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Friday, 15 September 2023 11:18

Another Exit From Merrill Lynch

One of the biggest stories in the financial advisor recruiting world has been the exodus of advisors from Merrill Lynch to greener pastures. The big winners of these transitions have been LPL and Morgan Stanley. 

Last month, the Harris Rao Group, who is based in Phoenix moved to Morgan Stanley from Merrill Lynch. The team has a total of $630 million in client assets and generated $3.5 million in revenue last year. 

The group’s lead advisors are Christopher J. Harris and Nihaal M. Rao. Harris and Rao joined forces in 2005 and had been looking for a new home over the last couple of months. Both started their careers with Ameriprise Financial before joining Merrill Lynch in 2008. They were ranked #30 by Forbes in terms of wealth management teams.

According to sources, they wanted a place where there was less pressure to sell banking products and a more complete set of insurance products for their clients. Many of their clients are business owners, and they believe that Morgan Stanley offers better solutions for their needs.

Morgan Stanley also continues to aggressively recruit advisors and has been offering high-end deals to continue gathering assets. Over the last couple of months, they have landed just over $1.2 billion in client assets from Merrill Lynch. 

Finsum: Morgan Stanley continues to poach advisors from Merrill Lynch. The latest is a group from Arizona which produced $3.5 million in annual revenue.

Citigroup conducted a survey of 268 family offices to gather information on their positioning and thoughts on the current market. Overall, the family offices decreased exposure to equities while more than half increased their fixed income allocations. According to Citigroup, it was the most significant change in family office positioning since 2020. 


The bigger trend is that family offices are becoming more conservative given the challenging economic environment. In terms of their biggest concerns, they identify inflation, a hawkish Federal Reserve, and a spike in geopolitical tensions specifically around the US and China.


Currently, the average family office has 16% in fixed income, 12% in cash, and 22% in equities. Even within these allocations, they are focusing on areas with less risk. For equities, it means companies in traditional industries with positive cash flow and attractive valuations. For fixed income, it means a bias towards higher credit quality and shorter duration. 


In total, these family offices that were surveyed control more than $1 trillion in assets. Specifically, the family offices that are adding fixed income exposure have a cumulative total of $568 billion in assets. 

Finsum: Citigroup surveyed 268 family offices to find out their thoughts on the current market. More than half are increasing fixed income allocation and selling equities. 



Wednesday, 13 September 2023 16:06

BlackRock’s Newest Active ETF Launch

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.



Wednesday, 13 September 2023 16:06

How Advisors Are Landing Clients in 2023

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.


Wednesday, 13 September 2023 16:00

Tax Considerations for Fixed Income Investors

Money has been pouring into fixed income and money markets as investors look to take advantage of high rates and protect their portfolios from inflation and market volatility. While the advantages are clear, investors should also understand the tax implications especially since there are more complications than equities. 


For one, taxes on interest income must be paid. However, there are some caveats. For instance, an investor can avoid state taxes by investing in a US government security such as Treasuries although federal taxes must be paid. In contrast, no state or federal taxes are paid on interest income from municipal bonds. 


Some investors choose to keep their fixed income investments in a tax-free retirement account. Despite taxes on interest income, fixed income continues to deliver positive, inflation-adjusted returns for investors. However, the tax bill should be considered prior to making these investments especially in high-tax states.


Ultimately, fixed income offers many benefits which investors are eager to capture. In this frenzy and focus on yield, many investors are losing sight that these expectations should be tempered given that the income is taxed. But the challenge is that this ‘penalty’ differs based on every owners’ geography and financial situation. 

Finsum: Fixed income has exploded in popularity due to high rates and recession risk. Yet, many investors are overly focused on the income and taking into account tax considerations.


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