Wealth Management
(New York)
Imagine you are an advisor at a big brand name broker-dealer or wirehouse. As much as you might gripe about your ever-changing compensation plan or the structures the firm puts in place, one thing you really like is that the logo on your business helps you win clients. Naturally then, losing that logo is a big challenge, both in terms of marketing, but also in terms you one’s own psychology. Therefore, when going independent it is critical to consider the marketing support you may receive. Many RIAs have next to none, or at least not much more than off-the-shelf options. However, some RIAs differentiate themselves through branding and marketing, such as leading investment concepts or customized marketing that empowers each advisor.
FINSUM: This might sound silly, but when considering whether to join an RIA google their name and check the Google News tab. Find key terms on their site (e.g. do they have any trademarked words?) and do the same. The firm’s marketing prowess will quickly become clear.
(New York)
Annuities have seen a pickup in interest over the last year. At first this was because of the big drop in markets last spring, but as the year progressed annuities picked up steam because of ultra-low interest rates, which effectively rob retirees of income. For those who want rock solid guaranteed steady income, fixed annuities work best. But for many, especially those can afford some risk to the exact of income they will receive, variable annuities can work very well. Most variable annuities have a couple critical features—they allow you some degree of investment selection, if not total control, and they often guarantee your principal (though not interest income). What this allows is higher payouts if the market does well, but still a guarantee you won’t lose your principal. For those who want the safety of an annuity, but still some income upside because of market growth, variable annuities can be a good choice.
FINSUM: Annuities have some strong demand behind them right now and only seem likely to do better as rates stay low and more Boomers enter retirement.
(New York)
With interest rates so low there has been increasing interest in the role that annuities can play for those near or entering retirement. Bonds just aren’t playing the dual roles of safe haven and income source that they once did, and annuities are a naturally inheritor of that role for the foreseeable future. However, one thing that many are not clear about is how well fixed and variable annuities can work together. While fixed annuities offer guaranteed income, they are susceptible to inflation. Accordingly, many retirees might also want to have some upside that will allow their payouts to move higher. Enter variable annuities, which can offer enhanced income in up markets (but do risk lower payments in down markets).
FINSUM: Fixed and variable annuities work well as a pair. The portion invested in fixed offers guaranteed income, while the variable portion offers upside potential.
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(Washington)
President Biden wasted no time in appointing a new Department of Labor chief. He has named Martin Walsh as Secretary of Labor. Walsh is currently the mayor of Boston and his history offers some insights into what his agenda may be. The Democrats have made very clear that one key component of their agenda is to undue the current DOL 2.0 rule and revamp it with a much stricter Obama era-like rule. That said, the naming of Walsh slightly complicates that picture. He was a union leader in Massachusetts and Biden has celebrated that Walsh is the first union member to lead the DOL in over half a century. Therefore, most think his immediate focus will be on workers’ rights issues and the gig economy rather than on wealth management.
FINSUM: It is hard to say how this will play out, but the naming of Walsh certainly makes it seem like a new rule may be slower in coming than some have feared.
(New York)
The market has been a bit choppy to start the year, including a loss over the last five days. See the full story here on our partner Magnifi's site.
(New York)
Any way you slice it, 2021 seems like it will be a good year for munis, and not because the financial condition of municipalities is so great (it isn’t!). One of the main reasons why is the incoming administration and Congress. Between Biden’s stimulus plans and the now Democrat-controlled Senate, the odds for large amounts of local and state financial support from the federal government are quite high. This part of equation is well understood, but there is a second aspect of the Democrats’ plans that will also be beneficial to munis: they plan to raise taxes on the wealthy. Higher taxes on the wealthy would directly increase demand for munis bonds, which means they should have a tailwind this year.
FINSUM: The part about increased taxes and how it drives muni demand has not been discussed enough. We think this is an excellent angle and combined with financial stimulus, should set up a couple years of smooth sailing.