. That is according to Rebecca Lake who recommended five ways for advisors to drive business through social media in an article on SmartAsset. In terms of which social media platform to use, that depends on your target client demographics. For instance, if your target client is younger, your best bet is on Instagram, TikTok, or Twitter. But if your target client is older, then you might get better results on Facebook or YouTube. Lake’s first tip is to be authentic as it’s essential to build trust with prospective clients. For instance, you could share a little about yourself on social media. Her next tip is to be consistent, as it’s also important in building trust. Posting quality content on a regular schedule is ideal. Lake’s third tip is to provide value. The content has to provide value for the people who see it. Plus, valuable content gets shared, which can help you attract even more business. The next tip is to engage with the people viewing your content. This could include replying to comments or even asking your followers to participate in a survey. The fifth and final tip is to be compliant with federal regulations and your firm’s regulations.

Finsum:Rebecca Lake, a contributor for SmartAsset, provided five tips for advisors to drive business through social media, including being authentic, consistent, compliant, providing value, and engaging with followers.

If you’re looking to hedge your client’s portfolio from inflation, consider investment-grade ETFs. That is according to American Century Investments client portfolio manager Balaji Venkataraman. He spoke at the recent ETF Exchange conference in Miami Beach and noted how the Fed’s moves played a role in the dismal performance of bonds last year. However, he also added that investors may see increased value in fixed-income vehicles this year. He stated, “The rate risk has subsided meaningfully because the fixed income market tends to price in where the Fed is going well before the Fed gets there. And that’s why we’ve seen a decline in yields here today.” Venkataraman also noted that investment-grade bonds, which are a debt of higher-grade securities, could be critical investments during periods of heightened inflation, as yields begin to fall in response to the Fed easing rates. He stated, “The beauty of fixed income in this environment, if the Fed eventually does [come to] its peak in terms of the terminal rate, bond yields should probably continue to come down.” While bonds saw their worst year on record last year, fixed-income ETFs continued to see inflows. That trend continued into this year, as bond funds saw $20.8 billion in inflows in January, the most of any asset class last month, according to ETF.com data.  

Finsum:According to American Century Investments client portfolio manager Balaji Venkataraman, investors should consider investment grade bond ETFs during periods of heightened inflation, as yields begin to fall in response to the Fed easing rates.

Parcl recently announced the launch of the real estate investment platform Parcl Protocol, allowing users to trade the price movements of real estate markets around the world. Its users can now invest in or trade specific geographical markets, which can be used for directional investment and hedging strategies in a traditionally opaque and walled-off asset class. Parcl is a digital real estate protocol built on Solana, a blockchain specifically designed to host decentralized and scalable applications. Through the Parcl Protocol and leveraging data provided by Parcl Labs, Parcl facilitates real estate investment. It provides exposure to cities in the United States such as New York City, Miami, Phoenix, and Los Angeles, while international cities such as Paris, London, and Singapore will be coming later this year. Users can browse global real estate markets, gain detailed insights, and have the opportunity to either buy or short real estate markets based on whether they think the real-world property values will increase or decrease. The platform is also built differently than other real estate platforms such as Yieldstreet, RealT, or Fundrise as it takes a new approach to increase liquidity and improve scale by using derivatives. The derivatives can improve diversification and add stability to a portfolio.

Finsum:Parcl launched the real estate investment platform Parcl Protocol, which allows users to trade the price movements of real estate markets around the world.

Vanguard, which is the second-largest ETF issuer, is planning to go all in on direct indexing. That is according to Tim Buckley, Vanguard CEO, as he was being interviewed on stage at the recent Exchange ETF conference. Buckley said that Vanguard looked at direct indexing years ago and started thinking about it. He stated, "What's a way that you could disrupt the ETF or the mutual fund? You always should be looking if there is a better way to do it." While direct indexing has existed for some time, it is typically only reserved for the "ultra, ultra, high-net-worth," according to Buckley. The CEO added "And we can see that … there's huge tax benefits for a lot of investors in using direct indexing." He said that the idea of creating portfolios that don't undermine people's retirement but let them invest in line with their values was something the fund firm found interesting. Instead of hoping that direct indexing would go way, Buckley said Vanguard decided to embrace it and "see if it is a better way to do something." He added, "And we'll find out over time. But we'll be investing heavily." The fund giant, which manages $2 trillion in assets across 81 US-listed ETFs, started its move into direct indexing in October of 2021, with its purchase of Just Invest and its direct investing platform, Kaleidoscope.

