Wealth Management
Insurance companies are increasingly turning to asset-backed bonds to support annuity payouts amid surging demand for retirement income products. Securitized assets now make up a quarter of insurers’ bond holdings, with exposure growing by $365 billion since 2017, according to Morgan Stanley.
Higher interest rates have fueled record annuity sales, reaching $432.4 billion in 2024, marking a 12% annual increase. This trend has intensified insurers’ appetite for asset-backed securities (ABS) and collateralized loan obligations (CLOs), which saw combined holdings rise to $312 billion last year.
Esoteric ABS, including whole business and digital infrastructure securitizations, have become key components of insurers’ portfolios due to their yield and duration advantages. As demographic shifts drive continued demand for annuities, Morgan Stanley projects structured credit exposure to grow at a 6% annualized rate through 2027.
Finsum: It’s important to understand the underlying structure of annuities, because it tells a compelling story for their high demand.
Syntax Data has joined forces with FTSE Russell to bring its indices into the Syntax Direct platform, allowing financial advisors to build more customized investment strategies. This partnership enhances direct indexing, a fast-growing segment in wealth management, by giving advisors greater flexibility to tailor portfolios for clients.
The demand for personalized investment solutions has surged, with assets in direct indexing swelling from $100 billion in 2015 to over $615 billion today, according to industry estimates. With the integration of FTSE Russell indices, advisors can refine portfolios based on specific factors such as market trends, risk preferences, and fundamental metrics.
The platform also simplifies managing large, diversified benchmarks, making institutional-grade strategies more accessible in private wealth management. By combining customization with scalability, this collaboration enables advisors to deliver more precise and cost-effective investment solutions.
Finsum: Having access to Russell brings a lot of flexibility to investors when paired with direct indexing and particularly allow them to increase value exposure.
A separately managed account (SMA) is a professionally managed investment portfolio tailored to an individual investor's needs rather than pooled with others. Unlike mutual funds or ETFs, SMAs provide direct ownership of securities, offering more control over investment decisions and tax strategies.
Originally created for institutional investors, SMAs have grown in popularity, with assets under management reaching nearly $2.2 trillion by 2023.
Their key advantages include flexibility in strategy, greater tax efficiency, real-time transparency, and typically lower fees compared to actively managed mutual funds. Investors can customize holdings and optimize tax implications through strategies like tax-loss harvesting.
Finsum: While SMAs can be cost-effective, additional fees from financial advisors may apply, impacting overall expenses.
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Vanguard announced its largest-ever expense reduction, cutting fees on 87 funds by one to six basis points, translating into over $350 million in investor savings for 2025. The lower costs apply to a range of funds, including bond mutual funds, ETFs, U.S. and international equities, and money market funds.
CEO Salim Ramji emphasized that reduced fees help investors retain more returns, aligning with the firm’s broader strategy to expand its fixed-income offerings. Chief Investment Officer Greg Davis highlighted the growing role of bonds in investor portfolios and the long-term benefits of compounding savings.
Vanguard, managing $10.4 trillion as of November 2024, has consistently lowered investing costs since its founding by Jack Bogle in 1975. Competing with BlackRock, it remains one of the world's largest providers of low-cost ETFs, offering 428 funds globally, including 212 in the U.S.
Finsum: Advisors need a strategy to articulate the importance of fee structure to clients, because its integral to their portfolios and can strengthen relationships by providing clarity and demonstrating communication.
Former President Donald Trump’s newly announced sovereign wealth fund has sparked speculation that it may include Bitcoin and other cryptocurrencies. Given his administration’s support for digital assets, experts believe this fund could serve as a vehicle to invest in crypto without bureaucratic hurdles.
Some argue that incorporating Bitcoin and other digital assets could bolster the U.S. economy while positioning the country as a leader in the crypto sector. However, skeptics highlight the risks of volatility, regulatory uncertainty, and governance challenges tied to managing crypto within a government-backed investment fund.
Other nations, including Norway, already have exposure to Bitcoin through their sovereign wealth funds, further fueling debate over the potential impact of the U.S. following suit.
Finsum: If implemented, this move could accelerate institutional adoption of crypto while reinforcing America’s role in the evolving digital asset landscape.
For years, wirehouses dominated the wealth management industry, but a growing number of advisors are breaking away to join independent RIAs. What was once seen as a risky move has now become a mainstream trend, with firms like Hightower Advisors playing a key role in accelerating the transition.
A decade ago, wirehouse executives dismissed concerns about advisors leaving, pointing to stable headcounts, but the shift has proven undeniable. Cerulli data projects wirehouse market share will drop to 27.7% by 2027, with RIAs benefiting from the exodus. In 2024 alone, wirehouses experienced a net loss of 612 advisors, while RIAs gained 856, reflecting the increasing appeal of independence.
With factors like autonomy, higher earnings potential, and access to cutting-edge technology driving the movement, the trend shows no signs of reversing—raising the question of how much longer wirehouses can sustain their traditional model.
Finsum: We really think technology is adapting how advisors are thinking about their evolution within a firm, wirehouses need to give them the most opportunities.