Displaying items by tag: clients

More than anyone else, financial advisors intuitively understand the value of planning in order to create successful outcomes. Their entire career is built around that concept, and they provide that service for their clients on a daily basis to help them reach their financial goals and attain a comfortable retirement.

So, it’s a conundrum that many advisors don’t apply the same rigor when it comes to their practices especially as it may impact their ability to recruit and retain clients if they are at a more mature age. Succession planning can also help advisors maximize the value of their business when it comes to selling, but it can be overwhelming given the variety of options. 

A good intermediate step for advisors who are just beginning the process is to have a management succession plan and a buy/sell agreement in the event of a death or disability. A management succession plan details who will take control of the business in terms of operations. Typically, it’s an employee or possibly a trusted colleague in the industry. The buy/sell agreement is usually funded by life insurance and is a legal document that clarifies how ownership of the business is transferred if the principal unexpectedly leaves the business. 

Both steps are essential as it guarantees the successful continued operation of the business, while assuring that the interests of the advisors’ heirs and family are also taken care of. 

Finsum: Ironically, many financial advisors don’t take succession planning seriously. It’s understandable given the variety of options and implications, but here are some small steps to get you started.

Although 2022 was the worst year for bonds in recent history, there are some silver linings for fixed income investors according to WisdomTree’s Andrew Okrongly and Behnood Noei who are the firm’s director of model portfolios and fixed income, respectively. These are the highest yields in decades which is bringing ‘income back to fixed income portfolios’ and the potential for significant returns. The second is reduced duration risk given that short-term bonds are offering generous yields.

The current environment is significantly different from what prevailed for much of the last 2 decades when bonds both trended higher with minimal volatility. However, the asset class became less appealing due to higher levels of duration risk in addition to miniscule yields. As a consequence, many fixed income investors went further out on the risk curve to find yield whether it was junk bonds, EM debt, or dividend-paying stocks. 

Now, investors can find much higher levels of yield with much less risk. Therefore, fixed income can return to its traditional role of providing income and safety in portfolios. In fact, it’s a rare circumstance that shorter-term bonds are offering much higher yields than longer-term bonds with less risk. And, these conditions should persist given current Fed policy and the economy’s resilience. 

Finsum: Investors should consider short-duration fixed income model portfolios given that they are offering higher yields with less duration risk. 

LPL Financial topped earnings expectations in the second quarter as it reported $3.65 in earnings per share which exceeded analysts’ estimates of $3.47 per share. It was also an 85% increase from last year, primarily driven by higher rates. The company also had another strong quarter in terms of recruitment which the firm expects to continue in the third quarter. 

In total, it added 421 new advisors in Q2 for a total of 21,942. Notably, this is more than a 5% increase on a year-over-year basis as it had 20,811 at the end of last year’s Q2. It saw an 8% increase in total assets, reaching $1.2 trillion with organic new assets of $22 billion and recruited assets of $19 billion. 

According to CEO and President Dan Arnold, the company’s success was due to winning new clients, expanding ‘wallet share’, focus on servicing clients, and a differentiated experience. It also saw a 99% retention rate in the quarter, and the company continues to invest in new technology and new services such as direct indexing. It also announced the acquisition of Crown Capital which has 260 advisors and $5.5 billion in assets. 

Finsum: LPL Financial announced its second quarter earnings results which topped analysts’ expectations in terms of earnings per share and asset growth.

It’s often remarked that demographics are destiny. Like most developed countries, the US has an aging population with about 10,000 Americans reaching retirement age every day. And over the next decade, more than 20% of the workforce will reach retirement as well.

The issue is even more stark for the financial advisor industry with the average advisor in the 50s. For advisors in this age group, it’s necessary to start thinking about succession planning for multiple reasons. 

For one, a successful exit requires the same type of planning and intention that an advisor helps clients with in order to reach their financial goals. Second, proper succession planning can ensure that you will maximize the value of your practice when you are ready to retire. Finally, it’s an important signal to prospective and current clients that you are committed to their success even if you may no longer be an active part of it. 

The first step is a continuity plan which details what happens to the practice in the event of a death or disability. The second step is to investigate various options. Recently, a popular option for smaller firms is to sell but then continue to work as an employee for a couple of years to ensure a smooth transition. 

Regardless of what you choose, it’s important to keep your clients updated about succession and continuity plans. Ideally, you can meet with your clients and their new advisor multiple times before the final transition. 

Finsum: The financial advisor industry is approaching a demographic cliff. For a variety of reasons, it’s important for advisors to start succession planning. 

LPL is partnering with MSCI to add direct indexing capabilities to its suite of model portfolios. Advisors will be able to access these features through custom indexed separately managed accounts. Direct indexing is a growth market for advisors due to its ability to provide tax savings in down years, a slight increase in returns, and more personalization.

The company made the announcement at its Focus 2023 event. LPL is currently the largest independent broker-dealer in the United States with nearly 20,000 advisors and over $1.1 trillion in assets. 

Rob Pettman, executive VP of Wealth Management Solutions said that “Investors want the ability to customize their investment strategy in order to achieve a range of goals, including reducing overall tax burden and/or avoiding a particular sector or security.”

The new offering will have a $100,000 minimum and include models for large-caps, small-caps, mid-caps, and international stocks. They will have the MSCI USA and EAFE indices as the basis for these portfolios. 

There will also be an option for automatic tax-loss harvesting which can be optimized according to each client’s portfolio. Overall, the firm believes that direct indexing will also help with attracting and retaining clients especially with nearly all of LPL’s competitors offering direct indexing. 

Finsum: LPL joined the model portfolio race and is partnering with MSCI to offer a variety of options and capabilities.