Wealth Management
Many advisors have embraced model portfolios as it frees them from a portion of their portfolio management responsibilities. Instead, they are able to focus more time and energy on areas like client relationships, prospecting, and planning which are shown to be more important to building a successful practice, client retention, and helping clients reach their goals.
However as covered by Jeff Benjamin for InvestmentNews, some advisors are rejecting this approach. Instead, they believe that they can add value to their clients by remaining involved in portfolio management. Many of these advisors apply their expertise when it comes to selecting individual stocks for their clients’ portfolios.
For instance, Ryan Johnson of Buckingham Advisors will manage the large-cap equity portion of clients’ portfolios, but when it comes to small-caps, international, or fixed income he relies on mutual funds and ETFs.
Many of these advisors cite reasons such as tax management, higher concentration, and greater client involvement in their portfolios. That being said, these advisors acknowledge that it’s more work and comes with greater risk. Yet, they are willing to accept the tradeoff.
Finsum: Model portfolios are taking a greater share of the industry as it frees advisors up from portfolio management responsibilities. Yet, some are not so eager to embrace the trend.
For WealthProfessional, Leo Almazora discusses best practices when it comes to succession planning. For one, advisors need to delineate between working in the business and on the business. Many are so wrapped up in helping their clients plan for the future and reach their financial goals that they don’t apply similar principles to the futures of their practice.
However, it’s increasingly accepted that succession planning is an integral part of serving your clients especially if you plan to retire before your clients. Therefore, advisors need to secure a worthy successor for their clients and it’s ‘the last best thing an advisor can do for their clients’.
According to Almazora, advisors should start planning for succession about 5 years before their retirement date. Although there are multiple ways to structure a takeover, some sort of soft transition is ideal, where the new advisor and old advisor both work together for a couple of years to ease the transition. These types of transitions typically result in less client attrition and more client satisfaction.
In terms of finding the right successor, some considerations are shared values in terms of planning and investing and a similar temperament when it comes to clients. Another important factor is that the successor should be able to identify with the niche that is an advisor’s specialty.
Finsum: Over the next decade, there is going to be a wave of retirement of financial advisors. WIth this in mind, advisors need to get serious about succession planning.
For Barron’s, Steve Garmhausen conducted a roundup of various financial advisors to get their input on the best strategy for fixed-income. Some of the factors to consider are where the Fed is in terms of rate hikes, is a recession imminent or will the economy continue to defy the skeptics, and will inflation continue to decline or will it plateau at an uncomfortably high level.
Yet, what is certain is that Treasury yields are at their highest level in decades. Further, investors can lock in positive real returns for many years given the jump in yields, coupled with the decline in inflation.
According to Matt Kishlansky of GenTrust, it’s a great time for investors to buy short-dated TIPS given the 3% coupon. This would outperform Treasuries as long as the inflation rate stays above 1.9%. And, he believes that inflation will prove to be much ‘stickier’ than consensus forecasts.
Thomas Salvino, the CEO of Performance Wealth, recommends building a ladder of Treasuries to lock in yields at different durations. Overall, he still believes the best way to build wealth is to build a portfolio of high-quality companies that are regularly increasing dividend payments.
Finsum: Fixed-income is in the spotlight as investors and advisors look to lock in lofty Treasury yields. Barron’s asked some advisors on their best fixed-income strategy.
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In an article for SmartAsset, Rebecca Lake CEPF discusses some time management tips for financial advisors. This is especially relevant for advisors in the early stages of their careers as they often have multiple roles such as prospecting for clients, servicing existing clients, portfolio management, operations, marketing, etc.
Many advisors end up overwhelmed and working inefficiently. Ironically, advisors need to audit their time and efforts to ensure that their daily routine is consistent with their long-term goals which is a similar process with onboarding new clients.
The first step is to start creating a structure and routine to your day especially in regards to the most important tasks that drive success. Often, advisors can end up in a reactive mode throughout their day which leaves them tired at the end of the day but still unproductive in terms of achieving longer-term goals.
Another step is to identify tasks that are time-consuming but not productive and find ways to outsource or delegate these. If this is not possible, then you can put some time limit on these tasks.
Overall, these steps can help advisors be more productive and also have a healthier work-life relationship while ensuring that progress is being made towards longer-term goals.
Finsum: A big challenge for advisors is time management. This is even more the case for new advisors who have to build their business while they learn the business.
At Morgan Stanley’s US Financials, Payments, & Commercial Real Estate conference, CEO James Gorman shared some thoughts on the bank’s future, and why he’s particularly bullish on its wealth management arm.
According to Gorman, the bank continues to look for opportunities to expand its asset management business through acquisitions. He believes there is more growth opportunity in this area especially compared to investment banking, lending, or sales & trading due to the industry being ‘non-consolidated’ unlike other parts of the financial world. He is also open to making deals in new geographies.
While Morgan Stanley has traditionally been a Wall Street-based bank, Gorman has sought to increase its presence in wealth management during his 14 year tenure. Some of his most notable acquisitions include Eaton Vance, Calvert Research and Management, and direct indexing provider Parametric Portfolio Associates.
He was particularly positive on direct indexing, since it has resulted in ‘huge positive flows’, and it has seamlessly fit with the rest of its wealth management division. Overall, wealth management is the fastest-growing part of its business albeit the smallest with $1.3 billion in revenue in the first quarter.
Finsum: Morgan Stanley CEO James Gorman has made a successful bet on wealth management as a key growth driver for the bank. He continues to believe in this strategy and is looking for expansion opportunities.
In an article for AdvisorHub, Karmen Alexander discussed the first 100 days of the new presidents of Merril Lynch, Eric Schimpf and Lindsay Hans. The duo have been hitting the road and personally meeting with the company’s roster of advisors, associates, executives, and investment professionals across major markets.
They are also betting on a new growth strategy which dovetails with its parent company, Bank of America. Essentially, it comes down to discovering new talent and then investing in their training. And, it’s a major shift from its previous aggressive recruiting of brokers and advisors.
Currently, it’s targeting about 200 new advisor recruits every quarter. In part, this is a response to the current attrition rate of 4% annually due to a combination of recruitment by competitors, exits from the industry, and retirements. The new trainees will also help to offload work and responsibilities from existing teams so that they can focus more on growing their business and serving clients.
Merril is also offering incentives for advisors to pursue new clients. So far, it’s working as it saw a more than 100% increase in the number of new client relationships in the first-half of the year and a 150% increase in the number of net new households added.
Finsum: Merril Lynch has two new presidents leading it. In their first 100 days, the duo have unveiled their new growth strategy for advisors and clients.