Artificial Intelligence is one of the fastest-growing segments of technology, and while most people think of AI as a computer listening to their conversations to send them advertisements it’s growing just as rapidly in the world of finance. In 2019, AI and machine learning was a $6.67 billion dollar segment of the financial world according to a study by Mordor Intelligence. That number is expected to more than triple by 2025 as the projection is $22.6 billion. Additionally, Business Insider pins the savings to financial institutions and banks by AI at $447 billion in the next two years. Magnifi can bring these powerful tools to your advising team to put research insights, analytics, and custom solutions for your clients at your fingertips. Magnifi uses natural language intelligence that can filter thousands of investment opportunities to provide the best opportunities to your clients, and these features are as simple to use as a Google search.

(Washington)

Rollovers are about to see a huge change. Advisors have largely been sleeping on the effects of the new fiduciary rule, largely because the current one was drafted under Trump and is thus milder. However, what many don’t realize is that come December, rollovers are going to be a lot more complicated. According to Fred Reish, leading industry attorney, the new rule “has turned the rollover world on its head”. Speaking further and addressing compliance, he added “A whole series of steps have to be taken to adjust to this standard”.

FINSUM: Okay so here is the reality. Full implementation begins in December, but the DOL may grant a last-minute stay because it is working on a full new fiduciary rule draft (Biden’s version). In either event, the new rule will certainly not be lighter than this version.

(New York)

Model portfolios are seeing great inflows recently, but their popularity has created its own problems. The biggest of those problems—a dizzying proliferation of funds. Today we are going to make an off-the-cuff recommendation. How about a one-stop, no fee “model portfolio” for retirement. The model portfolio? Buy these four ETFs: the Vanguard Total Stock Market ETF (VTI), the Vanguard Total International Stock ETF (VXUS), the iShares Core Total USD Bond Market ETF (IUSB), and the Schwab US REIT ETF (SCHH).

FINSUM: This is in jest of course, but this is a dead simple and well-conceived set of ETFs for retirement.

(New York)

ESG has been growing hand over fist, but it is still getting a lot of flak in the press. Two major reasons why. Firstly, many feel the sector’s performance is in question, largely because older investors believe there is an intrinsic misalignment between social & environmental goals, and returns. Secondly, many are starting to question whether ESG is really making an impact on society and the environment. Well, we cannot answer the second question, but number one has some new evidence. Morningstar recently ran an analysis of ESG funds, and found that: “25 out of 26 ESG equity index trackers beat funds that were conventionally weighted by market capitalisation, when it came to tracking the most common benchmarks last year”.

FINSUM: Proof of ESG outperformance depends highly on the timeframe being observed and the funds in question (which makes sense). For example, the last 18 months has been great for ESG because of some initial responses to the pandemic. Our view is that a lack of relationship to either out- or underperformance are both a good thing, since ESG is still accomplishing a social benefit and thus is a solid choice in the absence of any negatives to the investor.

(Washington)

Advisors and their clients have spent much of this year worrying about Biden’s tax plans. Two of Biden’s budgetary priorities to raise tax revenue fall squarely on the wealthy: nearly doubling capital gains taxes and the elimination of the step-up in basis in inheritance. Well, speaking on condition of anonymity, according to Bloomberg, Washington insiders are saying the elimination of step-up in basis (often panned as a “death tax” by critics) seems be heavily watered down, or maybe dead altogether. The proposal received heavy opposition and Democrats may have already backed away from its inclusion in the budget plan, or may go with a heavily diluted proposal.

FINSUM: So there is also a big knock-on effect here as well—it means the Democrats likely won’t hike the capital gains taxes to 28% or more on the wealthy, as hiking it much without having eliminated the step-up in basis will likely end up costing the government money.

