Wealth Management
In an article for ThinkAdvisor, Sudipto Bannerjee, Ph.D. and the VP of Retirement Thought Leadership at T. Rowe Price, distilled some advice for advisors on how to educate clients about annuities.
Recent research indicates that 70% of retirees are managing their money with the intention to preserve assets. While most of the discussion is about saving or investing, more important is how retirees will choose to spend their savings.
Given this reality, annuities offer major advantages since it comes with longevity protection, tax advantages, and potentially even income guarantees. It also reduces the risk that retirees will exhaust their savings.
The research indicates that retirees prioritize asset presentation, and it has a major impact on well-being. And, they cite running out of money as their biggest fear. Thus, annuities can be useful to accomplish both objectives.
We can see how this plays out by comparing the performance of retirees who have a pension against those that don’t. After 18 years of retirement, retirees with a pension only saw a 4% drop in assets, while those without a pension saw a 34% reduction in total assets.
Finsum: Annuities are a great option for investors especially since a guaranteed income leads to increased preservation of assets.
In 2022, Commonwealth Financial Network onboarded 270 new advisors, comprising a total of $11.2 billion in total client assets. The majority of the company’s advisors are fee-based, while the company is privately owned. The company also offers broker-deal and insurance products.
In a statement, Wayne Bloom, CEO of Commonwealth said, “Despite the difficult headwinds our advisors, their clients, and the industry faced last year, our team was extremely successful in bringing top-caliber financial advisors to our firm.” As Bloom looks forward, he is targeting $1 trillion in total assets under management, while maintaining the values that have enabled the company to succeed.
The company added that the new advisors came from a variety of backgrounds including RIAs, independent brokers, regional practices, and wirehouses. The company is also looking to continue targeting ensembles and larger firms. It’s especially interested in targeting those with an entrepreneurial bent, offering them services like a Virtual Transition Support team and an expanded offering of Outsourced Business Solutions.
Finsum: In 2022, Commonwealth Financial Network had a record-breaking year with 270 new advisors onboarded.
In an article for Vettafi, James Comois laid out some ways that direct indexing can help reduce taxes. Direct indexing essentially lets investors create their own customized indexes that are appropriate for their personal situations and can help them reach their financial goals.
Rather than buying an ETF or a mutual fund, investors buy the holdings directly. The obvious advantage is that it leads to more personalization so that portfolios can reflect an investors’ values and/or accommodate a unique situation.
A secondary benefit is that it can lead to a lower tax bill, so it may have additional utility for investors to offset capital gains. In essence, losing positions can be sold and then rebalanced into equities with similar factors.
Some of the likely factors that make it more likely that direct indexing can be useful are a high federal or state tax bracket, large investment pool, a steady replenishment of assets, volatile markets, and short-term capital gains. In contrast, the benefits of direct indexing are not substantial enough to offset the additional complications.
Finsum: Direct indexing can be a better choice for certain investors who need greater customization and have high tax bills.
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Growing a financial advisor practice is a challenging but rewrarding journey. It will force you to build new skills and marketing yourself in order to find the best clients. In an article for SmartAsset, Rebecca Lake CEFP laid out four key steps for advisors to grow their business.
The first step is to determine who is your ideal client and what niche will you be serving. Specializing in a particular segment will lead to more expertise and trust, leading to longer-lasting relationships and a more sustainable practice. It will also lead many people to seek you out, because they will find greater comfort.
The next step is to write a mission statement. This will help clarify your values, priorities, and motivations. It should be shared with your prospective clients so they have an understanding of how you do business. Not only will it help with conversion, but it will screen out candidates who aren’t a good fit.
Another important step is to get involved in the community which will increase the visibility of your brand and create opportunities for connection with prospects. This also leads to face to face interactions which are often the most impactful.
Finally, advisors should also embrace digital marketing. Younger clients are likely to find you online and will also likely have read reviews. You should have a comprehensive digital strategy and utilize social media, a user-friendly website, and email marketing. You can favor the platforms where your clients are likely to be found.
Finsum: Growing a financial advisor practice can be challenging but rewarding. Rebecca Lake CEFP lays out 4 steps that advisors should take.
In an article for CNBC, Sean Conlon discussed some factors behind the rise in demand for fixed income ETFs. Despite some softening in the economy and in terms of inflationary pressures, the Fed seems intent on hiking by another quarter point at its next meeting.
This is leading to juicy opportunities in the fixed income space which may not last if inflation does continue to trend lower or a recession materializes in the second half of the year. Additionally, current futures markets are forecasting that the Fed will be cutting rates by the end of the year. As noted by Vettafi, this dynamic is leading to inflows into Treasuries, corporate bonds, and high-yield bonds as investors look to lock in duration and yields.
Since the start of the year, there was about $45 billion in inflows into fixed income ETFs. Another factor behind this demand is the underperformance of traditional asset allocation models like 60/40. This is leading many investors to get more conservative and examine the fixed income space for opportunities.Until market stresses ease, demand for fixed income ETFs should remain elevated.
Finsum: Fixed income ETF demand rose sharply in Q1. Given the Fed’s hawkish bent and current market conditions, this should persist.
In an article for Vettafi, James Comtois laid out some of the benefits of direct indexing for investors. Direct indexing has grown in popularity for certain investors because it leads to greater tax savings and customization than traditional passive and active funds.
In terms of taxes, direct indexing allows investors to sell losing positions and then buy back stocks with similar characteristics. Then, these tax losses can be harvested and used to offset capital gains, leading to a lower tax bill.
Another beenfit of direct indexing is that it allows investors to have their personal values and preferences reflected in their investments. For instance, an investor may be uncomfortable with companies in a certain industry and can exclude them from being considered for investment.
Many investors may also be in a unique situation such as having large exposure to a particular company due to stock options or family holdings. Direct indexing allows them to construct a portfolio that reduces this particular exchange, leading to a more resilient portfolio and financial situation.
Finsum: Direct indexing is growing in popularity as it offers some advantages of traditional funds. However, it’s likely not appropriate or necessary for most investors.