Finsum:According to Vanguard’s CEO Tim Buckley, the fund firm plans to go all in on direct indexing as there are huge tax benefits for a lot of investors.

With market volatility still a concern among clients, private equity firms are positioning themselves as an option for advisors looking to minimize the impact of volatility in their client’s portfolios. Steve Brennan, head of Private Wealth Solutions at Conshohocken, Pennsylvania-based Hamilton Lane, told Financial Advisor magazine, “A benefit to a private equity fund is that it is a long-term investment vehicle that gives an investor an extended period to invest their money and protect it from the turbulence of the markets.” Private equity proponents say that the lower volatility typically outweighs the negatives of private equity, including high fees and illiquidity. Brennan said “The time horizon for investors in the private markets is ... a much longer time period so you’re not seeing the volatility in the private markets that you would see in the public markets.” Alexis Weber, chief investment officer and founder of PM Alpha told the magazine that a client’s private equity allocation should be fluid. He suggested a range of 5% to 20%, but also cautioned advisors that it depended upon the client’s risk tolerance. He also mentioned that private equity can be a benefit to an advisor looking to distinguish themselves from their competitors. He stated, “Really having the right level of allocation to these instruments allows them to differentiate their services and their portfolio construction approach from other peers.”

Finsum:Private equity firms are positioning themselves as an option for advisors looking to minimize volatility for their clients as well as differentiate themselves from their peers.

Morgan Stanley’s new exchange-traded fund platform will focus on actively managed funds, with Anthony Rochte, global head of ETFs at Morgan Stanley, seeing a “significant uptick in active transparent fixed income purchasing.” Rochte told ETF.com at the recent Exchange conference in Miami that “There's no doubt active management is where we're focused in additional series of ETFs. At the core of Morgan Stanley Investment Management is active management; that’s what we do.” The financial services giant made its return to the ETF industry on February 1st with the launch of six Calvert ETFs, including an active ultra-short investment grade ETF. Rochte stated that the firm is looking to launch funds across its Calvert, Eaton Vance, and Morgan Stanley brands. More specifically, he stated, “In the next suite of products you could expect to see from us, the ETF platform would be active, transparent.” According to ETF.com data, $57.4 billion flowed into active products last year as passive investments were hammered by the markets. Active funds comprise $407.9 billion of the ETF market, with many financial professionals seeing that segment growing. Currently, there are 1,027 actively managed ETFs in the U.S. market. With Morgan Stanley looking to add to its product suite, transparent, fixed-income products are squarely in focus, according to Rochte.  

Finsum:With many financial professionals expecting the active ETF segment to grow, Morgan Stanley is looking to add to its product suite with a focus on actively managed transparent fixed-income funds.

With direct indexing continuing to gain steam, the strategy isn’t just for the ultra-wealthy anymore, according to two panelists at the recent ETF Exchange conference in Miami. According to Randy Bullard, global head of wealth management at Charles River Development, any investor with more than $150,000 can benefit from these custom portfolios. Bullard stated that “Today an advisor might use direct indexing for clients with complex and unique investment policy requirements, but in the future, direct indexing won’t be such a niche thing.” Ben Hammer, head of client development for Vanguard Personalized Indexing, agrees and said “personalized indexing” can benefit many investors. For Hammer, direct indexing is simple, “It’s an individual account that’s managed to track an index. The individual owns the securities, which gives them flexibility to do things that they can’t with a fund. For example, when individual stocks are down, the investor can tax-loss-harvest them to offset gains elsewhere in their portfolio.” Hammer also noted that direct indexing can give advisors an “additional edge“ in their business. He stated, “They can utilize this to really establish an excellent tax profile for a client that might have some complications or give them an extra bit of customization.” However, Bullard acknowledged that direct indexing right now is for equities, not other asset classes.

Finsum:According to two panelists at the recent ETF Exchange conference, any investor with over $150,000 in assets would benefit from direct indexing, as would advisors by providing them an “additional edge“ in their practice.