Wealth Management
Exploring art museums isn't a leisure reserved for those in the artistic community; it's an enriching experience for financial advisors too. These vibrant spaces offer valuable insights into innovation and creativity, which are essential qualities in the financial world.
Artists are navigating an evolving technological landscape, that is mirrored throughout society including that in the financial world. Embrace the opportunity to explore art museums and discover how creativity can fuel success in the financial advisory realm.
One of the most popular destinations in the world is the Museum of Modern Art in New York city which specializes in art from the 19th century onward. For those in the Midwest, the Art Institute in Chicago features great works by Frank Loyd Wright and is near many Chicago cultural touchstones. Finally, those on the west coast should visit the LACMA in Los Anges which touch many places in the contemporary and historical art landscape.
Finsum: Art is also a rapidly growing alternative asset class and could provide a new perspective in investing.
Advisors are constantly looking for the latest tools that can help them manage their practice more efficiently without giving up returns in exchange. With the rapid developments in model portfolios, the technology is finally there to deliver the aforementioned goals in a timely manner.
Utilizing these models helps advisors draw on institutional expertise while still customizing to address each client's unique needs, ensuring a consistent experience for all clients. This strategy combines the benefits of professional research with the advisor’s ability to manage and optimize portfolios, facilitating both improved performance and efficient firm scaling.
By employing technology for asset research and replacement, advisors can integrate customization, allowing them to dedicate more time to client relationships and business growth.
Finsum: This efficiency gained by streamlining portfolio construction allows advisors to improve their relationships with clients.
The U.S. Treasury Department is seeking to curtail the use of bespoke life insurance policies and annuities by wealthy individuals and families to minimize their tax obligations. The proposal is called "Limit Tax Benefits for Private Placement Life Insurance and Similar Contracts" is part of the fiscal year 2025 "Greenbook"
This proposal aims to reduce the tax advantages associated with private placement life insurance, private placement annuities, and certain variable life and annuity contracts. While few Greenbook proposals are enacted into law swiftly, their inclusion can significantly influence financial services lobbyists and advisors over time.
Issued annually as part of the president's budget proposal, the Greenbook has previously suggested limiting business-owned life insurance and similar arrangements. The new measure could potentially raise $140 million in 2025 and $6.9 billion from 2025 to 2034. Designed for high-net-worth individuals, private placement life insurance and annuities allow customization of benefits and investments, often to gain tax benefits rather than to offer mortality or longevity protection.
Finsum: This proposal could take years to come into law, if it even ever happens, but the landscape could get more progressive if Biden is re-elected.
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Wealth managers rely on platforms such as broker/dealers and custodians, and over two-thirds have considered switching their current arrangements, though only 17.1% are actively planning to make changes by 2025 or 2026.
More successful wealth managers are actually more likely to switch for better operational and business support. Key factors influencing platform choice include financial arrangements, operational support quality, and business development assistance, while personal relationships are less influential.
Efficiency and negotiating favorable financial terms are critical, as is the ability to find ideal clients through referrals. Wealth managers should critically evaluate the claims of platforms, especially regarding business development support programs. Despite interest in changing platforms, inertia and other demands may prevent many from following through.
Finsum: While the relationship isn’t causal its worth pointing out that higher networth advisors are more active in thinking about their future relationships with their broker dealers.
Active bond funds are essential for a well-diversified investment portfolio, providing income and cushioning against market downturns. In 2022, bonds demonstrated their resilience, with most fixed income categories performing better than the broader stock market. However, bond values are inversely related to interest rate changes, so with rates projected to rise, focusing on short- to intermediate-term bond ETFs is advisable.
Active bond ETFs, such as Pimco’s Active Bond ETF (BOND), offer diversified exposure and professional management, helping investors navigate volatile markets. If you want to shorten the duration Pimco’s Enhanced Short Matruaity Active ESG ETF (EMNT) might provide a more robust alternative with ESG exposure.
Despite higher costs, active management can be beneficial, especially in uncertain economic conditions, making these funds a strategic addition to long-term investment portfolios.
Finsum: Duration risk is especially important in this current climate and because interest rates could fall quickly in the next year depending on the Fed’s decisions.
Summit Financial was founded in 1982 as an independent firm. Over the last 4 years, assets under management grew from $3 billion to over $10 billion as it aggressively recruited talent from wirehouses and other firms. Ed Friedman, the director of business development and growth at Summit, shared some insights on what has driven the firm’s recent success.
The biggest factor is creating a culture that allows advisors to be fiduciaries, grow their own businesses, and have a meaningful stake in the firm’s long-term success. Friedman stresses that clients are ultimately loyal to an advisor and not a company.
Additionally, advisors at independent firms have more control over their destinies. In contrast, an advisor's fate at a wirehouse or larger institution can be affected by unrelated factors. For instance, many brokers at Merrill Lynch had their equity wiped out in 2008 when it had to be bailed out by Bank of America. Similarly, advisors at First Republic were impacted by the crisis last year, despite the wealth management unit’s strength.
Friedman also attributes the acceleration in growth to bringing in professional management. This has allowed advisors to focus on clients, prospecting, and financial planning, while other matters such as compliance, backoffice tasks, and administration are handled by the firm.
Finsum: Summit Financial is more than 40 years old. Yet, the RIA’s growth has exploded in recent years as it has brought in professional management and found success with its independent-hybrid model.