Wealth Management
According to a poll of over 355 financial services IT and business leaders, financial services firms feel more confident that they're protected from cyber risk than firms in any other sector. However, they still face significant third-party cyber risks. Cybersecurity firm Trend Micro Incorporated commissioned Sapio Research to perform the survey. The poll found that 75% of financial firms believe they're adequately protected from ransomware. This is far higher than the average of 63% across all sectors. This confidence is attributed to the actions being performed by cybersecurity professionals. According to the survey, 99% say they regularly patch servers, 92% secure remote desktop protocol (RDP) endpoints, and 94% have rules in place to mitigate risks from email attachments. But 72% of respondents also admitted that their organization had been compromised by ransomware in the past, and 79% see their sector as a more attractive target for cyber-attacks. In fact, Trend Micro found that 56% have had suppliers compromised by ransomware, 54% believe their suppliers make them a more attractive target, and 52% say a significant number of their suppliers are Server Message Blocks (SMBs), who may have less resource to spend on security.
Finsum:While financial services firms are more confident in their cybersecurity protection than other sectors, they often face more threats.
Yields on developed market government bonds have been soaring this year, as a result of higher inflation, sharp rate hikes, and quantitative tightening. The latter of which is what has traders nervous right now. The Federal Reserve is looking to increase the pace of winding down its nearly $9 trillion balance sheet, while the European Central Bank has also been looking to shrink its €5 trillion bond portfolio. Central banks built up their balance sheets with bond purchases to help provide a stimulus for the economy, but with the current high inflation, banks are now looking to sell those bonds. With the bond market already facing pressure due to the rate hikes, further quantitative tightening could make trading even more difficult by worsening liquidity and increasing volatility. The Bank of England has already been forced to delay its quantitative tightening due to turmoil in the UK bond market. That turmoil, which also spread to the U.S. and European bond markets, has only added to the liquidity and volatility concerns.
Finsum:An increase in Quantitative Tightening by central banks could lead to more volatility in the bond markets.
Innovator Capital Management recently launched its new Research & Investment Strategy hub containing model portfolios. The new site was built to provide advisors with a framework on how to construct portfolios with Defined Outcome ETFs. The site also provides market and economic data, and analysis and commentary with a focus on managing risk. Innovator’s Strategic Defined Outcome ETF Portfolios are designed to target varying levels of risk and return across the risk-reward spectrum. There will be five portfolios to start. This includes a Conservative model, a Balanced Alternative model, an All-World Hedged Equity model, a Controlled Growth model, and an Accelerated Growth. All the portfolios will consist of ETFs from Innovator’s Defined Outcome ETF lineup. The lineup, which has so far amassed over $8.8 billion in assets under management, includes Buffer ETFs, Accelerated & Stacker ETFs, and Floor ETFs. The Defined Outcome ETF portfolios will be free and rebalanced annually. An advisor can construct portfolios with custom allocations to specific Defined Outcome ETFs and then analyze the custom portfolio’s return and risk characteristics.
Finsum:Innovator Capital has launched a series of model portfolios allowing advisors to construct custom portfolios using the firm’s Defined Outcome ETFs.
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According to retirement industry experts, the new DOL Fiduciary Rule is not expected to be released until the first quarter of 2023 due to two ongoing and related legal cases. The rule, which aims to create a universal fiduciary guidance standard for financial professionals, was previously expected to be released in December. The original Fiduciary Rule proposed under the Obama administration, was overturned by the Fifth Circuit Court of Appeals in New Orleans citing that the DOL's execution of the rule amounted to "an arbitrary and capricious use of regulatory power." Under the Trump presidency, the DOL released PTE 2020-02 in December 2020, allowing investment advice fiduciaries to receive payment in connection with rendering fiduciary investment advice. The Biden administration allowed that regulation to proceed and was expected to be published next month. However, the Federation of Americans for Consumer Choice (FACC) filed a lawsuit in federal court in Dallas claiming that the DOL does not have the jurisdiction to enlarge the list of advisors who are required to serve as fiduciaries for pension savings. Another lawsuit was filed by The American Securities Association in a federal court in Florida arguing that the rule breached the regulations requiring a period of public input.
Finsum:The release of the new Fiduciary Rule is facing additional delays as the DOL fights two separate, but related lawsuits.
According to a recent survey by Broadridge Financial Solutions, 67% of financial advisers are using alternative investments such as real estate investment trusts and private funds, compared to 59% in a previous survey taken earlier in the year. Of the 400 advisors surveyed by Broadridge, more than half said they plan to increase the use of alternatives over the next two years over traditional assets such as stocks and bonds. However, the advisers also noted their disappointment in the available offerings, with just 27% saying they are very satisfied with the options available from asset managers. Among the issues leading to this disappointment are too few choices, too much paperwork, and compliance and regulatory concerns. As per the reason for the increased interest in alternatives, advisers cited diversification, followed by non-correlation with equities. According to the survey, the alternatives that advisors were most interested in were REITs, commodities, private equity, hedge funds, and private debt.
Finsum: With investors concerned over steep portfolio losses, advisors are showing an increased interest in alternatives such as REITs, commodities, private equity, hedge funds, and private debt.
Seems advisors are grooving on model portfolios.
Why are they among the popular kids on the block?
Well, with the growing commoditization of portfolio management, the portfolios are viewed as an effective means by which to abet the ability of advisors to effectively serve clients and foster the growth of their business, according the latest Cerulli Edge—U.S. Advisor Edition, reported lifehealth.com.
“This saved time can be put toward client-facing activities, a particularly important activity, for example, for younger advisors that are focused on asset gathering and building a book of business,” said Brad Bruenell, associate analyst, the site reported
Then there’s the flexibility of the portfolios. Based on the circumstances of individuals and advisors and their practices, the way fit an advisors’ practice can vary – and in no small way, according to fundssociety.com.
And in the category that some things are downright worth the wait – even if it can be a bit maddening at times – the industry’s gradual segue toward a financial planning oriented service model will represent a potent catalyst toward the adoption of model portfolios, said Cerulli.