Displaying items by tag: advisors

While ESG investing has boomed over the past decade, there are some drawbacks. One is the lack of clear definition of ESG, and what qualifies an investment to be sufficiently deemed ESG. For instance, some ESG funds have much wider latitude, while others are much more discriminating. In an article for Vettafi, James Comtois discusses why some investors who believe in ESG investing are nevertheless unsatisfied with many ESG investment options.

Another issue is greenwashing which is when a company is deceptive or gives false information about its products or processes. As an example, some ESG funds will contain fossil fuel companies, or companies with a record of pollution.

This also brings up a broader criticism of ESG that asset managers are forcing their views on investors, markets, and companies. For investors who believe in ESG investing but are wary of greenwashing, direct indexing offers a solution.

With direct indexing, any ESG index can be replicated, and any companies can be excluded that merit concern. With direct indexing, investors can ensure that their values are reflected in their investments, while retaining the benefits of investing in a diversified index with low fees. 

Finsum: Direct indexing solves one of the major concerns about ESG investing which is that it includes many companies with poor environmental records who are engaged in greenwashing. 

In an article for SmartAsset, Patrick Villanova clarifies some misconceptions about annuities and whether they are protected in the event that the insurance company which issued the annuity goes out of business. 

Annuities are essentially an insurance contract that offers a guaranteed income in exchange for payment. These can only be issued by insurance companies which means that there is regulation at the state level and protection for buyers. Unlike bank deposits, there is no federal guarantee.

In essence, each state has a guarantee organization, composed of insurance companies operating in the state. In the event of an insurance company going out of business, the organization will make sure that outstanding claims are good. 

However, it’s important to understand the exact amount that is protected. In most states, it’s up to $250,000 per person. More often, the failing insurer’s claims would be bought by competitors who would make good on the contract. 

Investors interested in an annuity should also check how various insurance companies stack up in terms of ratings by authorities. Typically, insurers with lower ratings will offer higher yields, reflecting the greater risk. 

Finsum: Annuities are seeing a surge in interest given higher yields and market volatility. Here are some points to understand about various risks and protections. 

A financial advisor practice’s long-term success is dependent on building a pipeline of prospects given that attrition and turnover is a given. While there are many paths to accomplishing this goal, one of the most effective is social media. In an article for WealthManagement, Doug Wilber shares some tips on how advisors can leverage social media.

This is especially true for advisors looking to connect with Generation Z and Millennials as these demographics are more comfortable and receptive to messages on these platforms relative to traditional media. Social media also gives advisors an opportunity to share their expertise, personality, and build trust with potential prospects.

On social media, authenticity is the most important metric. Over time, an advisor can build relationships with potential clients. According to surveys, about half of investors say social media influences who they choose as their financial professional. 

Another benefit of social media is that these channels are on 24/7 which means that these interactions can happen at any time. These platforms also have infinite scale which means that the effort of producing content is the same with a small or large audience. 

Finsum: Having a social media strategy is essential for financial advisors who want to bolster their pipeline of prospects and/or connect with Millennials and Generation Z.

Markets often behave unexpectedly. This is certainly the case in 2023 as many have been caught off guard with strong equity markets which have sent stocks to their highest levels since the middle of last year. The S&P 500 is now nearly 20% above its October low which many would deem a new bull market.

In an article for TheStreet, Jim Collins, the founder of PortfolioGuru, discusses a model portfolio that would do very well if this unexpected return to normalcy continues. His strategy involves buying preferred shares of regional banks which have been among the hardest-hit parts of the market. The preferred shares do offer generous yield but have major upside in the event that interest rates move lower, easing the inverted yield curve which is proving to be a major challenge for the sector.

Collins says that this model portfolio is essentially a bet that the US’ financial system will remain stable and continue functioning well, meaning that we have passed the worst part of the crisis. He believes that the portfolio has considerable potential for capital gains in addition to hefty dividend payments. 

Finsum: Jim Collins shares a model portfolio that would particularly benefit if the crisis for regional banks is over and a return to normalcy is imminent for financial markets.

In an article for ETFTrends, James Comtois discusses how investors can capitalize from volatile markets with direct indexing. In recent days, volatility has plunged following the successful resolution of the debt ceiling which avoided a potentially catastrophic default. However, investors should continue to be wary given rising recession risk, geopolitical tensions, and still uncomfortably high inflation.

While volatility is painful for all investors, direct indexing is one way that investors can profit from it unlike with index funds. With direct indexing, an investor owns the actual stocks in the index. Due to this, losing positions in the account can be sold which can be used to offset gains from winning positions to reduce tax liabilities. Subsequently, these losing positions are replaced with similar ones to maintain diversification and faith with the underlying index. 

Notably, this strategy works even in years when the index was up. And, it works even better in conditions like 2023 when we have indexes with healthy gains albeit with considerable volatility. Further, many services now will automatically scan portfolios to identify rebalancing opportunities. And, the more frequent the scans, the more alpha that can be uncovered. 

Finsum: While market volatility has died down in recent days, it’s inevitably going to come back. Find out how direct indexing allows investors to capitalize during volatile markets.