The SEC is planning to beef up its Reg BI enforcement for the rest of the year. The SEC put out a recent bulletin focused on Reg BI compliance and the role that brokers and advisors play in the process. The tone was about how brokers and advisors need to take more responsibility into their own hands regarding compliance. Additionally, more focus and guidance on rollover recommendations is in the pipe, said the SEC. More bulletins on the topic are expected soon.

FINSUM: Rollovers are obviously a major topic for advisors, so this will be closely watched and scrutinized by the wealth management community.

Emerging market debt could be in trouble according to JPMorgan. With a seemingly never-ending Russia-Ukraine crisis as well as rising borrowing costs low grade emerging market debt could be in trouble. A note said that almost half of the sample of the 52 countries are carrying high repayment risk. Generally speaking, spillover risk is high if Russia defaults and Ukraine has to res-structure. All of this is compounded by rising yields which makes repayment even more difficult.

Finsum: For those looking for solutions to rising volatility be careful chasing emerging market debt as a response.

Volatility is pervading markets and many advisors may have new clients or millennial investors who haven’t experienced this volatility before. A study from McKinsey showed that trust with an advisor is highly correlated with the amount of communication with advisors. Outsourcing financial news, posts, and blogs are a way to not burn clients out. Also, you can give different avenues to communication such as emails as well as social media. Themes can also help concentrate your message and lead to better takeaways. Managing expectations in uncertainty and making sure your clients feel their goals are being addressed are crucial.

Finsum: A little communication goes a long way and investors need to understand how their portfolio is adapting and performing in high volatility. 

Some advisors think of model portfolios as a tool for advisors that is rigid: a pre-selected allocation not to be tampered with. However, the model portfolio’s true advantage is that it brings an element of customization. This varies based on how an advisor implements the options, but overall because investors own the underlying asset, unlike a mutual fund they can add/drop for customization. This gives investors an edge for tax loss harvesting or tweaking to add a growth stock for example. To add to that models are relatively fee efficient particularly when it comes to their mutual fund counterparts while bringing most of the same options.

Finsum: A model portfolio can also be selected for its inherent traits as well and provide advisors with more flexibility than they are perceived to have.

Direct Indexing is being touted as the best way to generate tax alpha in a portfolio but is it all that it's cracked up to be? Experts say it has limits and diminishing marginal returns over time because as stocks are dropped, replacements with a lower cost basis will be more expensive to unload later on. Moreover one of the less talked about aspects is that as opportunities narrow as stock is unloaded there is less upside to growth opportunities as the portfolio is smaller. Investors should look to capitalize on direct indexing as they offload specific accounts for inheritance and retirement which is a relatively more minor portion of the portfolio.

Finsum: There may be a shift from custom indexing as a primary ESG focus if it fails to deliver tax alpha and is better suited to dropping greenwashers.

Emerging market debt could be in trouble according to JPMorgan. With a seemingly never-ending Russia-Ukraine crisis as well as rising borrowing costs low grade emerging market debt could be in trouble. A note said that almost half of the sample of the 52 countries are carrying high repayment risk. Generally speaking, spillover risk is high if Russia defaults and Ukraine has to res-structure. All of this is compounded by rising yields which makes repayment even more difficult.

Finsum: For those looking for solutions to rising volatility be careful chasing emerging market debt as a response.

Volatility is pervading markets and many advisors may have new clients or millennial investors who haven’t experienced this volatility before. A study from McKinsey showed that trust with an advisor is highly correlated with the amount of communication with advisors. Outsourcing financial news, posts, and blogs are a way to not burn clients out. Also, you can give different avenues to communication such as emails as well as social media. Themes can also help concentrate your message and lead to better takeaways. Managing expectations in uncertainty and making sure your clients feel their goals are being addressed are crucial.

Finsum: A little communication goes a long way and investors need to understand how their portfolio is adapting and performing in high volatility. 

The ETF sell-off is rampant as a response to the wild and sudden market volatility, but its time to get rid of your fixed income funds? Some experts are saying there is a breakdown in the traditional 60-40 portfolio, but outflows aren’t present yet at the rate in bond funds. This is despite funds like AGG being down over 10% YTD. One possible reason for this is that investors are more worried about macro factors than most other factors. Over a third of advisors are worried about inflation, rates, and geopolitics whereas only one in ten are as concerned with volatility. This is could cause a shifting of flows into more stable macro flavored products like bond funds.

Finsum: We’ve said it once we can say it again, bond fund holders aren’t eyeballing returns like equity ETFs they are holding for security. 

JPMorgan is one of the few bulls it seems on Wall Street as Kolanovic says markets are just pricing in too much risk, but three stocks could be in the best position to rally. ACV Auctions is first which is a wholesale auto dealer. The revenues and the price are just a mismatch accordinding to JPMorgan. Boot Barn Holding is next with a rise in consumer spending as well as resilient profits are moving the EBITA nail for BOOT. Finally, there is Springworks Therapeutics which is a clinical research company for rare diseases. They have two prime candidates in different stages which could mean big things for their future moving forward.

Finsum: If the Fed steers its way around a recession then markets have definitely overreacted to tightening and equities could have a high upside. 

There has been a sharp uptick in the high-value bond ETF trades in the last 12-months which most investors are attributing to activity from large institutional investors. Transactions are up as much as 36% on some platforms from the previous year. This has been part of a longer more ongoing trend that has been successful for many bond funds. Since the GFC, investors have questioned the resiliency of these funds to economic downturns, but regulators and investors alike are pleased with their performance in the covid pandemic. Just as important to this is the support from the Fed and Fiscal policy to the economy. Stepping in with bond relief has helped these ETFs. Finally, the increase in investment in bond ETFs has actually led to tighter underlying spreads in bond markets themselves and reflects better liquidity.

Finsum: Many believe that over-investment in index funds could be disruptive to equity volatility over time, but it appears to be stabilizing bond spreads.