Displaying items by tag: advisors

A recent article from Morningstar’s John Rekenthaler discussed the tax benefits of direct indexing. Direct indexing is a strategy that involves directly buying the stocks of an index rather than through a fund. 

This confers several benefits such as allowing investors to gain the benefits of indexing while still being able to customize their portfolio to reflect their values and better fit their needs. Due to this, the category has exploded and gone from a niche offering solely for high net-worth investors to being offered by retail brokerages to customers for as little as $5,000.

However, the strategy is not necessarily for everyone, but it can be particularly useful for those with sizeable assets due to the potential tax benefits. This is because direct indexing results in capital losses in a separate account when stocks drop below their cost bases. The proceeds are then re-invested in stocks with similar profiles. 

This strategy can be particularly useful for investors with high federal and state taxes, large amounts of money invested in direct indexing vs other investments, short-term capital gains, and dealing with a volatile market environment. 

FinSum: Direct indexing comes with several benefits for clients but the most substantial one is the tax savings. However, it’s only worthwhile for a particular group of investors.

According to Daniil Shapiro of Cerulli Associates, there is a major product development opportunity for active fixed income ETFs in the coming years. A variety of factors are behind this segment’s growing popularity including the increasing acceptance of the ETF structure, growth of advisors who are comfortable with fixed income ETFs, and rising rates which lead to increased structural demand for fixed income products.

The report was compiled by Cerulli Associates based on polling of financial advisors and was covered by Kathie O’Donnel in an article on Pensions & Investment.

The major takeaway is that use of fixed income ETFs by advisors is rapidly growing with 70% reporting use in 2022, up from 63% in 2021. Most ETF issuers pointed to greater advisor acceptance of the product and institutional demand as drivers of the ETF market. Among issuers, 66% see fixed income as their primary focus which exceeded equities at 57%. 

Overall, this survey reveals that there continues to be opportunity for ETF issuers in the active fixed income space, given rising demand. While there are plenty of options in passive fixed income, there are relatively less active options. 

Finsum: The fixed income ETF category is rapidly expanding. Within the space, passive is saturated but plenty of opportunity remain for active managers especially given expectations of rising demand in the coming years.

Given increasing volatility in financial markets, it’s not surprising that many investors are feeling nervous. According to Corebridge President Bryan Pinsky, annuities are one option for investors to reduce the volatility in their portfolios and prevent them from making rash decisions. His perspective was shared in an article by Allison Bell for ThinkAdvisor.

Corebridge Financial is ranked third in terms of individual annuity sales at $20 billion and was previously known as AIG Life & Retirement. He believes that negative emotions during volatile markets often lead investors to sell low and buy high. 

In terms of his thoughts on the current market, he said that the doubling in the yield of the 10-year Treasury note in 2022 was historically unprecedented. It’s also resulted in annuities paying out higher rates which has led to a surge in demand for these products. 

He says that the elevated market volatility since the end of 2021 have validated the use case for annuities. He also doesn’t believe it’s too late to seek downside protection and that annuities can be an integral part of any retirement portfolio with recommended allocations between 10% and 30%.

Finsum: According to Corebridge’s Bryan Pinsky, market volatility has proven why annuities are an essential part of any investors’ financial plan. Additionally, he believes that buying conditions for annuities remain attractive.

There is no magic solution when it comes to growing your client base as a financial advisor. Instead, you should adopt a variety of strategies which include understanding your strengths as a financial advisor, defining your ideal client, developing a branding strategy, and pursuing effective partnerships.  

Rebecca Lake, CEPF, wrote an article for SmartAsset on how to expand your client base. First, she counsels that advisors should not make the mistake of sacrificing quality of service in the pursuit of adding more clients. Advisors should always ensure that they are providing adequate attention and services to clients to ensure retention and loyalty.

Next, advisors should get clear and specific on their ideal target client in order to construct an effective marketing plan. They should also consider the ideal type and mix of services that would appeal to this audience. 

Another source of client growth is by leveraging your existing client base and asking for referrals. This can be highly effective as people are more willing to trust personal recommendations, but the request must be made tactfully. Finally, branding is an essential element to differentiate yourself from other financial advisors. Once you settle on your brand, keep it consistent.

Finsum: Financial advisors can grow their client base by picking a specific niche, developing a consistent brand, form partnerships with other professionals, and targeting your ideal client.

In a recent article on WealthManagement, Charles L Ratner interviewed a baby boomer couple on how they interview investment advisors. One of the many things they consider when choosing an advisor is their website. A great website can help advisors attract new clients, but a bad website can turn off prospects. The first thing they mentioned looking for is “Who they are, their credentials, and their experience.” They noted that they began to see gaps between the advisor’s credentials and experience. They also said that an advisor’s clientele was the most important thing because they wanted to know that they would be playing to the advisor’s strengths and getting their fair share of attention and service. The couple also wanted to know what the firm does and who does what. They liked websites that clearly delineate an advisor’s services for each type of client. In addition, they wanted to know how their portfolios would be personalized. Pricing was also another topic. The couple said, “We realized early on that we were gravitating to the advisors who structured their fees in a way that allowed us to pick and choose the services that are of interest to us.” Another big plus for them was the strength, soundness, and continuity of their firm. They wanted to know that they will be with a strong firm today and tomorrow.

Finsum:A baby boomer couple interviewed on WealthManagement noted the things they looked for in an advisor website such as experience and credentials, clientele, who does what at a firm, personalization, pricing, and continuity.