COVID was one thing, but what about reconfiguring the economic landscape?

Among treasurers, the escalating significance of ESG related objectives reflected exactly that, according to gfmag.com.

Today, companies are looking at pressure to adopt ESG principles from stakeholders squarely in the eye, the site continued. The consequence of not embracing, defining and delivering on those initiatives? Potentially allowing the competition to slip through its fingers. And that means more than a diminished reputation or the perception of failing to d the right thing. In the face of market volatility, investments and companies with ESG profiles that rock outdo others, studies show more and more.

Meantime, in light of an uptick in interest among investors in ESG topics, regulators have been burning the midnight oil to come up with consistency and transparency surrounding ESG claims, according to acacompliancegroup.com.

A gaggle of firms also are taking a swing at establishing themselves apart from their peers by committing to, for example, climate and sustainability. 

There will be an awareness of the surge in activity related to the FCA on ESG issues among firms with UK operations. Since the Taskforce on Climate-Related Financial Disclosures has come into effect during the past year, the FCA’s created a division to oversee ESG-related issues. It clarified its strategic direction and focus areas for ESG issues.

Tim Rowe, manager in the FCA’s Sustainable Finance Hub, noted that the FCA is laser focused on five “Ts” for its ESG strategy: transparency, trust, tools and transition. 

Providers of ETFs that invest based on principles of environmental, social, and governance (ESG) are facing headwinds from multiple sides. First, they are about to be hit with a batch of new rules from the SEC. Secondly, they have been put directly in the middle of a political battle between those for ESG and those who think it is just woke capitalism. On the SEC front, the agency recently published the results of two consultations. The first was on proposals to change the so-called Names Rule. The SEC wants to strictly define how a fund’s constituent investments should be reflected in its name. The second was on proposals for requirements on ESG disclosures for investment advisers and investment companies. On the political front, Florida passed a resolution in August that bans its pension fund managers from considering ESG with regard to their investing strategies. During the same month, Texas criticized BlackRock and nine European financial groups for boycotting the fossil fuel industry.

Finsum:ESG ETF providers are facing criticism on both the regulatory and political fronts.

At the 2022 PLANADVISER National Conference, which was recently held in Scottsdale, Arizona, three staffers from the SEC provided an in-depth discussion on multiple topics, which included best practices that firms should consider putting in place to avoid any Reg BI issues. According to the SEC staffers, under Reg BI, when making a recommendation to a retail customer, a brokerage professional must act in the best interest of the retail customer at the time the recommendation is made, without placing their own financial or other interests ahead of the retail customer’s interests. Their recommendations included: avoiding compensation thresholds that disproportionately increase compensation through incremental increases in sales, minimizing compensation incentives for employees to favor one type of account over another, eliminating compensation incentives within comparable product lines, and implementing supervisory procedures to monitor recommendations.

Finsum:At a recent conference, three members of the SEC provided a list of recommendations for advisors to implement to avoid running afoul of Reg BI.

While many market strategists have noted the recent failures of the 60/40 model portfolio, one investment manager still sees value in the portfolio model. Quilter Cheviot's investment manager David Henry told the Financial Times that there was still value in 60/40 portfolios despite rising inflation and geopolitical uncertainty. He commented, "But if we look at the historical numbers, maybe the grim reaper should hold onto his horses." Henry looked at quarterly returns for stocks and bonds since 1986 and found that there were nine quarters when the prices of both bonds and stocks fell in tandem and it has only happened once since 1986 in consecutive quarters, the first and second quarters of this year. He stated, "Breakdowns in diversification like we have seen this year, are rare. We then looked at 12-month forward returns for a 60/40 asset allocation following quarters where stocks and bonds fell together and returns were pretty healthy following those quarters.”

Finsum: An investment manager still believes in the 60/40 portfolio model as it is pretty rare for stocks and bonds to fall in tandem.

Investors are shucking aside overpriced, actively managed funds and sinking money instead in less expense index ETFs, said Dave Nadig, financial futurist at research and consulting firm Vetta Fi., according to thinkadvisor.com.

Strong inflows have culminated from ETFs highlighted by dividend strategies, munis and high yield bonds, he continued.

Among most active investors, ETFs have emerged as the go to vehicle, Nadig continued. On top of that, for most investors, they’ve evolving into the default choice.

This year – in the eye of the worst worse financial markets in decades – the country’s $6.6 trillion ETF generated $375 billion in net inflows. And it’s been share and share alike as the wealth is spreading across the board. For example, positive inflows into equities, currencies and alternatives has reached into the billions of dollars, the site reported Nadig pointing out. 

“It’s been one of the circumstances where the entire ETF universe has caught a bid,” Nadig said.

A Fitch Ratings reports shows the likelihood that U.S. investors will continue to rachet up their fixed income exchange traded fund holdings, according to pioline.com.

On the heels of new guidelines kicking in in the Big Apple last December, Fitch indicated its rated 10 such ETFs. Doing so has helped ease the way for investors to maintain shares of them.

Doing a solid or two for investors; hey, the more the merrier, right? So, when it comes to active fixed income, it’s said that active managers dispense important expertise, which explains why they can bill slightly more than passively managed funds. When it comes to fees, of course, they tend to be a bit easier on the pocketbook, according to ftadviser.com.

