(New York)

Here is an eye-opening stat for anyone working in wealth management: 37% of all advisors expect to retire in the next decade. That will put about 39% of all AUM in the industry in motion. The biggest surge in retirement will be on the B-D side of the fence. The major question is who will replace all these advisors? “While some progress is being made, the industry is struggling to recruit and retain advisor talent that is adequately prepared to inherit the businesses … In an effort to overcome this challenge, firms are boosting recruiting efforts to bring new advisors into the industry and revamping training efforts to improve success rates”, says Cerulli Associates.

FINSUM: Succession panning has not been very good in general, so there are big questions about how this will play out. This is either one of the best opportunities in the history of the business, or the whole market might shrink naturally if older advisors retire and Millennials don’t hire new ones.

(New York)

One of the ways that wirehouses have been trying to make their brokers (and their brokers’ clients) more sticky is by pushing loans. Brokers are encouraged to get clients to borrow money. These loans have the effect of binding clients to firms for long periods, and correspondingly, it makes it harder for brokers to breakaway because clients are more likely to stay put. However, some RIAs are combatting the trend by offering to replace client loans during the transition period when brokers are joining their firms. Perhaps even more interestingly, custodians are getting into the game too, with Schwab announcing recently that they would be increasing lending products available to advisors to help them transition clients away from wirehouses. The loans provided often have lower interest rates than what the wires offer, so the success rate in migrating clients has been quite high.

FINSUM: The loan game has been the domain of the wirehouses for years, but with the big custodians getting involved, this is another important structure that will make breaking away easier.

(New York)

There are some very worrying signals coming out of the high yield sector. In particular, stocks at the riskiest end of the market have been underperforming. Bonds rated CCC, CCC+, and CCC-, which are the three lowest rungs before default, have been underperforming all year and that weakness has now reached an “unprecedented size”. What is worrying is that very lowly rated bonds are usually the most influenced by economic perceptions, and it is unusual that with junk rallying so much this year that this cohort has not taken part.

FINSUM: So there are two options for what this could mean. Either it means investors are just being cautious, or much more negatively, that credit conditions are tightening, which would be a sign of a pending economic downturn.

(New York)

If it seems like value investing is dead, it is because it almost is. Even major adherents have moved away from the practice as growth stocks have greatly outperformed value stocks for so long. The growth sector has been led by large tech companies for the last several years, and many are wondering whether the gains can keep going. The answer, according to Credit Suisse, is “yes”. The bank has put out a piece reminding investors that in late stage bull markets growth stocks can often hit P/E multiples of 45-60x. The sector is currently only trading at 28x earnings. Credit Suisse singled out Microsoft and Raytheon as good cheap picks.

FINSUM: The optimism has been building in markets, so it would not be far-fetched to think a big late cycle run could be in the cards for growth stocks.

(New York)

Nike is one of the retail stocks that has had a very good year, and it may be about to get even better. Goldman Sachs has just jumped on the Nike bandwagon, saying that the stock is going to keep on rising. GS upgraded Nike to a Buy from Neutral and joined 25 other analysts who say the stock is a Buy. According the GS, their change in view is due to “Evidence of building pricing power, signs of operating leverage, accelerating shift to differentiated retail, sharply scaling app ecosystem, and a constructive global athletic growth backdrop”.

FINSUM: Brands are in a better position than retailers, and Nike is on the very good side of that better group.