(Silicon Valley)

Finding growth stocks seems difficult with many of the tech giants at their peak, but robotics and artificial intelligence is the route many investors are peering down in order to hit the next big growth company. The biggest ETFs in the space are ARK Autonomous Technology Robotics ETF (ARKQ), Global X Robotics & Artificial intelligence ETF (BOTZ), Robo Global Robotics and Automation Index ETF (ROBO), iShares Robotics and Artificial Intelligence Multisector ETF (IRBO), and First Trust Nasdaq Artificial Intelligence & Robotics ETF (ROBT). Cathie Wood’s ARKQ has outperformed this year in large part due to a bet on TESLA, but the ROBO ETF has outperformed the SPY over the last 5 years. Intuitive Surgical and Nvidia are the only stocks held by all five ETFs, and Chinese tech underpins most of these ETFs, which could be worrisome as regulation is erratic lately. However, Wall Street has the highest upside with most of the Chinese companies, with Alibaba Group and Baidu Inc. leading the way with over 60% appreciation anticipated. In the U.S. its TuSimple Holdings and PTC Inc. that have the largest consensus upside.

FINSUM: These robotics stocks are some of the best bets to be staples in the Nasdaq in the next decade, and should be part of your momentum portfolio.

(New York)

Income investors and many wealthy clients have struggled to find the outlet post-pandemic for relatively safe capital accumulation, but real estate investment trusts are that release valve. Reflation trade, stimulus-driven output in the economy, is driving a boom in commercial and residential properties. Reopening of the parts of the economy is driving REITs like EPR Properties, which hold movie theaters, ski resorts, water parks, indoor skydiving. It’s not limited to just adventure opportunities, data centers, cannabis cultivation, and crypto mining facilities are all burgeoning opportunities in REITs. David Auerbach of World Equity Group says that capital raising is ‘in vogue in the REIT sector because they proxy traditional capital appreciation vehicles. Ground leases in particular are one of the best investments in this sector. Along with additional measures that can be taken for a tax advantage, ground leases offer the upside of equity with maturity risks and capital structure to bonds.

FINSUM: The flight to safe assets is driving a groundswell of opportunities in REITs. With the economy reopening, and stimulus pumping through it, REITs are an opportunity to hit the safe return of bonds with the equity upside. 

(New York)

Markets are fretting over a variety of concerns: spreading delta variant, Chinese regulator crackdown, and Fed taper. However, Goldman Sachs says these risks are overblown, as delta variant will likely be less worrisome economically and their Fed forecast is dovish. They see a sharp turnaround for cyclical assets such as higher equities and higher bond yields in the short run. Near-term optimism will fuel US and Euro equities and most likely boost Japanese stocks as well. Going so far as to recommend shorting long-term euro bonds, and buying economically sensitive currencies like the Norwegian krone and South Korean won, which will appreciate relative to the dollar. This near-term cyclical rally won’t last long as they expect 2022 to deal from a different deck that won’t be as friendly to investors.

FINSUM: Weaker jobs growth will also delay the Fed’s taper, aiding in the cyclical rally.

Magnifi’s Artificial intelligence is changing the way small financial advisors can interact with their client’s portfolios. They provide a wide variety of tools and services that can build a more diverse, robust, and optimized portfolio to suit your client’s needs. From the simple search features that allow investors to gauge the history of funds and stocks to more sophisticated tools like leverage selection that navigate the risk of a customized portfolio, Magnifi gives advisors options that allow them to compete with larger investment teams. Additionally, customizing portfolios is easier and quicker which allows advisors to draw in more clientele, all the while providing the personal experience a small financial team can offer. Finally, Magnifi seamlessly integrates with other leading custodians and optimizes the clients' experience. All of these features solve problems larger firms make hires to fix!

(New York)

The market was hit hard by bad economic data this week and yet markets barely budged. Consumer sentiment, Chicago Purchasing Managers Index, and Home Prices all swirled a whirlwind of bad news for markets and yet they hardly budged. This is because markets are convinced more than ever that bad news is good news because it will have the Fed kick the tapering can down the road. Powell made it clear that the new Fed environment will accommodate higher inflation and that while tapering might start this year, the Fed is a long way from rate hikes. This means growth-oriented interest rate-dependent stocks will do well as the Fed favors employment over inflation in its dual mandate.

FINSUM: Powell has all but confirmed a slow transition in monetary policy, don’t look for economic data to be the breaking point in your portfolio.