Displaying items by tag: advisors

BlackRock, the world’s largest asset manager with $2.4 trillion under management, is launching a new active fixed income ETF. This marks BlackRock’s 422nd ETF and the second active fixed income ETF to be managed by Rick Rieder, BlackRock’s CIO of global fixed income. 

The launch is also notable because the ETF is similar to its mutual fund offering, the BlackRock Total Return Fund. Both will invest its holdings into a diversified portfolio of fixed income securities. The ETF has an expense ratio of 0.34% while the mutual fund has a 0.45% expense ratio. Notably, the ETF will allow for intraday trading, offer more liquidity, and provide greater transparency of its holdings. 

This is a continuation of a larger trend. Active fixed income ETFs are taking market share from mutual funds and passive fixed income funds. Many asset managers are converting mutual funds into ETFs or dual offerings. 

The primary impetus is increasing comfort with the category from advisors and institutions. Additionally, active fixed income suits the current moment where there seems to be significant opportunity in the space, but headwinds linger due to a hawkish Fed and rising recession risk. The bet is that active managers are better suited to navigate this tricky environment. 

Finsum: Blackrock filed for another active fixed income ETF which is modeled after its very popular BlackRock Total Return Fund.

The world is always changing. This applies to how people spend their time, do business, communicate, socialize, entertain themselves, etc. The same applies for financial advisors when they are trying to recruit clients. While the principles remain the same, the methods must be constantly adapted to new technology and generations.

For SmartAsset, Rebecca Lake shared some tactics that are working for financial advisors in 2023. While there is plenty of content on the tried and true paths such as referrals or getting involved in the community, Lake explores more unconventional routes.

An interesting angle is to cultivate relationships with estate lawyers. Often, someone gets an inheritance and is in immediate need of an advisor. A recommendation from the estate lawyer can land an advisor a high net-worth client with minimal effort. Similarly, a tax accountant can also be a great source of referrals especially as people are more motivated to get their financial life under control during tax season.

Another approach is counterintuitive and that is to seek out older advisors and ask them for referrals. Many older advisors are not really interested in adding new clients as they have enough on their plates. Thus, they may recommend that the prospect meet with a different advisor who can do a better job for them. 

Finsum: Financial advisors have to get creative to land new clients. Here are some unconventional approaches that are working in 2023.

For decades, Americans have relied on pensions to fund their lifestyles during retirement. This is no longer the case with pensions being phased out in most workplaces. Given today’s high interest rates, it’s worth investigating whether annuities are a sufficient replacement.

It’s already clear that many advisors and investors feel the same way given that demand has soared in the last couple of years given the combination of high rates and an uncertain economic outlook. Last year saw a record of $302.9 billion in sales which was a 47% increase from last year. Further, 2023 sales are projected to exceed this figure by a decent margin. Demographics also support continued strength in annuity sales. 2024 is expected to see the largest number of new retirees in history, and around 40% have expressed concern about having sufficient income especially given the jump in inflation. 

According to an industry study, 32% of those buying annuities do so to have a guaranteed income stream in retirement. 25% do so to provide protection against their assets losing value. According to the same study, 80% of prospective retirees are interested in annuities, while 82% of recent annuity buyers said they would recommend the product to a friend or family member. 

Finsum: Annuity sales are booming due to high rates and an uncertain economic outlook. With a wave of retirees coming, they will play an important role in plugging the gap left by the exodus of pensions.

In theory, active fixed income offers the best of both worlds. It has all the inherent benefits of an ETF structure leading to more liquidity, transparency, and lower costs, but it still gives managers flexibility to find the best opportunities in the fixed income space. 

The category is seeing substantial growth in terms of inflows and new issues. Institutions and advisors are becoming increasingly comfortable with the asset class. Additionally, it’s well suited for this particular moment given the uncertainty about the Fed and the economy’s direction which should create more opportunities for alpha for active managers. 

The latest mega-institutions to jump on the trend is the Bank of Japan. The central bank is shifting $62 billion of passively managed fixed income into active management. It believes this will help it finetune the risk profile of their holdings. It’s also consistent with its recent policy to gradually let yields rise in an effort to combat inflation. 

In fact, this change in monetary policy is also contributing to bond market volatility. And, this jump in volatility is what is leading to opportunities for active managers that the Bank of Japan is keen to capitalize upon. The Bank of Japan is considered a trailblazer, so it will be interesting to see if other central banks follow suit and increase allocations to active fixed income. 

Finsum: The Bank of Japan is converting some of its passive fixed income holdings into active fixed income. Find out why and whether other central banks will follow.

John Olsen, the founder and president of Olsen Annuity Education and the author of ‘The Advisor’s Guide to Annuities’ recently spoke with ThinkAdvisor to share some insights on how advisors can sell more annuities. 

His advice is somewhat counterintuitive. He believes the ‘secret to secret to selling annuities is to give up on trying to sell annuities.’ This is because an advisor must always think about a client’s financial plan and not about potential product solutions. Instead, advisors should consider all financial products, including annuities, like tools to accomplish a job rather than the goal.

Therefore, an advisor’s task is to gain a complete understanding of your clients which includes their financial situation, personality, risk tolerance, lifestyle factors, health considerations, etc., to determine what ‘tool’ will be the most effective. He also believes that most of an advisors’ job is about understanding their clients’ emotions rather than quantitative factors.

Most financial plans fail because advisors don’t understand that emotions are ultimately what drive decision-making. And, a plan that doesn’t take into account these ‘soft’ factors is bound to fail as most decision-making is ultimately driven by emotions. 

Finsum: John Olsen, the founder of Olsen Annuity Education and one of the top annuity salesman in past years, shares some tips on selling annuities.