Wealth Management
For Financial Planning, Tobias Salinger talks with Dominique Henderson, the founder of DJH Capital to share tips on growing a financial advisor brand. Henderson is a financial advisor, planner, coach, and content creator who just released an ebook on tactics to grow a financial advisor practice.
His main advice centers around boosting leads, targeting a niche, and creating a long-term relationship. Henderson is a big believer in finding the ‘right room’ where you can be yourself. Here, your message and advise are more likely to resonate.
Henderson also focuses on advisors who are in the early stages of their careers and shares advice on making the right connections, finding the best events to attend, and how a real practice works. Henderson sees an increase in the number of people who considering becoming financial advisors and planners.
He believes that the initial difficulty of cold calling and taking meetings all days dissuade many from the career path. Therefore, Henderson wants to highlight alternative methods of getting started in the business.
Rather than the focus on gathering assets, he believes that advisors should think about how thier advice and planning will help an individual and their families over the long-term in multiple facets of their life.
Finsum: The financial advisor industry has too much of a focus on asset-gathering. Instead, there should be more focus on how the right advice can improve a client’s life trajectory
Direct indexing is gaining adherents at a rapid pace as it proliferates from solely high net worth investors to investors with much smaller sums and is now available through most wealth management platforms. Direct indexing allows investors to capture the benefits of index investing such as low costs and diversification but allows more personalization. Its most well known benefit is that it can help lower taxes due to its unique ability to harvest tax losses which can offset gains in other parts of the portfolio.
Another is that it allows customization of indexes because many investors may want to reduce exposure to a certain stock or sector. This can be because they have substantial exposure to the stock or industry through their other holdings or because of personal preferences.
The latter is a reflection of the rise of values-based investing which is increasingly popular among younger investors. This entails making investments that align with one’s own personal values. For instance, an investor may choose not to include fossil fuel companies in their index because of concerns around the environment. These holdings are then replaced with a different stocks that have similar factor scores.
Prior to direct indexing, investors with strong values would be limited in terms of investment options. Now, they are able to essentially create their own fund that aligns with their values.
Finsum: One of the major benefits of direct indexing is that investors can customize their holdings to align with their personal values.
In an article for WealthProfessional, Noelle Boughton covers Caldwell SEcurities’ strategy to support older financial advisors in their succession planning. This is due to the aging nature of the workforce in addition to the firm’s desire to maximize retention during the transition process. Senior advisors work with junior advisors in handling clients and then slowly phase out of the business with fewer responsibilities every year.
While junior advisors are focused on growing their business and adding clients, senior advisors are thinking about their retirement and maximizing the value of their practice. Many shops will have advisors sell their business to a junior advisor and then quickly move on.
Caldwell Securities sees an opportunity by having a more formal and longer transition period that caters to the needs and ambitions of both junior and senior advisors. It’s also a value add for clients as they initially work with both advisors before the junior advisor slowly takes the lead.
Senior advisors can be satisfied that their clients will continue to be satisfied and that they are being handed to someone who is caring, capable, and competent. They can also continue to draw a paycheck in addition to selling their business while easing into retirement.
Finsum: The financial advisor industry is aging with a big chunk expected to retire over the next decade. Here is how Caldwell Securities is handling this matter.
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In an article for Vettafi, Ben Hernandez discusses why intermediate-term Treasuries could be the best option for fixed income investors given the current market environment. In recent months, long-term Treasuries have considerably weakened as it’s become increasingly clear that the Federal Reserve is not close to pivoting in terms of its rate policy.
This is primarily due to the economy continuing to avoid a recession, while data like the jobs market and consumer spending continue to indicate the economy is expanding. At the same time, the short-end offers generous yields but would underperform in the event that the Fed cuts rates. Another factor is that there is going to be high levels of Treasury supply hitting the market later this year as the government looks to fund its deficit.
Given that both ends of the curve have high levels of risk and uncertainty, investors should consider intermediate-term Treasuries to take advantage of elevated yields while reducing duration risk.
Historically, these periods of ‘pause’ when the Fed is deliberating its next policy move tend to be volatile. This is even more the case this year given the runup in yields and uncertainty in political and macro arenas.
Finsum: Intermediate-term Treasuries could be the best option for investors given the risks and uncertainty surrounding the short and long-end.
In an article for AdvisorHub, Lisa Fu covers Prudential moving $50 billion in client assets from Fidelity’s custody to LPL. As a result, starting late in 2024, 2,600 Prudential brokers will start using LPL as their broker-dealer instead of Fidelity.
It continues to indicate that LPL is focused on growing its broker-dealer business in addition to having the largest network of advisors in the country. The deal is expected to result in around $125 million in costs for LPL but is expected to contribute $60 million in accretive earnings when the transition is completed.
LPL is boosting its broker-dealer business at the same time that many asset managers are outsourcing these functions to reduce costs. Currently, LPL’s custody unit has $230 billion in assets and has agreements with nearly 1,000 institutions. The firm sees an ultimate opportunity of $5 trillion in custodial assets.
Fidelity’s agreement with Prudential had an early termination clause which was triggered with the decision to move. It’s expected to be between $6 million and $8 million. Some other perks that Fidelity provided included revenue sharing, research, and preferred pricing.
Finsum: LPL Financial is growing its custodial business and recently landed $50 billion in client assets from Prudential who is shifting away from Fidelity.
In recent weeks, fixed income drifted lower due to concerns about Fed Chair Jerome Powell’s upcoming Jackson Hole speech, where he was expected to strike a hawkish tone given the economy continuing to expand at a moderate pace and inflation remaining well above desired levels.
Powell did lean hawkish in his remarks but not enough to fuel further selling in bonds. Notably, he warned that the FOMC was prepared ‘to raise rates further’. However, he did temper this with constructive comments on the economy’s resilience and inflation’s path lower. Equity markets experienced strength following the remarks as the speech was less hawkish than expected.
The ultimate takeaway is that the Fed is still hawkish, considers inflation too high, and further hikes are on the table if necessary, but it’s less hawkish than a few months ago. Additionally, it sees the resilience of the economy and progress on the inflation front as reason to remain patient in its current stance which delays the idea that rate cuts are going to happen anytime soon.
Thus, it’s not surprising to see odds for a rate hike later this year edge lower in addition to the odds of a rate cut in the first half of 2023. So far, the ‘higher for longer’ camp continues to be correct which is leading to weakness on the long-end and creating attractive opportunities on the short-end.
Finsum: Fed Chair Jerome Powell gave his much awaited speech at Jackson Hole. He struck a relatively hawkish tone which was broadly in line with expectations.