Displaying items by tag: clients

In an article for WealthProfessional, Noelle Boughton covers Caldwell SEcurities’ strategy to support older financial advisors in their succession planning. This is due to the aging nature of the workforce in addition to the firm’s desire to maximize retention during the transition process. Senior advisors work with junior advisors in handling clients and then slowly phase out of the business with fewer responsibilities every year.

While junior advisors are focused on growing their business and adding clients, senior advisors are thinking about their retirement and maximizing the value of their practice. Many shops will have advisors sell their business to a junior advisor and then quickly move on. 

Caldwell Securities sees an opportunity by having a more formal and longer transition period that caters to the needs and ambitions of both junior and senior advisors. It’s also a value add for clients as they initially work with both advisors before the junior advisor slowly takes the lead. 

Senior advisors can be satisfied that their clients will continue to be satisfied and that they are being handed to someone who is caring, capable, and competent. They can also continue to draw a paycheck in addition to selling their business while easing into retirement.  

Finsum: The financial advisor industry is aging with a big chunk expected to retire over the next decade. Here is how Caldwell Securities is handling this matter.

In an article for AdvisorHub, Lisa Fu covers Prudential moving $50 billion in client assets from Fidelity’s custody to LPL. As a result, starting late in 2024, 2,600 Prudential brokers will start using LPL as their broker-dealer instead of Fidelity.

It continues to indicate that LPL is focused on growing its broker-dealer business in addition to having the largest network of advisors in the country. The deal is expected to result in around $125 million in costs for LPL but is expected to contribute $60 million in accretive earnings when the transition is completed. 

LPL is boosting its broker-dealer business at the same time that many asset managers are outsourcing these functions to reduce costs. Currently, LPL’s custody unit has $230 billion in assets and has agreements with nearly 1,000 institutions. The firm sees an ultimate opportunity of $5 trillion in custodial assets. 

Fidelity’s agreement with Prudential had an early termination clause which was triggered with the decision to move. It’s expected to be between $6 million and $8 million. Some other perks that Fidelity provided included revenue sharing, research, and preferred pricing. 

Finsum: LPL Financial is growing its custodial business and recently landed $50 billion in client assets from Prudential who is shifting away from Fidelity. 

Most advisors and investors are familiar with the benefits of diversification when it comes to asset classes. However, there‘s less understanding about the importance of risk factor diversification. In ETF Trends, Scott Welch CFA of Wisdom Tree Investments shares the importance of this concept, and why advisors need to intuitively understand it.

There are some parallels between asset class and risk factor performance and diversification. Both are nearly impossible to forecast especially on shorter timeframes. But over a longer period of time, certain conjectures can be made with confidence. For instance, there tends to be mean-reversion over longer time periods. 

Last year exemplified the risks of not being sufficiently diversified in terms of factor risk, growth was crushed, while value outperformed for the first time in decades. Yet, this has nearly completely inverted in the first-half of 2023 due to the rollicking bull market in stocks linked to artificial intelligence. Thus, this demonstrates the importance of factor diversification and rebalancing, similar to what is done for asset classes. 

Currently, one risk for investors overexposed to growth factors is valuations that are historically elevated. In contrast, value factor stocks are quite cheap from an absolute and relative basis. Thus, it could favor some rotation from growth to value once again. 

Finsum: Asset class diversification is an elementary part of portfolio management and construction. Another important concept is risk factor diversification.

Until very recently, direct indexing was simply not an option for the vast majority of investors.  This is because the strategy is quite tedious to execute and could become cost prohibitive in the previous era when commission-free trading and fractional shares were not available.

This is because the strategy requires creating an actual index within an investors’ portfolio. It’s now feasible and quite easy to do due to technological advances. Additionally, the real alpha in the strategy is created through routine tax loss harvesting. 

This is an automated process where the portfolio is regularly scanned to sell off losing positions. Then, these losses can be used to offset capital gains elsewhere in the portfolio. Proceeds from the sold positions are then reinvested into stocks with similar factor scores to the ones that are sold in order to ensure integrity with the underlying index even if the holdings temporarily deviate. 

Clearly, this strategy wouldn’t be tenable without cheap and/or free trading and fractional shares for smaller sums. In the previous era, the high volume of trades would offset any additional returns. Without fractional trading, smaller sums also would not be able to track the underlying index and not be able to invest in higher-priced stocks that comprise large portions of indices. 

Finsum: Direct indexing’s proliferation is only possible due to 2 specific fintech breakthroughs - commission-free trading and fractional shares. 

LPL continues to add advisors with its recent addition of 4 advisors from Edward Jones who managed $410 million in assets and a Merril Lynch broker, J. Brendan Wood, with $130 million in client assets. 

Wood is launching a solo practice - Wood Wealth Management - through LPL’s employee channel, Linsco. Previously, he had been ranked as one of the top #100 advisors in Massachusetts and worked as part of Foundation Management Group which managed $654 million in assets. 

Linsco was created to appeal to wirehouse brokers who want more independence and want to build a business. It gives more flexibility but doesn’t burden advisors with administrative tasks. In June, another Merril broker with $315 million in assets moved to Linsco as well as the channel now counts 100 advisors in total.

In addition to Merril Lynch, LPL has had success in luring brokers from Edward Jones. 4 brokers and $400 million in assets moved to LPL’s Strategic Wealth Services unit and will operate as Omnia Wealth Group in Elkhorn, Wisconsin. Strategic Wealth Services offers support for marketing, compliance, and administrative tasks for a fee. 

Prior to the latest move, 5 Edward Jones brokers had moved to LPL already this year. LPL is now the largest independent broker-dealer with 21,000 advisors while Edwards Jones is a full-service brokerage with 18,900 brokers. 

Finsum: LPL Financial is the largest independent broker-dealer, and it continues to lure brokers from more established firms like Merril Lynch and Edwards Jones.