Wealth Management
According to data from the financial technology platform 55ip, a record number of financial advisors are taking advantage of tax-loss harvesting opportunities for their clients. Data from its platform revealed that across client portfolios through Q3, the 2022 YTD tax savings benefit for model portfolios of ETF and mutual funds was 2.99%. Going back to 2020, the annualized tax savings across clients in model portfolios on their platform was 2.82%. The tax savings illustrates the value of ongoing tax loss harvesting within client portfolios throughout the year, compared to those not harvested for tax losses. 55ip, which is a wholly owned subsidiary of J.P. Morgan Asset Management, offers advisors trading and rebalancing capabilities, in addition to automated, personalized, and optimized tax outcomes. Paul Gamble, Chief Executive Officer of 55ip stated “The growth of model portfolios is one of the fastest growing trends in asset and wealth management, but concerns about the tax implication of transitioning and managing client accounts have been a major barrier to broad use by advisors. Volatile markets can be emotionally and financially challenging for investors, but our data indicates they can also present potential opportunities for meaningful benefits from a tax perspective.”
Finsum:Based on data from 55ip’s platform, a record number of advisors are implementing tax loss harvesting in their clients’ model portfolios.
According to the Wall Street Journal, investor home buying has fallen 30% over the past year due to high prices and rising interest rates. The Journal cited Redfin data that showed companies bought 66,000 homes across 40 markets in the third quarter of 2022, a 29% drop from the 94,000 homes bought during the same period last year. The declines come after a two-year period in which investors piled into the US housing market as the demand for suburban properties rose. While investors were buying one in every five homes at the start of the year, a combination of rising rates and elevated prices is driving the slowdown. The Federal Reserve tightened rates from near zero in March to a current range of 3.75% to 4%, which pushed mortgage rates higher and curbed demand. The interest rate hikes were in response to escalating inflation. In addition, house prices have remained the same in many areas of the market despite the fall in sales.
Finsum:Investor homebuying dropped 30% year over year due to a combination of rising rates and high home prices.
Merrill Lynch has landed a San Franciso-based financial advisor from Morgan Stanley. Nandi Gunning, who managed $430 million at Morgan, joined Merrill Lynch’s private wealth management business, which caters to high-net-worth clients. According to the firm, the former CMW Group is now the CWMG Group with the addition of Gunning. The team includes advisors Anthony Canini, John Myers, and Andrew Wages. The CWMG Group also includes five support staff and is based in San Francisco and Columbus, Ohio. It oversees $2.5 billion in total. Gunning got her start at Morgan in 2014. She was drawn toward Merrill’s capabilities in banking, lending, and trust offerings. She also liked the idea of switching from running her own practice to working on a team. As part of a statement, she wrote, “While everyone has unique gifts, the power of teams is bringing together individual skills and talents, diverse perspectives, and vast experience to serve a common purpose. Diverse teams have a broader, more comprehensive view, and the more perspectives the better.” Merrill had previously landed a $1 billion team from Citi earlier in the month.
Finsum:Morgan Stanley advisor jumps ship to Merrill, drawn by the firm’s banking, lending, and trust offerings and the chance to work as part of a team.
More...
Wavertown, a discretionary fund management firm in the UK, is currently pulling in net inflows of £100mn per month from financial advisors, with 85% going into model portfolios. Waverton attributes the growth in demand for its models due to the structural shift in the advice market towards outsourcing portfolio management. In 2020, the firm also noted an uptick in demand for real assets exposure and absolute return strategies from advisors and clients. Currently, more than 30 percent of assets in the model portfolios are allocated to those asset classes. The firm, which has assets under management of £8.6bn, works with 500 advice firms in the UK and offers a range of model portfolios. The firm is noteworthy for the fact that, unlike many other providers, Waverton does not allocate to external funds. Instead, it invests directly in equities, bonds, real assets, and absolute return funds. The firm started as JO Hambro Investment Management and was owned by Credit Suisse from 2001 to 2013. A private equity-backed buyout took place and the firm then renamed itself Waverton in 2014.
Finsum:A structural shift in portfolio management outsourcing has increased the demand for model portfolios driving inflows for a UK-based Wavertown.
According to findings from Janus Henderson Investors’ 2022 Retirement Confidence Report, self-directed investors appear to be tightening their budgets amid rising inflation and market volatility. The report found that 86% of survey respondents are concerned or very concerned about inflation and 79% are concerned or very concerned about the stock market. However, despite these concerns, only 13% of investors have moved money out of stocks or bonds and into cash. Instead, almost half of the respondents said they have reduced their spending or plan to reduce spending as a result of the financial markets and rising inflation. The report also noted that women reported greater concern about the stock market than men, but no gender-based difference was found regarding inflation. Another noteworthy finding from the report was that investors still in the workforce were more worried about the stock market and inflation compared to retirees. This can be attributed to the many uncertainties associated with how their household budgets could change in retirement.
Finsum:A recent report found that investors are tightening their budgets, but not moving to cash amid the current rising inflation and market volatility.
While institutional investors are allocating more to alternative investments, recent analysis has shown that the asset class does not help boost returns. Public Pension Investment Update: Have Alternatives Helped or Hurt? was run by the Center for Retirement Research at Boston College (CRR). It found that the investment performance of public pension funds from 2001 to 2022 averaged only 5.9%, despite increasingly larger allocations to private equity, hedge funds, real estate, and commodities. CCR looked at the returns for broad indices of alternatives and traditional equities before, during, and after the Financial Crisis. It found that alternatives substantially outperformed traditional equities from 2001 to 2007; and other than real estate, alternatives lost less than equities during the financial crisis. However, Jean-Pierre Aubry, associate director of state and local research at CRR and the brief’s author wrote that “Since the crisis, the performance of alternatives has been more mixed, with private equity and real estate rebounding somewhat, while hedge funds and commodities continue to provide lower returns.”
Finsum: A recent brief found that alternatives have not helped public pension performance due to mixed performance since the financial crisis.