Displaying items by tag: advisors

In an article for AdvisorPerspectives, Jack Van Dyke of Russell Investments shared some strategies for advisors to attract high net worth investors with direct indexing. 

For most advisors, most strategies or tactics to grow their practice revolve around generating additional revenue from existing clients or adding new high net worth clients. And, the key to accomplishing these goals is to have a unique and differentiated offering. 

Direct indexing fits the bill as it can help reduce a clients’ tax bill, retain the benefits of indexing, and allow for effective customization. While most advisors are aware of this innovation, they have not yet begun offering it to clients. 

Therefore, it’s essential to start the conversation with your prospects and clients. Van Dyke recommends that advisors begin by asking questions to determine whether direct indexing is a good fit for them. These include whether or not they are expecting a large windfall in the future, their current tax liabilities from investments, and whether they have a concentrated stock position. 

These questions are effective conversation starters that you can transition into a discussion about why direct indexing can help them reach their financial goals while giving them more control over their financial destiny.

Finsum: The key to a financial advisory practice is to grow their business and/or increase revenue per client. Direct indexing is one way that advisors can achieve these goals.

In an article for AdvisorHub, Karmen Alexander covered comments from Stifel Financial’s recent conference call when CEO Ronald Kruszewski remarked that there was an opportunity to recruit financial advisors especially following the exit of ‘high payers’. 

While Kruszewski didn’t single out any firms by name, it’s likely that he was referring to First Republic which was a victim of the regional banking crisis and was taken over by JPMorgan with an FDIC backstop. The bank was notable for being an aggressive recruiter of financial advisors with large bonuses and attractive packages. At the start of the year, First Republic was reportedly offering as much as 400% of revenue generated in the past year to advisors with over $10 million in revenue. 

Unlike First Republic which targeted brokers with over $2 million in revenue, Stifel tends to target smaller brokers. Additionally, Stifel has been much more conservative in the terms that it offers. Overall, the bank hired 49 advisors. Of these, 20 were experienced brokers who were lured from other firms. 

Yet, the company also affirmed that while it sees the landscape becoming less competitive with First Republic’s exit, it will continue sticking to its discipline in terms of not offering excessively lavish packages.

In an article for BankRate, Karen Bennett discussed whether CDs or annuities are the best option for someone saving for retirement. Both are low risk compared to other options, however there are some important differences.

A CD pays a guaranteed rate of return for a certain amount of time, but the funds are completely locked up for the entire term at which point the principal is returned. However if the money needs to be accessed early, then there is likely to be a penalty which negates the earned interest and even potentially cuts into the interest. 

In contrast, an annuity is a contract that guarantees a certain amount of income for an upfront cost. Typically, annuities last for the remainder of one’s life, or it can be for a pre-set length of time. Typically, the counterparty in an annuity is an insurance company. Annuities also come in many forms. They can be structured to allow one to build wealth in a retirement account, or it can be like life insurance and pay out a benefit upon death. 

Some differences to consider are that annuities typically pay higher rates than CDs, offer similar amounts of security, higher taxes on income from CDs, and higher penalties for annuities if you need to access your principal. 

Finsum: Annuities and CDs are low risk ways to build wealth for retirement. Here are some differences to consider. 

In an article for ThinkAdvisor, Dinah Wisenberg Brin shared some tips from experienced financial advisors on the best way to integrate model portfolios into your practice. The category has seen rapid growth in recent years with nearly $400 billion in assets as of January 2023 which was up more than 20% over the previous year.

In many ways, model portfolios level the playing field between large and small firms. While some clients will always require a personal touch, model portfolios can be valuable in serving clients who have more typical goals and circumstances. Additionally, model portfolios allow advisors to focus more on enhancing the client experience and growing their business rather than managing investments. 

Another advantage is that they give smaller practices the ability to leverage tools and resources of major asset managers. These portfolios are also scalable and also leads to more optimal and efficient asset allocation. 

However, one clear disadvantage of model portfolios is that they cannot be customized especially in terms of allocations, time horizon, and risk tolerance. Therefore, they may not be appropriate for clients who have special circumstances or unique goals. 

Finsum: Model portfolios are a new innovation and are exploding in popularity. Find out if they are a good fit for your clients. 

Alphathena, a personalized investing platform and direct indexing startup, won the ‘Best in Show’ award at the 2023 Morningstar Fintech Showcase Conference and was covered by Benzinga. Alphathena is attempting to use AI and automation to create solutions and tools for RIAs and Wealthtech platforms with a specific focus on customized direct indexing, automated tax-loss harvesting, and lifecycle management solutions. 

The conference featured 25 fintech startups that were geared towards financial professionals. Some of the major themes included AI, personalization, and improving the client experience. Another discussion point is how the wealth management industry is poised for the Great Wealth Transfer as demographics predict a tidal wave of assets from Baby Boomers to Millennials. 

In regards to Alphathena, Lawrence Johnson, the Head of Emerging Fintech at Morningstar remarked, "Alphathena, with its elegant platform and powerful engine, is an example of a growing field of innovators that have learned to harness frontier technologies to deliver better outcomes for investors."

The judges spoke highly of Alphathena’s innovative approach, potential for disruption, and strong value proposition. Currently, it can customize portfolios with ETFs and factors for personalization and performance. Its longer-term ambition is to be the solution for wealth advisors when it comes to managing the entire lifecycle of personalized investing.

Finsum: Alphathena, a startup in the direct indexing and personalization space, won the ‘Best in Show’ award at the 2023 Morningstar Fintech Conference.