Wealth Management

Retirees have many options when it comes to generating income from their portfolios. Each approach comes with its own tradeoffs in terms of yields, risk, and liquidity. In recent years, fixed indexed annuities have become increasingly popular as they generate higher returns than traditional investments, while offering protection during periods of poor market performance.


Fixed indexed annuities are issued by insurance companies. It provides a guaranteed return while also earning additional interest based on the performance of a specific index such as the S&P 500. Like most annuities, they also allow for tax-free compounding. 


One of the major advantages of a fixed indexed annuity is that it reduces the downside risk of a decline in markets which can be more damaging to retirees. Research shows that these products deliver strong returns over long periods of time, although they do underperform during booms. 


If an investors’ goals are to generate more income while reducing the overall risk in the portfolio, then a fixed indexed annuity is a prudent option. When determining whether a fixed indexed annuity is the right choice, a major factor is what it will be replacing in the portfolio. 

Finsum: A fixed indexed annuity can help investors generate more income from their portfolios while also reducing risk. Downsides are less liquidity and underperformance during periods of strong market performance. 


Interest in alternative assets continues to grow. For many, it’s become a core part of their portfolio along with equities and bonds based on the theory that it can increase diversification, reduce risk, and deliver higher returns in high inflation scenarios. 


In response, asset managers are introducing new products at a fevered pace. Examples include bitcoin ETFs, private credit, and infrastructure funds. Advisors have the task of figuring out which of these products will help their clients and become a part of their allocations. 


Some important considerations are properly explained to clients that many alternative investments mean sacrificing liquidity for a multiyear period and are only justified if investors are willing to hold for the long term. Further, focusing on returns is not the right metric, instead these products are more about dampening portfolio volatility and providing a source of non-correlated returns. 


Therefore, the biggest impediment for more adoption of alternatives is education. Many might not have a deep understanding of these strategies and have varying risk tolerances. Advisors should consider allocations to alternatives on a case-by-case basis and also gradually increase exposure levels to gauge comfort levels. 

Finsum: There is an explosion of alternative investment options available to advisors. Here are some tips on how to navigate this expanding landscape.

Assets under management, tied to model portfolios, are forecast to exceed $10 trillion by 2025. Some reasons for the category’s growth include increasing awareness and comfort among clients, a wider range of options that are enabling customization, and the advantages for financial advisors.


Currently, 70% of model portfolios are asset allocation models. Some advisors choose a hybrid approach with some of the portfolio allocated according to models with some portion remaining discretionary. Another important choice is whether there is an open or closed architecture. With an open architecture, advisors can allocate to a variety of funds, while closed architecture means that funds are from an individual asset manager. 

A growing segment is outcome-oriented models which can help clients achieve a precise goal such as generating income, reducing risk, or minimizing taxes. This is another way that model portfolios can achieve greater customization while still retaining the core benefits for advisors. 


Overall, model portfolios are rapidly gaining traction due to their ability to provide sophisticated solutions for advisors and clients. For advisors, it frees up more time and resources to spend on growing and managing the business while also deepening the relationship with clients. 


Finsum: Model portfolios are forecast to exceed $10 trillion in assets in 2025. Here are some of the reasons the category is growing so fast. 


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