Wealth Management
Financial advisors can increase their chances of success of landing Generation Z clients by understanding their generational preferences. Many of these younger investors have an intuitive relationship with technology, so they are interested in digital solutions which will give them a more interactive experience. At the same time, they are also accustomed to having instant access to information.
Therefore, it’s prudent to have the right tech stack in place to facilitate this in addition to a comprehensive digital marketing and communication strategy. This includes social media, interactive content, and other tools to increase engagement. These can also be effective mediums for advisors to show their personality and knowledge to build a more authentic connection with prospects. A successful and repeatable strategy is to offer a free financial assessment which can be an effective lead-generation tool and more effective for younger investors than a phone call or face-to-face meeting.
Many in this generation are also enamored with newer asset classes like cryptocurrencies, so advisors should be able to engage on these topics. In terms of soft skills, advisors should cultivate an air of approachability, relevance, and empathy to increase their appeal.
Finsum: Gen Z is coming of age and will soon be entering their 30s. Here are some tips on how to appeal to this demographic.
Over the summer, the SEC made a proposal that advisors and brokers would have to address conflicts that emerge through investors interacting with artificial intelligence, an algorithm, or similar technology. At the Securities Industry and Financial Markets Association annual conference, there was some discussion over this proposal with SEC Chair Gary Gensler challenging the audience of financial professionals in his remarks.
Essentially, many believe that this is a way to expand Reg BI to make it apply to all sorts of interactions that happen between an advisor and client. SEC Chair Gary Gensler pushed back on this when he remarked, “We’re not trying to change Reg BI or change the fiduciary guidance.” He clarified that instead the SEC is looking to crack down on the use of predictive analytics to ‘micro target’ investors.
According to Gensler, there is an inherent conflict between current standards and this new technology if it’s built to help an advisor or broker increase their earnings as it would lead to unsuitable recommendations. He wants to see these algorithms modified so that the advisors’ interests are eliminated or neutralized. However, he didn’t have a strong opinion on how this should be achieved, citing that there are multiple paths to achieving this goal.
Finsum: The SEC is proposing a new rule for use of AI and predictive data analysis. At a recent conference, SEC Chair Gary Gensler provided some more details about the proposal.
JPMorgan is looking for a partner to accelerate its push into private credit. Some current prospective partners include sovereign wealth funds, pension funds, endowments, and alternative asset managers, although it’s possible that the bank may ultimately go with multiple partners.
Reportedly, the bank is looking to add to the $10 billion it’s already set aside for its private credit strategy. It believes that this additional capital will enable it to compete with other names more effectively in the space such as Blackstone, Apollo Global, and Ares as it would be able to make bigger deals. Additionally, there would be less balance sheet risk as the bank would originate the deals with its outside partner, providing the capital. In theory, this would allow for more scale to grow private credit revenue without additional risk.
Due to banks dealing with an inverted yield curve and high rates, private credit has been taking market share away from other sources of capital like leveraged loans and high-yield bonds. Already, many of JPMorgan’s competitors like Barclays, Wells Fargo, and Deutsche Bank have launched their own efforts to build a presence in the private credit market, although each has its own strategy.
Finsum: JPMorgan, like many Wall Street banks, is looking to increase its presence in the private credit market. It’s currently in discussions with prospective partners to provide outside capital.
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For many clients who want personalized solutions and have complicated financial needs, the traditional approach of mutual funds or ETFs fall short. For investors with more complex tax issues or who desire that their investments align with their values, direct indexing offers a more comprehensive strategy.
Direct indexing captures many of the benefits of passive investing such as diversification, low-costs, and investing in an index. But the key differences are that the actual components of an index are owned by the investor rather than the fund.
Thus, there is a greater level of customization as investors modify these holdings to reflect their own political, religious, or ethical beliefs. This is especially pertinent with the increasing traction of ESG or values-based investing.
This customization can lead to better risk management as portfolios can be adjusted to reflect a clients’ particular risk profile and long-term goals. Another benefit is increased tax efficiency as there is more control over when capital gains are realized. Tax losses can be regularly harvested and used to offset capital gains. Similarly, charitable giving through direct indexing can also have certain tax advantages while also giving clients an opportunity to support causes or organizations that they believe in.
Finsum: Direct indexing has specific benefits that may appeal to clients looking to optimize their tax situation, align their investment with their values, while still retaining the benefits of passive investing.
One of the keys to unlock growth for your financial planning business is an effective marketing strategy. Marketing is important in every industry but even more so for financial advisors trying to differentiate themselves from the competition. You need to show what makes you unique and qualified to improve your clients financial situation.
The right marketing plan will help define your brand, raise your profile, and start generating leads. The first step is to understand your own strengths and weaknesses, identify your ideal client, figure out your unique value proposition, and research the marketing strategies of your competitors. It’s also helpful to think about what mediums or online platforms would be best suited to reach prospects.
Next, it’s time to set specific and actionable goals and evaluate whether your marketing plan is working or needs to be tweaked. Some metrics to consider are traffic to your website, social media followers, new clients, and an increase in sales. Once you have set your goals, it’s time to develop a content strategy.
There are many possible options, but it’s best to start with one that fits with your personality and that you personally enjoy. Once there is some traction, you can consider other forms of content.
Finsum: Financial advisors need a solid marketing plan to effectively grow their businesses. Here are some tips on getting started.
Advisors have to offer personalized solutions for their clients’ financial needs. Of course, this presents an inherent conflict for any advisor who wants to grow their practice as these efforts are often not scalable.
Unified managed accounts (UMA) are a potential solution for advisors to offer low-cost and customized solutions by outsourcing these functions from professional asset managers. UMAs provide an open structure for advisors to toggle between managed account programs, asset allocations, portfolio management, and trading in order to become more efficient and increase the speed of implementation.
Advisors can leverage UMAs to reduce complexity and provide more holistic advice for clients while freeing up time and energy to focus on business development. In contrast to mutual funds or ETFs, UMAs and separately managed accounts (SMA) provide more customization and tax efficiencies. However, SMAs often lead to more administrative burdens since each account generates its own statements, tax documents, and portfolio management needs.
In contrast, UMAs offer access to multiple strategies in a single account while enabling tax savings through tax-loss harvesting. There is more efficiency given that there is less paperwork while also providing a more holistic view of a clients’ financial situation.
Finsum: UMAs can lead to more efficiencies for advisors, leading to less paperwork and tax complications. It also leads to a more holistic view of a clients’ finances.