If advisors are looking to build out their practice, they should look no further than Millennials and Generation Z. That is according to Fidelity, which believes younger investors represent substantial, long-term wealth potential. According to a recent report from Fidelity Institutional, population and wealth are significantly shifting to the younger generations, who now collectively represent 47% of the U.S. population. These findings came from the Fidelity Investments 2022 Investor Insights Study, which included 2,490 investors who were 21 and older and had household investable assets of $50,000 or more. Fidelity also offered recommendations on how to approach younger investors. For instance, advisors should create an ideal profile of the young clients they would like to work with. They should also engage with the children of their current clients as a way to retain assets when wealth is transferred. Financial advisors can differentiate themselves by becoming a coach and elevating the client experience with frequent check-ins and establishing and monitoring financial routines. In terms of gathering clients, Fidelity recommends that advisors refine their social media strategy to capture their attention, while also telling younger prospects what they do for the community and the causes that they care about.

Finsum:According to a recent study by Fidelity, advisors should consider reaching out to Millennials and Generation Z as they offer substantial long-term wealth potential.

JPMorgan Asset Management recently announced that it plans to convert four of its mutual funds into ETFs, pending fund board approval. This includes three municipal mutual funds. The firm plans to switch all share classes of the Limited Duration Bond, High Yield Municipal, Sustainable Municipal Income, and Equity Focus fund. If approved at a meeting scheduled for February, the funds will be converted to actively managed transparent ETFs in July. The JPMorgan Limited Duration Bond fund invests mainly in mortgage-backed or mortgage-related securities that it believes will perform well over market cycles. The JPMorgan High Yield Municipal fund is designed to deliver a high level of current income exempt from federal income taxes. The JPMorgan Sustainable Municipal Income fund is designed to deliver current income exempt from federal income taxes by investing in municipal bonds with the use of proceeds that provide positive social or environmental benefits. According to the firm's announcement, the new ETFs will mainly have the same investment strategies as the mutual funds. JPMorgan was one of the first companies to convert active mutual funds into ETFs with the Inflation Managed Bond ETF conversion taking place in April.

Finsum:JPMorgan announced that it plans to convert three active municipal bond funds into actively managed transparent ETFs in July.

The SEC brought its first enforcement action this year for alleged violations of Reg BI, which requires that broker-dealers act in the best interest of their clients. The action came almost two years after Reg BI took effect. There are signs that there will be more Reg BI enforcement this year as the agency has issued subpoenas to dozens of broker-dealers. Toby Galloway, chair of the securities litigation and enforcement practice at Winstead PC stated, “They’ve got this rule that hasn’t been enforced a whole lot just yet. But they’re going to use it.” Reg BI isn’t the only enforcement action expected to take place this year. Communication technology and other issues are expected to see new enforcement actions in 2023. For example, several big banks were fined close to $2 billion in September for failing to monitor employees’ communications on messaging apps such as WhatsApp. Bloomberg News reported that the SEC’s probe into communication is expanding to other industry players such as asset managers. In addition, the agency is working to finalize new climate disclosure requirements for companies, while also looking for ways to bring litigation related to ESG issues under existing regulations.

Finsum:The SEC is expected to litigate more violations of Reg BI, communication technology, and ESG-related issues this year.

While many advisors are already making the move from wirehouses to RIAs and independent shops, recruiters expect that activity to pick up this year. That was the conclusion of a recent presentation put on by Fidelity which featured advisor recruiting professionals. The panel included Jodie Papike, president of Cross-Search, Ryan Shanks, co-founder and CEO of FA Match, and Louis Diamond, president of Diamond Consulting. The trio urged all advisory firms to review their recruiting and retention strategies this year, or “risk being left behind in a rapidly evolving and increasingly competitive industry.” Papike warned, “From my point of view as a recruiter, I can tell you that there are a lot of firms that are making massive missteps in how they are recruiting and retaining advisors. They have not kept up their service levels, and so, many advisors are feeling like they aren’t being supported or serviced at the level they need and expect.” This comes as a new report from Cerulli Associates indicated that many broker-dealers are finding it difficult to generate growth in advisor affiliations as independent firms become more popular among advisors. Advisors identified several challenges of operating at wirehouses, including insufficient staffing support, changes to compensation, and imposed minimums for new clients. The Fidelity panel predicted that the movement of advisors will continue to accelerate in the years ahead.

Finsum:According to three advisor recruiters and a new report from Cerulli Associates, advisors are unhappy at wirehouses due to insufficient staffing support, changes to compensation, and imposed minimums for new clients.

According to industry group Nareit, REITs are well-positioned to navigate economic and market uncertainty in 2023 due to strong operational performance and balance sheets. As part of their 2023 REIT Outlook, the firm wrote, “despite economic headwinds and weakness in valuations, equity REITs have proven to be quite resilient from an operational perspective, and it is clear that REITs are well-positioned for ongoing economic uncertainty in 2023.” The firm noted that data from the Nareit T-Tracker in the third quarter of 2022 highlighted solid year-over-year growth in funds from operations (FFO), net operating income (NOI), and same-store NOI. Quarterly FFO increased to $19.9 billion in the third quarter, a 14.9% increase from a year ago and an all-time high. While the pandemic took a toll on the operational performance of equity REITs, there’s no question that it has recovered and surpassed pre-pandemic levels. Nareit also noted how REITs historically perform during and after a recession. For example, REITs have historically outperformed private real estate during a recession and in the four quarters after a recession. REITs have also historically outperformed their equity market counterpart before, during, and after recessions.

Finsum:Based on Nareit's 2023 outlook, REITs are well-positioned to navigate market uncertainty and a potential recession due to strong operational performance.