Wealth Management
According to Marcy Keckler, senior vice president of financial advice strategy at Ameriprise Financial, couples consulting a financial advisor tend to be more transparent about their finances, emphasizing the importance of selecting an advisor jointly. Keckler highlights the optimistic trend in couples' financial communication, as revealed by the Ameriprise Couples, Money & Retirement study, which surveyed over 1,500 American couples with substantial investable assets.
The study indicates that the majority of couples trust each other on financial matters and share similar retirement goals. Keckler stresses the necessity for advisors to engage with both partners from the outset, ensuring a balanced relationship and effective financial planning.
Furthermore, the survey underscores the crucial role of advisors in addressing couples' concerns, such as providing support to family members and navigating retirement uncertainties. While most couples plan to retire simultaneously, the reality often diverges, requiring flexibility in retirement planning. The study's recommendations include open communication about financial objectives, resolving disagreements constructively, and collaborative selection of a financial advisor. Despite positive findings, challenges such as estate planning and financial transparency persist, highlighting the ongoing need for advisor assistance in fostering financial harmony among couples.
Finsum: The couple adds a different dynamic to the advisor client relationship and understanding their needs is fundamental, as more are seeking advisors in pairs.
Direct indexing has witnessed a meteoric rise, with investments in direct indexes eclipsing $260 billion by the end of 2022. This method, involving the investment in individual securities comprising an index rather than the index fund itself, offers a distinctive set of advantages.
It not only aims to closely replicate index performance but also holds the potential to significantly enhance tax efficiency. Furthermore, direct indexing provides a level of customization surpassing conventional index funds, making it increasingly attractive for those seeking tailored investment approaches. Direct indexing is gaining momentum, particularly due to its ability to mitigate risk concentration.
Through this strategy, investors can manage individual components for tax purposes more effectively. By liquidating underperforming securities to offset taxable gains elsewhere in their portfolio, investors can potentially reduce tax liabilities and enhance tax efficiency. However, it's essential to navigate this strategy within the confines of the wash sale rule, which prohibits claiming a tax deduction for a sold security if a substantially identical one is purchased within 30 days before or after the sale.
Finsum: More needs to be said about direct indexing reducing risk in the portfolio by selecting and deselecting stocks based on their risk profile.
Amidst higher interest rates, achieving alpha and managing risk in corporate credit necessitates a nuanced approach. Josh Lohmeier of Franklin Templeton Fixed Income unveils a dynamic portfolio construction method adaptable to diverse investor profiles and market conditions.
In the current interest rate landscape, sophisticated techniques are essential for capturing alpha with improved downside protection. Alongside meticulous bottom-up security selection, a systematic quantitative portfolio construction process can potentially yield consistent excess returns uncorrelated with peer benchmarks.
By segmenting the opportunity set based on volatility and strategically positioning along the yield curve, investors can optimize risk allocation and enhance portfolio returns. This adaptable portfolio construction framework offers a repeatable process with consistently positive outcomes, emphasizing the importance of diversification across managers and fixed income portfolios.
Finsum: Quantitative approaches can deliver a more resilient portfolio in times of increased volatility.
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Opting to switch broker dealers is typically a last-resort decision, stirring discomfort among advisors. The mere contemplation of change signifies a threshold of considerable discomfort. There are various catalysts for this discomfort, with the top three reasons for advisors to consider such a move descending as follows:
- Advisors increasingly require practice management and marketing aid from broker/dealers as they expand their practices and seek to optimize efficiency.
- Advisors prioritize broker/dealers offering innovative technology solutions such as electronic signatures and paperless office systems.
- Advisors explore broker/dealers offering higher payouts, lower expenses, and more favorable administrative fees to maximize profitability.
Despite the challenges, the landscape of over 500 Independent Broker/Dealers presents ample opportunities for advisors seeking change, with the potential for greener pastures elsewhere.
Finsum: Tech advancements are offering new advisors a plethora of reasons to consider a transition because they can improve both efficiency and client relationships.
There has been widespread adoption of separately managed accounts starting in the mid 2000s. The rationale for managing fixed income assets in this manner remains pertinent today: transparency, flexibility, transaction cost management, and active management are paramount in fixed-income investing.
SMAs offer tailored portfolio management to meet clients’ fixed-income objectives, including tax management, income production, and specific investment restrictions, setting them apart from pooled vehicles like mutual funds and ETFs. The growth in SMAs for fixed income has been remarkable, with assets in SMA municipal fixed-income investments expanding from $100 billion in 2008 to $718 billion by Q2 2023, according to Citi Research.
The advantages of SMAs, such as enhanced customization and efficiency, have fueled their increasing adoption by investors seeking precise control and personalized solutions in managing their fixed-income portfolios.
Finsum: Tailored financial products deliver a more personalized client experience and SMAs provide an avenue to improved relationships.
Raymond James conducted its annual survey of retired financial advisors to figure out how happy they are and the factors behind their responses. A consistent lesson is that succession planning is essential to feeling content in retirement.
Many advisors recommend getting immediately started with succession planning, even if it is many years down the road. An important step is to identify a successor who you believe can continue effectively serving your clients.
Some steps in this process include surveying your network to identify potential candidates, conducting interviews, and spending time with them to gauge if they are the right fit. It can also be helpful to get input from your firm’s management team.
Once you’ve identified a successor, the next step is to inform your clients. In the survey, 74% of advisors mentioned that communicating with clients was important in preparing for retirement. While these conversations can be initially awkward and uncomfortable, they will ultimately deepen the client-advisor relationship and increase the odds of a successful transition for your clients.
The final step is getting mentally and psychologically prepared for retirement. This can mean planning the final stage of their career, whether it means an immediate exit, a transition period, or a consulting role. Retiring advisors have considerable experience and wisdom that they can still share with their successors, especially during stressful situations.
Finsum: Raymond James conducts an annual survey of retired advisors to find out how many are happy and why. One of the major takeaways is the importance of proactive and effective succession planning.