Wealth Management
Most think of millennials and they compartmentalize them into 3 categories: fee minimizers, crypto /alternative investors, or meme traders. However, a recent poll shows they have a strong desire for traditional income products. Over 82% of more affluent millennials are concerned with finding income products for retirement, which is almost 30 percentage points higher than Gen X. Additionally, almost a quarter of the poll were willing to purchase an annuity in the next quarter, and half of those were millennials. Many of these affluent millennials are looking to income products because they are skeptical that social security will be there for them in retirement.
Finsum: Millennials are bucking conventions and looking early to secure income products like annuities.
One of the biggest criticisms of model portfolios is that they are opaque black boxes that investors are worried about, but BlackRock could be shaking things up. A new suite of actively managed model portfolios will be registered on the Nasdaq Fund Network. The models will be available across a variety of ‘themes’ and will be registered with six-character symbols. NFN will dismantle statistics and strategy to increase transparency for the Models. Model portfolios were once an obscure investment but they are growing in popularity and hopefully building a better bridge to advisors and portfolio managers.
Finsum: This is a big step for models and will hopefully increase confidence in them as a product with investors.
Crypto could be a stress inducer when it comes to managing their tax solutions. However, a variety of portfolio products help investors navigate their digital wallets, track crypto investments, and manage their tax solutions. These portfolio trackers can help investors navigate the nuanced complexities in capital gains taxes that are constantly evolving. CoinTracker, TokenTax, and CoinLedger are all great crypto portfolio managers. TakenTax really lets investors take advantage of tax loss harvesting to optimize their crypto portfolio.
Finsum: Cryptos wash rule differences should incentivize investors to take advantage of tax loss harvesting.
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Direct indexing is one of the fastest growing market segments and investors surveys confirm that customization is king of the modern landscape. Curulli Associates forecasts that direct indexing will grow faster than ETFs and mutual funds. Custom indexing has a legg up on traditional ETFs when it comes to volatility because investors can harvest losses as the market takes dips. With traditional ETFs investors have to just eat the losses as they slow the long run growth of the fund, but micro dips can be maximized by taking advantage for tax purposes, say industry quants.
Finsum: It's clear that direct indexing has advantages over traditional ETFs, but even when compared with their fees the tax savings is worth it for direct indexing strategies.
There has been an explosion of annuity interest by investors, a lot of that is being driven by the low-interest-rate environment and increased uncertainty more broadly. Health is a key factor in an annuity purchase, but a healthier individual will receive lower payments so they may want to delay their annuity purchase. If you are seeking a deferred annuity, however, then you may want to purchase it sooner and annuitize later in order to grow the value if it has a guaranteed interest. Finally, inflation can eat at the value of a fixed annuity which means it might devalue your payment stream later on. The optimal purchased time for a fixed annuity is generally a couple of years post-retirement: 70-75. A deferred annuity should be purchased much younger, the optimal age being in the mid-40s.
Finsum: Consult a financial advisor as to which annuity timeline makes the most sense for your portfolio.
Wells Fargo’s recruiting efforts have been no secret, but it looks like it is starting to pay off. In Q1 of 2022 they brought in over $5.4 billion in assets under management. Wells had seen advisors flee as a result of various public scandals in the last few years. They had lost 1.5% of their advisors in Q4 of 2021 and 8.5% in the whole year prior. The firm has said they are more pleased with their recruiting efforts as of late, but they are still putting forth efforts in the hiring process to retain and recruit advisors.
Finsum: Wells Fargo may be turning a new leaf and the bonuses related to advisor recruiting and retention are bringing in more assets.