Wealth Management
LPL recently announced that it nabbed two advisors from Securities America. Eric Fenton and Rodney Wangler, who operate as Fenton Wangler Financial, and are based in Vancouver, Washington, will link up with the JFC Advisor Network, which conducts brokerage and advisory business through LPL Financial. The duo managed a combined $300 million in advisory, brokerage, and retirement plan assets at Securities America. Fenton has been in the industry since 1989. He started with Mutual Service Corporation but has also been affiliated with The Prudential Insurance Company of America, Pruco Securities Corporation, Mony Securities Corporation, Carillon Investments, Sunset Financial Services, SII Investments, and Securities America. Wangler started his career in 1996 with Pruco Securities Corporation. He has also been registered with Mony Securities Corporation, Carillon Investments, Sunset Financial Services, SII Investments, and Securities America. In a statement, Fenton had this to say about the move, “LPL invests heavily in its innovative technology, which is critical to keep pace in this ever-changing environment. We recognized that we needed a platform such as LPL’s ClientWorks where everything is connected, making it easier to do business. Our clients will also appreciate Account View, where they can easily view reports and account information in one place.”
Finsum:A duo from Securities America made the move to LPL due to the firm’s investments in innovative technology, which make it easier to do business.
Recent developments in the wealth management space are expected to fuel the adoption of direct indexing by advisors over the next few years. We previously reported that direct indexing is expected to grow at an annualized rate of 12.3%, according to Cerulli Associates. In a separate survey by FTSE Russell in conjunction with Aite-Novarica, 80% of wealth and asset management firms expressed major interest in offering direct-indexing products to advisors, with 76% ranking the strategy as a top priority over the next year. Developments such as zero-commission trading and fractional shares are expected to help fuel the adoption of direct indexing among advisors. For instance, Charles Schwab and Fidelity both launched direct-indexing offerings last year with low investment minimums at $100,000 and $5,000, respectively. This could potentially bring these strategies into the mainstream. In addition, Fidelity's strategy incorporates fractional shares, while Altruist launched a direct-indexing product last April with a $2,000 minimum. Plus, according to an FTSE Russell spokesperson, “More large custodians and other players entering the space could fuel adoption among registered investment advisors.” Ninety percent of firms polled by FTSE Russell ranked RIAs as a major opportunity for the adoption and distribution of these strategies.
Finsum:Recent developments such as low investment minimums, fractional shares, and more players entering the space are expected to help fuel the adoption of direct indexing among advisors.
Last month, the Vanguard Group decided to drop out of the Net Zero Asset Managers initiative, whose members commit to making their investment portfolios emission-neutral by 2050. The decision by Vanguard emphasizes the notion that retail investors are less focused on ESG priorities than institutional investors. The fund giant said that 80% of its nearly $8 trillion in assets are in index funds, which typically attract retail investors. The rationale for the decision, according to Vanguard was that it was responding to the desire of its clients to provide "clarity" and make its independence clear. Vanguard's largest competitors, BlackRock and State Street rely more on institutional investors such as pension funds and foundations. Todd Rosenbluth, head of research at VettaFi told Reuters that “Institutional investors focus more on climate and other ESG priorities amid pressure to do so by clients, regulators and investment activists. BlackRock and State Street are appealing to an investment base that cares more about ESG." Both BlackRock and State Street have stuck with the Net Zero Asset Managers initiative. Rosenbluth also stated that “Many retail investors are also interested in matters like climate change, but prioritize them less in building retirement portfolios.” That matches a FINRA Investor Education Foundation study of retail investors last year that found only 9% of respondents held ESG investments.
Finsum:Many retail investors are interested in climate change, but prioritize them less in building portfolios, while institutional investors focus more on ESG amid pressure from clients, regulators, and activists.
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With studies indicating that the advisory industry’s organic growth rates are near zero, Gary Foodim, chief marketing officer for Mercer Advisors, believes it’s time to bring a renewed focus to marketing. Firms are facing a more challenging environment now. Advisors are dealing with rising inflation, higher interest rates, and market volatility that have slowed down the decision-making time of consumers. In addition, the competitive environment has also increased with an influx of low-cost financial advisors. Due to these challenges, traditional referral activities may no longer be enough. So, Foodim is recommending advisors embrace digital marketing for more leads. He noted that “A strong digital client lead generation engine requires three important things rooted in a ‘test and learn’ approach. First, firms need to refine their message and target audience – are you targeting the right people, and are you doing it with a differentiated message?” He also believes that firms should be open to testing various digital lead sources including paid search, social ads, connected TV ads, and nurturing email campaigns. Firms should also conduct audience testing through lookalike audiences, where you create groups of people who look like your current clients. This can be done through outside marketing firms or on social media platforms such as Facebook. Finally, firms should develop an internal sales team to follow up and convert these leads into clients.
Finsum:With increased competition and a challenging market environment, referrals may no longer be enough, which is why advisors should embrace digital marketing as a way to generate new leads.
After a brutal year in the markets, you wouldn’t blame investors for being cautious in 2023. However, Fundstrat’s Tom Lee believes that history favors a 20% stock-market return in 2023. According to Fundstrat, “Historical data shows there is a high chance that the U.S. stock market may record a return of 20% or more this year after the three major indexes closed 2022 with their worst annual losses since 2008.” Lee basis this on the fact that in the 19 instances of negative S&P 500 returns since 1950, over half of those years were followed by the index gaining more than 20%. He and his team believe that three possible catalysts would enable stocks to produce 20% gains this year. The first catalyst is lower inflation. They expect lower inflation to set the stage for the Fed to stop raising rates and eventually start to lower them. Fundstrat also believes that wage gains will slow and volatility will fall. According to Fundstrat, equity and bond market volatility is likely to fall sharply in 2023 in response to a drop in inflation and a less hawkish Fed. Lee and his team wrote in a note that “Our analysis shows this drop in VIX is a huge influential factor in equity gains, which would further support over 20% gains in stocks.”
Finsum:Due to historical data, lower inflation, slowing wage gains, and falling volatility, Fundstrat’s Tom Less believes that the market will gain 20% or more this year.
Direct indexing was a hot topic last year as personalization gained steam. It is expected to continue to gain popularity with investors still dealing with inflation and recessionary concerns. Investors want an investment strategy that not only combats market volatility but also addresses their personal situation. According to a 2021 McKinsey study, consumers don’t just want personalization, they demand it more than ever. Investment advisors are recognizing this and looking for ways to incorporate personalization into their clients’ portfolios. Based on the results of Schwab’s 2022 Independent Advisor Outlook study, more than half the advisors surveyed anticipate clients to expect more personalization of investment portfolios. Millennial investors are leading this trend. While personalized portfolios were historically designed for ultra-high-net-worth investors due to high account minimums, advancements in financial technology have brought these offerings to investors of all means. With personalization, investors can have more control over their holdings matching their specific views. Plus, it might also lead to better investment outcomes. Poor investing behavior such as making decisions based on emotion can lead to poor results. With a personalized portfolio, investors are more likely to stick to their strategy when markets get volatile.
Finsum:As inflation and a potential recession remain on investors’ minds, advisors expect their clients to ask for more personalized portfolios.