Displaying items by tag: smas

Wednesday, 10 July 2024 05:20

SMAs Getting a Boost Due to Technology

A recent Goldman Sachs survey reveals that investors are enthusiastic about separately managed accounts (SMAs). Financial advisors appreciate SMAs for their professional management, customization, transparency, tax efficiency, and diversification benefits. 


Chris Mankoff of JTL Wealth Partners finds SMAs advantageous for aligning with clients' preferences and optimizing tax strategies. While there have been challenges in the past with SMAs but the recent technological advancements have made them more accessible and effective. 


Direct indexing, a step beyond SMAs, leverages technology for customized tax management and ESG preferences. Despite their benefits, SMAs may not be suitable for all clients, particularly those with smaller portfolios or predominantly pretax investments.

Finsum: While SMAs might not be for all, with a sizeable portfolio technology makes them easier for advisors to manage. 

Published in Eq: Small Caps
Thursday, 04 July 2024 13:54

Direct Indexing Reflects Changing Demand

Strategic inflection points often build up gradually before causing sudden change, reflecting the need for constant innovation and adaptation in business. Embracing technology, such as direct indexing can create efficiencies, scale operations, and enhance investment processes which is crucial for asset managers. 


Understanding and meeting complex client demands, especially in retail, is essential as clients seek value, not just investment vehicles. The rise of ETFs and SMAs shows the importance of offering cost-effective, customizable solutions, while active management must justify its value in a fee-compressed environment. 


Indexing and alternatives have gained traction due to their reliable and affordable returns, but asset managers must continue to adapt and price their offerings appropriately. Ultimately, leveraging technology and maintaining a client-centric focus are key to navigating disruption and ensuring long-term success.

Finsum: Direct indexing should really be thought of as alpha that is on the table ready to deliver to clients that can afford the sizeable investment. 


Published in Wealth Management
Wednesday, 12 June 2024 06:15

SMAs are the Vehicle To Capitalize on Rate Cycle

Locking in current rates can be beneficial before the Fed cuts interest rates. Holding bonds until maturity offers potential yield, though buying individual bonds can be complex so investors should prioritize vehicles like SMAs to achieve the goals with less complexity. 


Additionally, scalable solutions like individual bonds in SMAs or iBonds ETFs can be used to build bond ladders, providing steadier income. Amid high interest rates and an inverted yield curve, bonds may outperform cash, especially during a Fed pause. 


Advisors can enhance portfolios by adding longer maturity exposures. ETFs and SMAs help add income and stability to portfolios before the next rate cycle while simplifying the approach.

Finsum: There is something to locking in yields, but keep in mind bond prices will fall if the fed cuts rates but holding to term will be beneficial

Published in Wealth Management
Saturday, 08 June 2024 12:12

Investors Aren’t Maximizing Direct Indexing

Direct indexing is increasingly popular as investors seek personalized options and lower costs. This method, which involves owning a representative sample of securities in an index, offers benefits like reduced costs, individual tax lot ownership, and increased tax efficiencies.


However, to fully realize these benefits, direct indexing should be implemented within a single multi-manager account (UMA) rather than standalone accounts. This approach allows for effective tax loss harvesting, consistent exposure to the reference index, and avoids disallowed losses due to wash sales. 


Managing a portfolio within a UMA also simplifies administration and enhances rebalancing and asset allocation efficiency. When switching firms, advisors can use UMAs to minimize capital gains taxes for clients by absorbing satellite holdings into the core direct index.


Finsum: We know the benefits of tax-alpha but these account types could give investors an additional edge.

Published in Wealth Management

According to Cerulli, wealth management firms vying for high-net-worth clients should increase their focus on personalization and private markets. With traditional wealth management, it’s increasingly challenging for advisors to differentiate their services. Additionally, it doesn’t fully meet the needs of clients, especially given unprecedented amounts of uncertainty in terms of the economy, monetary policy, and geopolitics.

A consequence of this uncertainty is unpredictability in terms of return and risk in terms of major asset classes, highlighting the need for effective asset allocation. The report also showed that direct indexing is utilized by 55% of advisors who are looking to provide active management and customization to clients. 

The firm also projects growth for separately managed accounts given high net worth investors’ growing demand for customization and private market investments. As a result, these trends underscore the need for effective account aggregation and performance reporting. 

This enables the alignment of solutions across different areas such as financial planning, investing strategy, banking, estate planning, etc. Equally important, this type of comprehensive reporting and consolidation eases the transition to having higher allocations to alternative investments. 

Finsum: Cerulli conducted a survey of advisors and high-net-worth clients. The findings highlight the importance of providing access to private markets and personalized services.

Published in Wealth Management
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