Wealth Management
Treasuries gained momentum following a weaker-than-expected U.S. producer prices report, reinforcing the potential for the Federal Reserve to lower interest rates more aggressively. The two-year yield, which closely mirrors Fed policy expectations, fell by 8 basis points, while the 10-year yield decreased by 6 basis points.
Market participants are now eagerly anticipating the upcoming consumer price index (CPI) data, which could further influence rate-cut expectations. However, some Federal Reserve officials remain cautious, emphasizing the need for more economic data before supporting any rate reductions.
Despite recent market volatility, with shifts from expectations of a soft landing to a hard landing, uncertainty persists.
Finsum: Markets thought there was going to be an emergency Fed meeting last week, but look to Jackson Hole for better clarification.
The July Consumer Price Index (CPI) data indicated that inflation is slowing, prompting speculation about a potential interest rate cut by the Federal Reserve in September.
Ken Mahoney, CEO of Mahoney Asset Management, suggests that investors should focus on large-cap stocks, which have been performing well, particularly in comparison to small-cap stocks in the Russell 2000, where the majority of companies are unprofitable.
He also expresses caution about sectors such as autos, airlines, and retail, noting a lack of enthusiasm in those industries. Keep in mind this combination of size and industry for the fall.
Finsum: It’s important to keep an eye on leverage as interest rates fall this factor will greatly help the more levered companies.
As custodians in the independent advisor market undergo mergers and consolidations, advisors are increasingly finding it challenging to secure a stable home for their clients' assets. Many advisors are opting to use multiple custodians to mitigate risk and increase efficiency, akin to diversification in investment portfolios.
However, frequent changes in custodial arrangements add layers of complexity and concern. This instability can lead to tedious processes like transferring accounts. The landscape is further complicated by the rise of niche custodians and specialized services targeting specific needs, such as real estate or gold investments.
The trend of using multiple custodians is driven by the need for diverse capabilities and the ever-evolving market dynamics, including mergers, competition, and new technologies.
Finsum: Getting a fuller picture of the technology and services offered by different custodians is a huge benefit.
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In the past five years, direct indexing has become a valuable tool for advisors to personalize client portfolios, addressing unique tax and asset allocation needs. Between April 1 and May 1, 2024, FTSE Russell partnered with RIA Channel to conduct a survey of over 600 advisors from various firms...[Read More]
SEI has expanded its suite of Separately Managed Accounts (SMAs) and Unified Managed Accounts (UMAs) by introducing new strategies focused on direct indexing and factor-based investments. These additions include fixed income strategies, such as the Systematic U.S. Aggregate Bond Core and the Systematic Municipal Bond Core, as well as equity options like the Systematic U.S. Dividend Yield Core and the U.S. Dividend Yield Multi-Factor SMA.
These offerings aim to help advisors serve mass-affluent, high-net-worth, and ultra-high-net-worth clients with tailored solutions that offer flexibility and tax optimization.
The move comes as UMAs gain popularity, with assets growing at an annual rate of 34% over the past five years, according to Cerulli. SEI’s expansion aligns with broader industry trends, as other major players like Envestnet and Dimensional.
Finsum: An SMA makes a lot of sense for direct indexing options given the tax implications.
The asset management industry is seeing a significant shift towards Separately Managed Accounts (SMAs), with assets growing by 30% over the past two years, according to Cerulli Associates. This growth is expected to continue, with projections suggesting SMAs will reach $3.6 trillion in assets by 2027, up from $2.4 trillion today.
SMAs offer tax advantages and personalization options that are appealing to investors, allowing them to hold individual securities and tailor portfolios to their specific needs. SMAs are particularly useful for strategies that benefit from direct ownership of securities, such as tax-loss harvesting and options overlays, which can enhance after-tax returns and generate additional income.
The rapid innovation in this space means that SMAs are becoming an increasingly attractive option for investors looking for a personalized approach to asset management.
Finsum: We expect the SMA boom to continue with trends in both demographics and wealth management in the US, so familiarity is key.