Wealth Management
Alphathena, a personalized investing platform and direct indexing startup, won the ‘Best in Show’ award at the 2023 Morningstar Fintech Showcase Conference and was covered by Benzinga. Alphathena is attempting to use AI and automation to create solutions and tools for RIAs and Wealthtech platforms with a specific focus on customized direct indexing, automated tax-loss harvesting, and lifecycle management solutions.
The conference featured 25 fintech startups that were geared towards financial professionals. Some of the major themes included AI, personalization, and improving the client experience. Another discussion point is how the wealth management industry is poised for the Great Wealth Transfer as demographics predict a tidal wave of assets from Baby Boomers to Millennials.
In regards to Alphathena, Lawrence Johnson, the Head of Emerging Fintech at Morningstar remarked, "Alphathena, with its elegant platform and powerful engine, is an example of a growing field of innovators that have learned to harness frontier technologies to deliver better outcomes for investors."
The judges spoke highly of Alphathena’s innovative approach, potential for disruption, and strong value proposition. Currently, it can customize portfolios with ETFs and factors for personalization and performance. Its longer-term ambition is to be the solution for wealth advisors when it comes to managing the entire lifecycle of personalized investing.
Finsum: Alphathena, a startup in the direct indexing and personalization space, won the ‘Best in Show’ award at the 2023 Morningstar Fintech Conference.
In an article for Vettafi’s AdvisorPerspectives, Nestor Hernandez discussed some ways that investing in alternative asset classes can help reduce portfolio volatility. Due to the poor performance of stocks and bonds in 2022, interest in the category has exploded in 2023. Another contributing factor is that technology and regulatory changes have made these investments available to a much wider audience.
Based on research, it’s clear that investing in alternatives leads to lower volatility due to increased diversification. These tend to be private, non-public traded funds in different asset classes such as real estate, private credit, private equity, hedge funds, venture capital, etc. In contrast to public markets, private markets tend to have less liquidity, transparency, and minimums when it comes to investment amounts.
Until recently, these investments were only available to institutional or high net-worth investors. But, these can play an important role for investors especially given that we are seeing the number of companies shrink on the public markets, while opportunities increase on private markets. Additionally, companies are going public at much later stages, meaning private investors have more opportunities to see their investments appreciate.
Finsum: CalPERS CEO Marcie Frost is facing competing pressures from liberals and conservatives over ESG investing.
In an article for AdvisorHub, Jeff Nash the founder and CEO of BridgeMark Strategies discussed what financial advisors need to consider when they are thinking about switching firms or shifting to a different business model.
He recommends that advisors start with the basics which means thinking about your current level of satisfaction, the impact on your staff and clients, and the different options that are out there. First, he recommends not falling into the trap of too much analysis which is a common occurrence given the plethora of options for successful advisors. In order to avoid this, he recommends thinking about what is currently missing from your practice that you want to add, what you want to keep, and what responsibilities you don’t want to add.
The next step is to think about what type of business model is ideal whether it’s a hybrid model, an RIA, a smaller, more regional focused firm, an independent broker dealer, or a traditional wirehouse.
Finally, he concludes by saying that hiring a consultant who is experienced and fully knowledgeable about the space can help you make the best decision in terms of financial rewards and personal satisfaction.
Finsum: Recruitment of financial advisors is picking up pace. Here are some things for advisors who are considering a move to think about.
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In an article for Bloomberg, Ye Xie and Liz McCormick discussed how Vanguard’s fixed income ETFs have been major recipients of inflows as investors look to take advantage of higher yields and protect their portfolio from a potential recession later this year.
In March, the funds saw $26 billion of inflows due to the crises at Credit Suisse and Silicon Valley Bank. This was nearly more than last year’s cumulative $31 billion of inflows.
It’s also an indication that Vanguard’s passive management and indexing strategies will take on even greater significance in the fixed income world as these funds keep growing. In total, Vanguard’s fixed income funds have over $1 trillion in assets.
It also follows what has happened in equity markets, where passive funds have ballooned in size, and make up the bulk of inflows. In hindsight, the 2008 financial crisis and subsequent few years seem to have been the trigger for equity investors favoring passive funds over active ones due to the strong outperformance of indexes.
Similarly, 2022 was the biggest rout for bonds in decades due to inflation and a hawkish Federal Reserve. This also has led to investors rethinking allocations, and one outcome has been the growth of passive over active.
Finsum: Similar to what happened in equities over the last decade, passive bond funds are starting to see the bulk of inflows.
In an article for Axios, Dan Primack discussed some of the competing pressures faced by CalPERS CEO Marcie Frost. CalPERS is America’s largest public pension system and has more than $440 billion in assets under management.
Currently, Frost is facing pressure from conservatives and liberals about ESG investing. Conservatives see it as a ‘tax’ to accomplish liberal policy goals, while liberals are pushing legislation in the California state legislature that would bar investing in publicly traded fossil fuel companies.
Frost is against such limitations, however she is a supporter of ESG and sees it as key criteria in evaluating investments. As an example, she cited CalPERS’ significant commercial real estate investments in coastal and urban areas whose value could be impacted by climate events.
Her priority is to fulfill the pension obligations for Californians which she considers more important than ESG factors. She said she would pursue investments that would generate healthy returns regardless of ESG factors but would use her standing as an institutional shareholder to push the company in a more ESG direction.
By banning fossil fuels, CalPERS would not be able to play a role in helping fossil fuel companies transition for the future. However, Frost does expect the legislation to pass.
Finsum: CalPERS CEO Marcie Frost is facing competing pressures from liberals and conservatives over ESG investing.
In an article for AdvisorHub, Steven Brod of Crystal Capital Partners discussed how alternative investing options are increasingly important when it comes to financial advisor recruiting. He believes that having a robust alternative investing platform is essential for small and mid-size wealth management firms to successfully recruit advisors.
Alternative investments have exploded in popularity following the poor performance of stocks and bonds in 2022. These investments typically provide increased diversification and the potential for higher returns.
An effective alt platform will give advisors access to all sorts of strategies and the requisite technology to manage these investments. Interest in alternative investing is especially high among the younger demographic so not having a sufficient platform could repel advisors with such clients.
Some examples of offerings include hedge funds, private equity, private credit, SPVs, and venture capital. Overall, the platform should offer a broad variety of investing strategies and tools to evaluate these options from a quantitative and qualitative perspective. The final step is to ensure that there is an alignment of interest between the platform, advisor, and clients.
Finsum: Alternative investing is exploding especially among younger, entrepreneurial advisors. Here is what to look for in a good alt investing platform.