Wealth Management
Research shows that the average advisor spends about 11 hours per week on administrative duties. Ideally, this time could be better spent on activities that are more directly connected to the firm’s success. AI can offer some relief in terms of reducing time spent on repetitive tasks. It can also help generate better outcomes by increasing efficiency, analysis capabilities, and decision-making.
Among the many use cases, scheduling and transcription are two that can be immediately applied. For scheduling, apps like Trevor or Clockwise can organize tasks, create to-do lists and daily plans, sync calendars across apps, and maximize time for deep work and productivity. These apps also become more effective over time as they adapt, learn patterns, and can help prioritize tasks.
Another powerful use for AI is transcription. Apps like OtterAI record, transcribe, and summarize meetings and can be integrated with Zoom, Microsoft Teams, or Google Meet. Future versions of these apps could analyze communications with clients or prospects to understand their emotions and provide more personalized service and communications.
While AI can make advisors more effective, it’s necessary to understand the limitations, especially given the nature of financial services and the importance of safeguarding client information.
Finsum: Advisors spend 11 hours per week on administrative tasks. AI apps can offer relief, especially in terms of scheduling, transcription, and organization.
A major trend in wealth management is the rise of customized products and services. Direct indexing is essentially a personalized equity or bond index.
In terms of benefits, direct indexing gives more control over the timing of realizing capital gains for maximum tax-efficiency. Unlike ETFs or mutual funds, tax losses can be harvested and then used to offset capital gains with direct indexing. According to research, this can boost after-tax returns between 1% and 2%.
It also allows clients to invest in a way that aligns with their values and/or unique financial situation. This could mean not including stocks from a particular industry, such as tobacco or firearms. It also allows for better risk management, as exposure to certain stocks or sectors can be more effectively managed.
In terms of drawbacks, a major chunk of direct indexing’s benefits are due to tax savings. However, this is less relevant in a retirement account. Another complication is that short-term losses cannot offset long-term gains.
Another is the ‘wash sale rule’ which means that investors cannot sell and then repurchase the same security within 30 days. One workaround is to buy securities with similar factor scores to remain consistent with the underlying benchmark.
Finally, direct indexing has become available to a wider group of investors in recent years due to technology and low-cost trading. However, it’s still most impactful for investors in a higher tax bracket, long-term capital gains, and large, concentrated positions.
Finsum: Direct indexing is increasingly popular, especially as it’s becoming available to more investors. However, the strategy is most applicable for investors in a higher tax bracket, large concentrated positions, and long-term capital gains.
Financial advisors frequently turn to bonds when managing retirement investment risk, as they are traditionally viewed as a reliable hedge against stock market fluctuations. However, recent research suggests caution, with a Bloomberg report revealing that the bond market has experienced significant volatility in recent years, and the traditional hedging with fixed income might be inadequate.
To circumvent losses from bond volatility, fixed index annuities (FIAs) can serve as an effective alternative. FIAs generally carry lower risks compared to bonds but they can do so at a reduced price with a much higher potential upside. Unlike bonds, FIAs can guarantee a lifetime income, providing a unique form of security for retirement planning.
Interest earned from FIAs is based on an external market index, such as the S&P 500, allowing investors to benefit from market gains without the risk of market volatility. This makes FIAs an appealing option for achieving a balanced and secure retirement portfolio.
Finsum: This really comes down to investor preferences, but stock-bond correlation is increasing which should give investors reasons to consider annuities.
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Pickleball is the fastest-growing sport in America. Last year, the number of Americans playing increased by 53%, for a total of 13.6 million, making it the fifth-most popular sport in terms of participation. This makes it roughly equivalent to those who played baseball (16.7 million), soccer (14.1 million), and skied (13.1 million).
Pickleball still trails tennis (23.8 million) and basketball (29.7 million) by wider margins. However, it’s increasingly difficult to see the sport as simply a fad, especially with major investments in the space in terms of building public courts at the local level, indoor facilities, two professional leagues, expansion to international markets, etc.
Even more impressive than the 53% increase in the number of players is the 111% growth in ‘core players’, defined as those who play more than eight times a year. It’s translated into the number of public pickleball courts in the US increasing by 650% over the last 7 years.
Private operators are also seeing an opportunity. CityPickle was founded in 2022 and currently has multiple locations in New York City, including 14 courts in Central Park’s Wollman Rink. There are also franchises in other parts of the country, including Ace Pickleball with 80 franchises awarded, Pickleball Kingdom with 140 awarded, and Chicken N Pickle with 16 locations.
Gyms and golf clubs, such as Life Time Fitness and Invited Clubs, are also investing as if pickleball is more than a fad. Life Time now has nearly 700 courts across 170 locations and has invested $60 million into building courts. The gym saw 51% growth in pickleball players at its clubs and forecasts having 1,000 courts in the near future. Invited Clubs is the largest operator of private golf clubs and has spent between $10 and $12 million in the last 3 years and has nearly 500 courts.
Finsum: Pickleball was the fifth-most-played sport in the US last year. It’s surprising since most people had never heard of the sport until a couple of years ago. Yet, serious sums of capital are flowing to it, indicating that it’s more than a fad.
While the looming demographic shift to millennials is upon the RIA community the question of which actions to take is something completely different. A massive generational wealth transfer is on the horizon, yet numerous firms find it challenging to transition from acknowledgment to action.
Broadridge's "2024 Financial Advisor Marketing Trends Report" indicates that 78 percent of advisors target baby boomers due to their considerable wealth, but Cerulli Associates reveal that fewer than 20 percent of affluent investors retain their parent's financial advisors, underscoring a significant potential loss or opportunity.
To ready my firm for next-gen clients, I emphasize technology that boosts operational efficiency and client interaction. Investing in technology not only draws next-gen clients but also makes the firm more enduring and future-proof, ultimately resulting in higher valuations or a more robust business.
Finsum: Even millennials want a personal touch in their financial advice, but integrating technology will help you deliver optimally.
The federal reserve is holding steady with interest rates, at least at the current time, but other central banks around the globe are cutting and other hiking, creating opportunities in fixed income. While this is certainly adding a level of depth to portfolio management that hasn’t been present often in the last decade, high yields indicate great returns in fixed income.
According to Goldman Sachs investors should consider upping their exposure to high quality fixed income, emphasizing active management due to unpredictable US monetary policy. Despite expectations of rate cuts, recent inflation data suggests a "higher for longer" environment, meaning higher rates may persist.
As a result, US equities may still be attractive, but some investors are shifting towards fixed income to capitalize on strong yields, particularly in high-quality investment-grade bonds and structured products.
Finsum: Active investors continue to have an edge with disparate monetary policy actions around the globe.