(New York)

The real estate market has been worrying and disappointing for well over a year now. Home sales and new constructions have been trending poorly, all of which has worried investors that a recession may be on the way. However, this year’s drop in yields has made mortgages much more affordable, which seems to be helping the market. Big market player Realtor.com has just put out its updated outlook for the year, saying “lower, but still increasing mortgage rates that will buoy home prices and sales by boosting buyers’ purchasing power beyond what we initially projected”.

FINSUM: For a $200,000 mortgage, the difference in monthly payments right now is already almost a $150 lower versus what it was in the fourth quarter. That is a meaningful difference for many families.

(New York)

The last year has seen a steady and encouraging rise of alternative fee structures in mutual funds. In particular, a number of managers have adopted so-called fulcrum structures to their mutual funds. All of these funds charge a low or zero base fee, and then a performance fee for outperformance of their relevant benchmark. The idea is that customers only have to pay up for services that actually outperform benchmarks. Some providers that now offer these funds include AllianceBernstein, Fidelity, Allianz, and Fred Alger. The main criticism of the funds that is that they can skew incentives and push managers to take outsized risk in order to produce upside.

FINSUM: These funds are not without their imperfections, but they are a useful and thoughtful response by mutual fund managers who are realizing they need to do more to justify their raison d’etre versus ETFs. We think they are a good deal for investors because if the results aren’t good, you pay very little, if they are great, you pay for it. Compare that to an ETF, where you are never going to outperform, but will likely pay more than 10 bp.

(Washington)

The lone wolf financial advisor is steadily becoming a rarity in the wealth management industry (Edward Jones advisors aside!). For instance, 77% of Merrill Lynch advisors now report that they work in teams, up from 48% in 2013. Whether you work solo or in a team, one thing many might not know is that FA teams tend to grow their AUM and client base much faster than solo advisors. The advantage seems to be derived from two key aspects. The first is that a team has a wider variety of skill sets to help deliver comprehensive services to clients. The other is that having a team in place makes clients worry less about the impact of losing a single advisor via illness, death, or leaving the firm.

FINSUM: The team approach seems to be working across the industry, with clients liking the change. That said, forming teams comes with its own set of significant risks and considerations.

(Washington)

The reality of the political environment in the US is making one thing very clear: it is a tentative time to buy or own healthcare stocks. While healthcare companies are currently performing well, the market is growing increasingly bearish about them, and with good reason. Democratic candidates have proposed an array of new national healthcare plans that all have degrees of disruption, some of them massive, to the status quo. That means the healthcare industry is facing a problem that is very hard to control and could cause extensive changes to their current operating paradigm.

FINSUM: Unless healthcare gets so beat up that it is worth taking a risk on the stocks just as a bet that the Democrats don’t win the election, it seems like there is asymmetric risk reward in the sector right now.

(Washington)

Senator Elizabeth Warren, who is running for the Democratic presidential bid, has just put forward a brazen new policy. She is calling for a large scale program to forgive student debt for millions of Americans. She wants to offer a $50,000 forgiveness program to those with incomes under $100,000. She plans to finance the overall program, which also includes making future tuition free, through a tax on the ultra wealthy. Her plan has faced some internal party criticism, because many times those with the highest debt are also those that went to elite colleges and tend to be at the higher echelons of the earnings spectrum.

FINSUM: While this is a LONG way from happening, it is worth thinking through, especially as other candidates are likely to adopt some form of it. In our view, the biggest beneficiary of this policy would be real estate, as it would enable a whole generation of Millennials and Gen Zers to buy homes because they would suddenly be unsaddled by student debt.