But – and isn’t there typically one – the debate among bond investors is more nuanced. Here’s the upshot: to some, because of the immense size of the bond market and since it’s so liquid, pinpointing the market inefficiencies that put active managers, or are supposed to, in a position to deliver value’s a little, well, trickier.

That said, this just in: it’s snot incumbent on active managers to be perfect. Yep; seriously.

In fact, during the past 70 years, studies of market indices show, these managers can land on the wrong side of the market approaching 40% of the time, according to naaim.org. And even then still equal a buy and hold return. When the market’s in an upturn, the deeper an investor reaches into their pocket, the more performance leverage they generate.

Rules….rules.

Yeah, well, don’t follow ‘em, you could just find yourself in a bit of tepid water.

In June, five registered representatives or brokers of The Securities and Exchange Commission were charged by the body with violating Best Interest Obligation regulations – known commonly as Regulation Best Interest or Reg BI, according to napa-net.org. The subjects include Nancy Cole, Patrick Egan, Andy Gitipityapon, Steven Graham, and Thomas Swan.

The issue stems from their recommendation and selling of an unrated, high-risk debt security known as L Bonds to retirees and other retail investors. Western sold an aggregate of $13.3 million of L Bonds from July 2020 through April 2021, alleges the SEC complaint. The kicker: many of the customers were on fixed incomes with moderate levels of risk tolerance, while the bonds were high risk, illiquid, and only suitable for customers with substantial financial resources stated the issuer, GWG Holding Inc.

Neither Western nor the registered representatives used reasonable diligence, care and skill to grasp the risks linked with L Bonds, claims the SEC. And it doesn’t stop there. Western also was charged by the SEC of violating Reg Bi’s Compliance Obligation, according to sec.gov/. Western’s policies and procedures were duplicated – and significantly so – from the SEC’s Small Entity Compliance Guide, the SEC charged. As for specific tailoring to Western’s particular business? It had none.

According to the findings of the Advisor Edition of State Street Global Advisors’ Inflation Impact Survey, the vast majority of investors who are currently working with a financial advisor, believe their advisors’ insight and guidance are valued more today during the current period of market volatility and rising inflation. The survey revealed that approximately three-quarters of investors have discussed inflation with their advisors and how inflation will impact their investment goals in both the short and long term. 90% say they value their financial advisors’ knowledge and guidance even more during uncertain times, and 86% believe their advisor has helped them remain confident during the current period of rising inflation and market volatility. The data follows the initial findings of State Street’s Global Advisors’ Inflation Impact Survey that showed inflation-induced stress and anxiety is influencing investor behavior with short-term budgeting and long-term financial goals.

Finsum:State Street’s Inflation Impact Survey revealed that investors are placing a higher value on their financial advisor’s guidance during times of heightened market volatility and inflation.

Relative Strength is an investment strategy based on the belief that winning securities will continue to outperform. It provides a way for advisors to identify leading stocks in sectors and other market segments based on their history of outperformance. The premise is that investors should only invest in the areas of the market that have shown the ability to outperform. Investors should stay with those securities as long as they continue to outperform and then sell when they begin to fade.

Since relative strength is based on price, and not on fundamental research or your gut, emotion doesn’t Companies, sectors, and other market segments can establish themselves as leaders and even remain as leaders for years to come. 

Relative strength can also identify areas of the market that have weakened and should be avoided. This can help your portfolio adapt to market swings. It can also help you to manage risk. However, you should note that relative strength will not be able to target a stock’s exact top or bottom as no investment strategy can be expected to do so consistently.  Plus, waiting for confirmation that a stock is in fact a leader, allows you to avoid stocks that are short-term winners, but fail to establish themselves long-term. 

Relative strength’s ability to deliver outperformance has been demonstrated by numerous academic and financial studies. Since relative strength is simply the comparison of price performance in a universe of securities, it’s not difficult to develop a rules-based system for investing in high relative strength securities.

Nasdaq Dorsey Wright helps advisors identify Relative Strength stocks and sectors for them to include in their client portfolios. Click here for a free trial of relative strength research and tools.

CAIS recently announced that Mariner Wealth Advisors selected the firm to provide a customized alternative investment platform solution for the firm’s rapidly growing network of advisors. CAIS is a leading alternative investment platform for independent financial advisors. It provides advisors with a broad selection of alternative investment strategies, including hedge funds, private equity, and more. Mariner Wealth Advisors is a privately held advisory firm with over $60 billion in assets under advisement. CAIS will offer Mariner’s advisors access to a broad menu of alternative investment funds and products, educational resources, end-to-end digitized transaction processing, and third-party reporting integrations. Mariner’s advisors will receive access to a curated menu of diversified alternative investment products across asset classes and qualification levels. CAIS will also assist in the launch of proprietary funds and multi-manager funds managed by Mariner Wealth Advisors and enable the firm to add its own sourced third-party funds to the platform for centralized monitoring, transacting, and reporting.

Finsum:Alternative investment platform CAIS was recently selected by Mariner Wealth Advisors to provide its advisors with a broad selection of alternative investment strategies.