Displaying items by tag: advisors

In an article for VettaFi’s Modern Alpha channel, Nick Peters-Golden discussed the outperformance of active fixed income funds in the first quarter of 2023. The entire sector has had strong performance since the end of last year primarily due to decelerating inflation, rising recession odds, and the banking crisis. 

As a result, fixed income ETFs saw $52 billion of inflows in the first quarter which is more than 60% of the total $80 billion in ETF inflows. Within the fixed income ETF universe, active bond funds have outperformed as they have been able to take advantage of market volatility and concentrate on shorter-term maturities which have outperformed. 

One example is the Kingsbarn Tactical Bond ETF which invests across the credit and duration spectrum in global bond ETFs and Treasuries. This is an outperformer among active bond funds with a 6.2% return YTD. Another outperformer is the First Trust TCW Securitized Plus ETF which invests primarily in mortgage-backed securities that are comprised of private securities and government-sponsored debt. This fund is up 5.2% YTD. 

Finsum: Active fixed income funds have outperformed in 2023 and been the recipient of the bulk of ETF inflows.

In an article for ETFTrends’ Direct Indexing Channel, James Comtois shared some thoughts from Vanguard executives about direct indexing. In essence, the company sees it as having a bright future and offering significant benefits in the terms of tax-loss harvesting.

With traditional ETFs, investors aren’t able to reap the benefits of tax-loss harvesting. However, direct indexing allows investors to get the benefits of an ETF like diversification and low costs, but they can also sell securities at a loss to offset taxable gains in profitable securities. Subsequently, the sold securities can be replaced with securities that have similar factors to maintain diversification.

These benefits also compound with more frequent scans. So, daily or weekly scans will lead to better outcomes than monthly or quarterly scans. Previously, there were constraints to more frequent scans as an advisor couldn’t monitor portfolios so frequently. But with automated, direct indexing strategies, these services are available to a wider swathe of investors. Overall, more frequent scanning can add between 20 and 100 basis points to a portfolio.

Finsum: Direct indexing offers specific benefits to investors especially when compared to investing in ETFs.

In an article for SmartAsset, Rebecca Lake CEPF discussed the importance of a workable retirement plan for financial advisors. Many advisors spend their careers helping their clients achieve their financial goals, so they can retire in peace. Yet, they don’t apply the same diligence to succession planning for their own practices.

Instead, advisors should think about the ultimate outcome they want for their business and then work backward to create a plan to achieve that goal. Of course, the plan needs to have some flexibility built in as circumstances can change. But, an end goal is essential to ensure that all of your efforts translate into ultimate success. 

The next step is to have a rough estimate of the net worth of your business. This will help you understand how much your practice would generate in the event of  sale. In tandem with this, advisors should also ensure that their personal financial planning is on track in terms of retirement planning, disability insurance, life insurance, budgeting, etc.

Following this, you should be transparent about your succession planning with clients and employees or anyone else who could be potentially impacted. Employees want to have some sort of clarity about their careers and potential roles, while clients want to be reassured that they will be in good hands with a new management team. 

Finsum: Succession planning is an essential step for financial advisors especially as these decisions will have a major impact on clients and employees.

In an article for LPL Financial, the firm discussed some methods for how financial advisors can build a pipeline of potential clients to ensure the growth and longevity of their practice. 

The first step is to identify your prospecting strategy. This entails identifying key goals and metrics for each step of the client journey to ensure that consistent effort and focus is being applied at all stages. There should also be some sort of system to monitor outreach to prospects, quickly follow up, assess whether the prospect is a good fit, and conversion into clients.

The next step is to identify your key values and differentiators. Then, share this with your target audience. This step is critical in helping prospects understand why you chose the profession, and what you stand for. 

An important element of this step is to figure out your ideal client and then focus your outreach efforts on this niche. Then, you can brainstorm ways to connect with that target audience whether it's through advocacy groups, social media, community events, etc.

Finally, you should ask for referrals from existing clients as they are likely to have the best understanding of who among their friends and colleagues would be receptive to learning about your approach to helping them reach their financial goals. 

Finsum: Financial advisors need to build and nurture their pipeline of prospects to ensure that their practice continues to grow and has longevity. 

Algo Chain, a fintech wealth management startup, is launching an AI powered toolkit subscription service which utilizes ChatGPT 3.5 Turbo. The service offers a variety of ETF model portfolios that use technical signals and macro data points to help users navigate markets and optimize asset allocation. 

The AI is designed to generate signals and suggest allocations based on historical precedent. It enables advisors to sort through thousands of ETFs to find the ideal combination of factors to suit a client’s needs. 

Given the proliferation of AI tools following the release of ChatGPT 3.0 earlier this year, it’s not surprising to see the technology applied to wealth management. The company believes that the bulk of a portfolio’s returns are due to asset allocation. Thus, it offers insight into how various asset allocations have performed in various circumstances. 

This is Algo Chain’s second model portfolio offering. Earlier this year, it launched six model portfolios in tandem with HANetf, representing various themes. It’s expected that we will continue to see a proliferation of AI-backed tools to enhance model portfolio offerings over the coming months.

Finsum: Algo Chain is launching an AI powered toolkit to help enhance and optimize ETF model portfolios offerings.