Displaying items by tag: clients

Decisions made by model portfolio managers are showing that investors are starting to get cautious about valuations of megacap tech stocks. These stocks have been the biggest gainers this year in the stock market. Tech stocks with market caps above a trillion dollars are up more than 50% YTD, while the S&P 500 is up 19%. 2 major catalysts for this group have been the perception that rates have peaked and a frenzy for securities connected to artificial intelligence. 

Of course, many market-cap weighted or tech-focused indices will have outsized exposure to this group. According to Brooks Friederich of Envestnet, an intermediary which operates a platform that offers customized products from asset managers, “End-clients are saying ‘I want an investment product that isn’t going to have all this exposure to the big-tech stocks,’ If you look at retirement portfolios, they all have too much exposure to that because of the construction of the market.”

He also adds that balanced portfolios continue to have appeal and are a major reason for the boom in model portfolios given the ease of combining asset classes. More than half of the assets on its platform are linked to 60/40 or 70/30 portfolios despite the poor performance of fixed income as a hedge against equities last year.  

Finsum: Model portfolio end-clients are showing some concerns about the valuations of megacap tech stocks, while remaining committed to balanced portfolios despite recent volatility. 

Building a powerful brand is necessary for financial advisors who want to differentiate themselves and boost their chance of attracting and retaining clients. Think of branding as the feeling that people get when they think of or see your name. 

Creating an effective online presence is an important element of branding. According to Maritza Lizama, the cofounder and chief marketing officer at Captiva Branding, “93% of buying decisions are influenced by what people see online. How can you improve your online presence? Start with your LinkedIn profile. Get rid of your old profile photo. Your photo needs to look like you. And it’s OK to show a little personality.”

It’s also necessary to figure out your ‘brand purpose’. This encapsulates your reasons for becoming a financial advisor that go beyond just monetary reasons. In addition to this, advisors need to develop a solid understanding of their target audience in terms of their demographics, career, pain points, motivations, constraints, and where they can be reached. 

Then, you can further refine your brand by creating complementary online content that showcases your personality. This can also mean talking about topics that are outside of the realm of finance in order to build a more authentic connection with your audience. 

Finsum: Building an effective brand is important for every financial advisor and can be invaluable in recruiting and retaining clients. Here are some tips to get started.  

Kevin Flanagan, WisdomTree’s Head of Fixed Income Strategy, and Scott Welch, the firm’s CIO of Model Portfolios, recently shared some insights on how model portfolios can be used to generate yield in the current environment. They see this as an opportune time to invest in fixed income especially given the differential between the S&P 500’s dividend yield and short and long-term rates. 

Currently, they see the Fed as wanting to remain hawkish, however the rise in long-term yields has also contributed to a tightening of monetary policy. In terms of inflation, they believe it has peaked but that the Fed is unlikely to begin cutting rates until the middle of 2024 due to ongoing tightness in the labor market. Additionally, they note that credit spreads have recently widened but nowhere near extreme levels.

Amid this environment, they recommend that investors stick to the short-end of the curve given the inverted yield curve and favor US Treasury floating rate notes which are the highest-yielding Treasuries. Within WisdomTree’s model portfolios, the firm has reduced its weight of high-yield debt while modestly boosting allocation to mortgage-backed securities.

Overall, they see fixed income as resuming its natural role - providing low-risk income and serving as a hedge against equities. 

Finsum: WisdomTree shared some insights on the current macro landscape, and how it’s positioning its model portfolio allocation to flourish in this environment. 

A major consideration for many firms is the aging of financial advisors. It’s estimated that over the next 5 years, 25% of advisors will be approaching retirement age. This demographic reality means that recruiting will be a greater challenge and of even more importance. 

Similar to financial planning, effective recruiting means setting clear goals and identifying what your firm needs. This will ensure that your decisions and actions are in alignment with the long-term vision. 

When looking at which groups to target, some common pools to consider are interns and recent college graduates, emerging advisors, and paraplanners. In terms of finding the best candidates, it can be helpful to do some research on competitors to see what they are offering recruits in addition to understanding what prospective hires value. 

Many may not be familiar with the various opportunities and career paths of an advisor. Nor will they be familiar with how an advisor can have a meaningful impact on their clients’ lives so having some personal examples of helping clients and building relationships will be particularly useful. Many candidates also will want some visibility around how the business works, and how the progression will work in terms of professional development, compensation, responsibilities, and partnership opportunities.

Finsum: A major challenge for the financial advisor industry is that 25% of advisors are approaching retirement age. This means that effective recruiting is of greater importance and value.

Being a financial advisor certainly has its challenges due to the unique nature of the industry. One aspect of this is the difficulty of differentiating your offerings and services from your competitors especially when it comes to attracting new clients. 

This means that an effective marketing strategy is essential to long-term success. It can help in building a solid pipeline of prospects and increasing your conversion rate. There are many well-trodden templates that advisors can follow such as building a website or a newsletter. However, your marketing strategy can be more creative and go beyond these generic ideas.

Additionally, it can result in more chances of success if it’s something you enjoy, can be consistent with, and reflect your personality which will lead to a more authentic connection with prospects. 

Some of the more outside-of-the-box ideas include sharing ideas on online forums or message boards. Here, the key is not to make a hard sell but instead show your expertise. It can be valuable in building SEO visibility while creating a more genuine connection than other marketing channels.

Some other ideas to consider are direct mail marketing, hosting a client appreciation event, or sharing quizzes or polls on social media. The commonality of these marketing ideas is that you can experiment with different approaches, show off what makes you unique, and target your ideal clients. 

Finsum: Marketing is more important for financial advisors than most industries given that it can be difficult to easily differentiate services and offerings. Here are some out-of-the-box ideas to consider.