Wealth Management

The Bureau of Labor Statistics released the CPI report for August which showed a 3.7% increase in inflation which was above expectations of 3.6%. Core CPI came in at 4.3% which was in line with expectations.


It marks the third straight monthly increase in inflation as July saw CPI at 3.2%. Some of the factors contributing to this were a 5.6% increase in energy prices and a 7.3% increase in owners-equivalent rent. 


Initially, Treasuries weakened on the news as it incrementally increased the odds of another hike by the Federal Reserve. However, the fixed income complex was quickly bid up on the drop as market participants seem willing to look past the hotter than expected inflation data.


Two major components of the inflation report - housing and wages - are softening which spells relief for the market. Rents are already dropping in key markets, while recent labor market data shows that unemployment is ticking higher. Much of this data will take time to be reflected in the CPI. Thus, investors are willing to use the weakness to add to fixed income. 

Finsum: Fixed income was bid up despite a hotter than expected CPI report. This seems to be because investors are increasingly confident that inflationary pressures will continue to recede.


One of the biggest stories in the financial advisor recruiting world has been the exodus of advisors from Merrill Lynch to greener pastures. The big winners of these transitions have been LPL and Morgan Stanley. 

Last month, the Harris Rao Group, who is based in Phoenix moved to Morgan Stanley from Merrill Lynch. The team has a total of $630 million in client assets and generated $3.5 million in revenue last year. 

The group’s lead advisors are Christopher J. Harris and Nihaal M. Rao. Harris and Rao joined forces in 2005 and had been looking for a new home over the last couple of months. Both started their careers with Ameriprise Financial before joining Merrill Lynch in 2008. They were ranked #30 by Forbes in terms of wealth management teams.

According to sources, they wanted a place where there was less pressure to sell banking products and a more complete set of insurance products for their clients. Many of their clients are business owners, and they believe that Morgan Stanley offers better solutions for their needs.

Morgan Stanley also continues to aggressively recruit advisors and has been offering high-end deals to continue gathering assets. Over the last couple of months, they have landed just over $1.2 billion in client assets from Merrill Lynch. 

Finsum: Morgan Stanley continues to poach advisors from Merrill Lynch. The latest is a group from Arizona which produced $3.5 million in annual revenue.

Citigroup conducted a survey of 268 family offices to gather information on their positioning and thoughts on the current market. Overall, the family offices decreased exposure to equities while more than half increased their fixed income allocations. According to Citigroup, it was the most significant change in family office positioning since 2020. 


The bigger trend is that family offices are becoming more conservative given the challenging economic environment. In terms of their biggest concerns, they identify inflation, a hawkish Federal Reserve, and a spike in geopolitical tensions specifically around the US and China.


Currently, the average family office has 16% in fixed income, 12% in cash, and 22% in equities. Even within these allocations, they are focusing on areas with less risk. For equities, it means companies in traditional industries with positive cash flow and attractive valuations. For fixed income, it means a bias towards higher credit quality and shorter duration. 


In total, these family offices that were surveyed control more than $1 trillion in assets. Specifically, the family offices that are adding fixed income exposure have a cumulative total of $568 billion in assets. 

Finsum: Citigroup surveyed 268 family offices to find out their thoughts on the current market. More than half are increasing fixed income allocation and selling equities. 



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