According to a new research report from Cerulli Associates, financial advisors are retiring at a pace, faster than they can be replaced. The firm estimates that 109,000 financial advisors in the US will retire over the next decade. This is about 38% of all advisors in the US, representing about 42% of total assets. Overall, the industry needs to do a better job of investing in training programs and giving younger advisors more opportunities in client-facing and asset-gathering roles.

The report highlighted another trend as older, established advisors will continue to move into RIAs given more control and the ability to sell their practice. Currently, advisors over the age of 55, manage 56.7% of total assets, despite accounting for 42% of advisors. 

RIAs and independent broker-dealers saw headcount growth of 856 and 685, respectively, in the first 9 months of 2023. In contrast, wirehouses lost 612 advisors. This has been the case since 2008, and Cerulli forecasts that the share of advisors at wirehouses will go from 15.1% to 13.4% over the next 5 years.  

In contrast, RIAs are where growth is happening as most broker-dealers now offer some sort of RIA platform to entice recruits. There has also been consolidation, driven by private equity, with a total of 321 deals in 2023. 

Finsum: Cerulli issued a new report which revealed that nearly 40% of advisors will be retiring over the next decade. 

Entering 2023, the consensus was that fixed income would outperform. This turned out to be incorrect as the economy and inflation proved to be more resilient than expected. For the year, the Bloomberg US Aggregate Index returned 5.5% which is in-line with the average return although the bulk of gains came in the final months of the year.  

As the calendar turns, the consensus is once again that the Fed is going to be embarking on rate cuts. Currently, the market expects 6 cuts before year-end which means there is room for downside in the event that the Fed doesn’t cut as aggressively. According to Bernstein, this may be premature as the firm sees many reasons for upward pressure on yields including inflation re-igniting, heavy amounts of Treasury debt issuance, and an acceleration of economic growth. 

Bernstein recommends that investors eschew more expensive parts of fixed income like high-grade corporate debt. Many are unprepared for a scenario where spreads tighten or rates fall less than expected. Instead, it favors segments that would benefit from stronger growth like preferred securities and AAA collateralized loan obligations (CLOs). The firm also likes TIPS and the 2Y Treasury as these offer attractive yields and inflation protection. 

Finsum: While most of Wall Street is bullish on fixed income in 2024, Bernstein is more cautious due to its expectations that rates will fall less than expected, while valuations are not as attractive. 

Marketing is essential to an advisors’ long-term success as it is how you connect with prospects. Ultimately, it requires experimentation to figure out the best approach for your practice. But, it’s useful to learn from other advisors and identify what works for them as a starting point when constructing your own marketing plan.

While there are many methods, some commonalities between effective marketing strategies is that it effectively captures the attention of your target audience. It also communicates what makes you unique and what value you provide to clients. It should establish your credibility in your prospects’ mind. Finally, the end goal of marketing is to capture leads that can eventually be converted into clients. 

Email marketing allows you to share information and promote your business to people who have signed up for your email list. You can offer an incentive for people to join such as an e-book or a free workshop. This can be quite effective as it allows you to build a relationship and establish credibility by speaking about topics that address potential pain points.

By going straight to a persons’ inbox, there is an opportunity for a deeper connection than other mediums. Over time, some portion of readers may elect for an in-person consultation or phone call once your value proposition becomes clear. 

Finsum: Email marketing can be a quite effective marketing strategy. It allows advisors to establish credibility and start a relationship with clients in a low-pressure manner. Over time, some portion of readers can be converted into clients.

Schwab Asset Management conducted its annual ETF and Beyond report in which it surveys a sampling of its own clients to gain insight into how investors are thinking. One of the most interesting findings was that Millennial investors are the demographic most interested in personalizing their portfolios and having their investments align with their values.

But, that instinct is shared by other age groups to a lesser degree. Overall, 88% of respondents said that they are looking to personalize their portfolios, while 78% want to align their investments with their personal values. 

65% of ETF investors said that it’s important to have more control over their investments, 61% want a greater ability to customize investments, and 61% are looking to optimize their tax situation. Of course, these factors are why direct indexing has been gaining in popularity in recent years. 

There’s also increased awareness as 87% of ETF investors are now familiar with the strategy in comparison to 80% last year. 69% of ETF investors, not in any direct indexing product, expressed interest in doing so over the next year. 

Not surprisingly, direct indexing is even more popular with Millennials as 53% are interested in learning more about it, in contrast to 34% of Gen X and 22% of Baby Boomers. Overall, all investors want more control of their portfolios and alignment with their values, but this trend is even more pronounced among younger investors. 

Finsum: Investors are looking for more control over their investments, tax savings, and alignment with their values. All 3 are possible with direct indexing. 

JPMorgan issued its 2024 outlook for alternative investments. Overall, it sees continued growth for the asset class especially as economic and financial uncertainty remain elevated due to inflation, tight monetary policy, a decelerating global economy, geopolitical risks, and volatility in financial markets. 

According to Anton Pil, the Global Head of Alternatives for JPMorgan Asset Management, alternatives offer investors a means to diversify traditional portfolios especially as stocks and bonds have been increasingly correlated in recent years. It can also help to reduce volatility, increase income, provide protection against inflation, and boost returns on an absolute and risk-adjusted basis.

It notes some key growth drivers for the asset class in the coming year. One of the consequences of tighter monetary policy has been a slowdown in private market activity which has impacted many alternative assets. This has led to attractive valuations in some areas that could have upside especially in the event that the Fed meaningfully eases policy. 

Another catalyst for alternative investments is simply that access to these investments continues to increase due to technology and more awareness. Finally, traditional portfolios have failed to provide adequate diversification in recent years. In contrast, alternative investments were a source of outperformance and diversification during this period.  

Finsum: JPMorgan is bullish on alternative investments for 2024. It sees major growth drivers as increasing access, the need for diversification, and an improvement in financial conditions.