Follow the leader?

Thing is, whether due to, for example, the pending retirement of its founder and current CEO or spurred by growth targets that have fallen short, your investment advisory firm needs fresh executive leadership, according to selectadvisorinstitute.com.

One of a number of questions you should ask yourself: should the new leader currently be a member of your firm or not?

Prior to arriving at a decision, bear in mind:

Three reasons to hire from the outside:

• Internal employees may lack the leadership ability
• It’s time for a shakeup
• Removing top talent from the competition

Three reasons to promote from within 

• Save time, not to mention, money
• Your firm’s already on the right track
• Retention and morale

The need for new talent in commodity management’s made all the more important to move off the back burner considering financial advisors managing assets valued at trillions of dollars are preparing to head into retirement, according to financial-planning.com.

Yet, it’s not an easy road for those breaking into the industry, reported Cerulli Associates. In 2022, more than 72% of early career "rookie" advisors didn’t break through and left the profession in the rearview mirror.

In an article for USNews, Tony Dong covers the opportunity for investors in high-yield fixed income and equity ETFs. Currently, investors can lock in risk-free yields above 5% due to rates being at their highest level in decades. 

However, these short-term rates are not likely to linger at these levels for a long period of time due to inflation peaking and now starting to roll over as well as increasing risk of a recession. Although there is divided opinion on which outcome will prevail, the reality is that either scenario will result in lower rates and yields. 

For investors who don’t believe that a recession will materialize, they should be salivating at the prospect of buying a high-yield fixed income or equity ETF to lock in these yields. These ETFs offer higher yields than Treasuries, but they also offer the potential for appreciation if economic growth surprises to the upside. 

For instance, the Invesco Fundamental High Yield Corporate Bond ETF is a diversified basket of high-yield, corporate bonds. These are riskier than investment-grade bonds but less so than equities. Currently, it pays a yield of 6.7% with an expense ratio of 0.5%. 

Finsum: Investors should consider taking advantage of the highest rates seen in decades through high-yield ETFs. 

At the Aspen Ideas Festival, Blackrock CEO Larry Fink surprised many when he said that he will no longer use the term ‘ESG’ because it had been misappropriated by the far left and the far right. Of course, Blackrock and Fink have been one of the leading proponents of the movement and used their station as one of the world’s largest asset managers to push corporations to consider these factors when making decisions. 

Now, many conservatives are pushing back and want to end the consideration of ESG factors when making investment decisions. At the state level, legislation has already been passed in many red states to ban ESG investing by state funds. Florida actually pulled $2 billion out of Blackrock funds to protest its ESG stance. 

Fink’s verbal retreat is an acknowledgement of these forces, but it’s uncertain whether this is simply a rhetorical change or a change in behavior. Previously, Fink has spoken passionately about the risks that climate change poses to companies and the importance of governance and diversity at the highest levels. He believes that long-term financial results are enhanced by considering these factors in decision-making by executives. 

Finsum: Blackrock CEO Larry Fink is one of the original and most passionate believers in ESG investing. However due to recent political blowback, he has said that he will stop using the term.

Following a couple of quiet months in terms of financial advisor recruiting, there’s been another surge in activity in terms of M&A for RIAs as covered by Ali Hibbs for WealthManagement. It’s not a coincidence that this renewal in appetites is happening along with a resurgence in ‘animal spirits’ due to strong stock market gains and constructive developments on the economic and inflation front.

Commensurately, Cetera Holdings which is the parent company of Cetera Financial Group, acquired The Retirement Planning Group (TRPG). TRPG is a firm with 14 advisors and 40 employees with headquarters in Kansas City and offices in St. Louis and Denver. It marks the first pure RIA acquisition by Cetera, but it wasn’t exactly surprising given the recent arrival of former Fidelity senior executive Mike Durbin as CEO. As of the end of Q1, Cetera had $330 billion in assets under administration and $116 billion in assets under management. 

According to Durbin, the deal is accretive for Cetera and ‘represents our commitment to constantly identify and deliver multiple options that give advisors a depth of choice and flexibility to affiliate their business with Cetera.’ Earlier this year, Cetera made minority investments in Prosperity Advisors and NetVEST Financial. It also acquired the retail wealth business of Securian Financial Group. 

Finsum: M&A activity is picking up once again in the RIA space after a couple of months of less activity. The most high-profile is Cetera’s acquisition of The Retirement Planning Group.

In an article for Citywire, David Stevenson discusses whether active fixed income or equity ETFs will displace mutual funds. Already, passive equity funds have replaced mutual funds as the preferred vehicle for investors and institutions given lower costs, more transparency, and better returns over long time periods. 

On the fixed income side, it’s a bit more challenging given that active funds have a track record of outperforming passive funds. In large part, this is because active funds have more latitude in terms of duration and credit quality that are not available to passive funds. 

However, Stevenson is skeptical that active ETFs will be able to completely replace mutual funds. He sees many active ETFs as being mutual funds in an ‘ETF package’ with a slightly lower fee. He is also skeptical that active fixed income will continue to outperform over the long-term. 

As evidence, he cites the lack of inflows into active ETFs despite a spate of launches over the past year. So far, active funds only account for 5.8% of assets under management, while passive makes up the rest. Of this, active fixed income ETFs have seen 9% of total bond flows, totaling only $8.5 billion, while passive fixed fixed income ETFs have seen $75 billion of inflows. 

Finsum: Active fixed income funds have performed well YTD but still are not seeing significant inflows despite a number of new issues in the past year.