Wealth Management
A major trend in wealth management is personalization. Due to new technology, financial advisors are now able to offer customized products and solutions without sacrificing scalability. It can help clients reach their financial goals while also creating a stronger relationship between advisors and clients.
A survey conducted of high net worth investors by PwC showed that 66% are interested in more personalization, while 46% are looking to change or add new advisors within the next couple of years. For advisors, offering personalized solutions will be increasingly important in terms of recruiting and retaining clients.
Personalization is also impacting model portfolios. Until recently, most model portfolios were built around the traditional portfolio, combining stocks and bonds, which limited customization. Now, there are more options to customize model portfolios including by factors, themes, and values.
According to research from MSCI, wealth managers can allocate to these strategies without worry that it would have an adverse impact on a portfolio in terms of returns or diversification. Further, these model portfolios are customized but still retain their core benefits. For advisors, this means spending less time on investment management and more time on client service, financial planning, and growing the business.
Finsum: Personalization is a major trend in wealth management. Now, model portfolios can be customized which is bringing a variety of benefits for advisors and clients without an adverse impact on returns or diversification.
In 2023, municipal bonds showed a recovery after a tough 2022, largely due to late-year rallies and shifts in Federal Reserve policy. However, the market has not fully rebounded, indicating ongoing opportunities in 2024.
First, strong credit fundamentals are expected to persist, supported by substantial federal spending post-pandemic, leading to record tax receipts and rainy-day balances.
Next, strategically positioning across the yield curve offers chances to secure historically high yields, particularly in the long end, where steepening curves and higher yields prevail compared to U.S. Treasuries. Anticipated recovery in demand may see mutual fund inflows resume, especially for long-term funds and ETFs. Separately managed accounts (SMAs) are likely to remain popular among investors seeking customization and tax efficiency.
Finally, despite recent tactical investor decisions, municipal bonds continue to offer tax-free income, solid credit quality, and promising long-term returns, making them a strategic allocation option. Given current market conditions, entering the municipal bond market now may prove compelling for investors.
Finsum: Muni’s are leaving lots of options for investors on the table to tactically deploy in 2024.
Understanding the evolving landscape of women's financial influence is crucial for advisors, as women are increasingly controlling wealth and making key financial decisions. With studies projecting women to control $30 trillion in U.S. assets by 2030 and their wealth growing faster than men's, this demographic shift presents significant opportunities for advisors to tailor their approach.
Women often have different financial goals, risk tolerances, and longevity considerations, emphasizing the need for advisors to understand their unique needs and priorities. Building trust and establishing personal connections are essential for long-term client relationships in the women's market, as women value communication and partnership with their advisors.
To effectively engage with female clients, advisors should focus on education, empowerment, and holistic financial planning, addressing their specific concerns and objectives. Tailoring strategies, asking meaningful questions, and using storytelling techniques can help advisors connect with women clients and build successful, lasting partnerships.
Finsum: Better understanding the financial needs of female clients will help you be more strategic in growing your platform. ad
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Building and maintaining meaningful relationships with plan participants is an ongoing challenge for 401(k) advisors. Demonstrating their value is vital. One powerful strategy lies in the skillful use of managed accounts, which showcase their investment expertise and enhance participant engagement.
Managed accounts allow advisors to personalize their investment guidance at scale. By collaborating with the right recordkeeping partner, advisors can craft the portfolio allocations within the program, thus affecting the allocations within individual accounts. This partnership enables both parties to highlight their value propositions: advisors provide strategic investment guidance, while the recordkeeping platform facilitates participant access to this invaluable services.
Ed Murphy, President and CEO of Empower, recently shared insights with planadviser.com on the strong demand for discretionary, personalized managed portfolios. He also commented that nearly 9% of their participants are enrolled in their managed account program, underscoring its value and appeal. Murphy's observations reflect a broader industry trend where participants seek personalized financial strategies, highlighting the importance of advisors integrating managed accounts into their service offerings.
Finsum: Implementing manage accounts within a 401(k) plan is an effective and scalable way for plan advisors to demonstrate value to participants.
Financial advisors have begun to embrace the concept of buffered ETFs. These specialty funds track equity indices, capping the potential upside, which pays for downside protection (the buffer) if the index experiences a decline.
While this concept has practical portfolio applications, these funds have another unique feature advisors should know about: they mature (and reset).
A buffered ETF has a stated cap and buffer that stays in place for a specific period, in many cases one year. This means the cap and buffer reset at the end of the period (at maturity). It also means that investors buying the ETF any time after the first day of the period should be aware of the remaining cap and buffer for that ETF for the rest of the period they bought within.
Here’s an example: let’s say a fund that caps its return for the year at 10% has already experienced a 5% decrease since the start of the period. An investor purchasing the fund at that point has a 15% cap for the remaining period – this is a good thing. The opposite is also true. Had the fund already experienced an 8% gain in the period, the buyer would only have the potential to gain 2% for the remainder of the period.
Finsum: Buffered ETFs have a unique feature that every financial advisor should know about: they have a maturity date when their upside cap and downside buffer resets.
Marketing is a non-negotiable for any practice that is serious about sustaining consistent growth. While there are many aspects to consider, an overriding factor is determining the right budget. Some of the variables that will impact this decision are the size of the firm, the marketing strategy, and the channels that will be targeted.
It can be helpful to study the marketing strategies and budgets of other advisors. According to a study conducted by Broadridge, the average advisor spent $17,400 on marketing in 2022. The average spend for an RIA was $27,800 vs $9,700 for independent broker-dealers. In terms of impact, the study found that firms were onboarding an average of 23 clients per year with the cost of acquisition at $743 per client. However, there was significant variance as some reported spending under $250 per client, while others reported figures above $2,000 per client. The survey also showed that 30% of advisors plan to increase their marketing budget, while only 2% of advisors plan to reduce spending.
The general rule, for more established advisors, is that the marketing budget should be between 1% and 10% of annual revenue. Marketing is also an iterative process, so it’s important to evaluate the effectiveness of spending and various tactics in terms of desired metrics such as generating leads, finding prospects, or brand building.
Finsum: Marketing is key to sustainable growth for advisors. Determining a marketing budget is the first step. Here are the most important factors to consider, and how other advisors are approaching the matter.