Displaying items by tag: advisors

For Advisorhub, Jeff Nash shares some thoughts on how financial advisor practices can invest in technology to lure top-notch advisors to their firm. Technology solutions should offer specific benefits such as a quick and easy transition, an increase in efficiencies, automation of routine tasks, regulatory compliance, and an improved client experience.

One of the factors limiting advisor movement is the amount of time and attention that is required to facilitate the move including paperwork, interruptions to operations, and regulatory compliance. So, it’s essential that any practices’ tech stack have an effective onboarding process that minimizes these disruptions and inconveniences.

Another consideration is that advisors’ time during the transition process should be ideally spent on staying in constant touch with clients to ease any concerns and resolve any issues. However, this can be difficult given all the additional challenges of the transition period. 

Many firms are investing in AI to assist with onboarding especially as it can help complete paperwork and address regulatory filings. Overall, AI will help reduce burdens on back and middle office support roles and play a role in client communications and provide more scalability. 

Finsum: Technology can help firms recruit advisors and aid with the onboarding process. Onboarding is stressful for firms and advisors given the regulatory challenges and additional demands but technology and AI can reduce the burden.

At the VettaFi Fixed Income Symposium, Todd Rosenbluth hosted a conversation between Stephen Laipply, the global co-head of iShares fixed income ETFs and Anmol Sinha, fixed income investment director at Capital Group. The conversation spanned a wide array of topics regarding the advantages of investing in fixed-income through ETFs.

Both also spoke of the recent growth in active fixed income ETF offerings, and why they are bullish on the category going forward. However, they rejected the binary of being an active or a passive investor and instead see a role for both strategies in a portfolio.

Active fixed income ETFs allow investors and advisors to better achieve specific goals such as exposure to a certain segment of the market or take advantage of market inefficiencies. Both are in favor of pairing an active ETF with a passive one to achieve ‘total portfolio exposure’. 

Fixed income ETFs are outpacing equity ETFs in terms of inflows over the last couple of years due to yields at their highest level in decades and a shaky economic outlook. Within the fixed income ETF universe, active strategies are seeing the most growth as they have outperformed amid recent volatility and advisors and wealth managers are becoming increasingly comfortable with the asset class.

Finsum: At the Vettafi Symposium, there was a discussion centered around fixed income ETFs and their future outlook. Regarding active vs passive ETFs, there was agreement that both are complementary rather than competing.

In an article for InvestmentNews, Emile Hallez reports on annuity sales reaching record levels in the first-half of 2023. Demand for these products is due to the highest interest rates in decades, coupled with economic uncertainty with factors like inflation and concerns of a recession. Overall, annuity sales reached $182.9 billion in 2023 which is a 28% increase from the first-half of 2022. 

One of the fastest-growing annuity categories is registered index-linked annuities (RLIA). These have gone from a fraction of the annuity market to becoming one of the most popular in 2023. In 2017, only 4 companies offered these products, while 17 do so currently with others planning their own offerings in the coming months. 

Interestingly, RLIA sales are up 8% compared to the first-half of 2022 but sales of traditional variable annuities are down 25%. RLIAs are different from variable annuities because they offer more protection with some also offering some sort of guaranteed income. 

Recent developments are supportive of continued inflows into these products especially given what’s happening in other asset classes. Equities have enjoyed a surprisingly robust performance, but it’s leading to concerns about valuation. Fixed-income also offers generous yield, but the asset class posted negative returns in 2022 and middling returns in 2023. Therefore, it’s likely that annuities continue to see record inflows in the second-half of the year. 

Finsum: The outlook for annuities is quite strong for the second-half of 2023 given high interest rates, an expensive stock market, and volatility in fixed income.

Many advisors and wealth managers are switching to model portfolios and taking a more hands-off approach when it comes to constructing and managing clients’ portfolios. The upside of this is clear as it gives advisors more time to spend on client relationships and building their business. According to surveys, about 35% of an advisors’ time is spent on managing and researching investments.

Yet, it doesn’t make sense as an advisors’ ultimate success depends on retaining and recruiting clients and helping them reach their financial goals rather than the incremental gains that can be theoretically achieved by spending more time researching investment ideas. 

According to Cerulli Associates and covered by Kenneth Corbin in Barron’s, many large brokerage firms are also embracing model portfolios and encouraging brokers to spend more time with clients. Cerulli’s research shows that in down years for the market, 60% of advisor portfolios underperform the market, undercutting the rationale for more active management. 

 68% of brokerage firms are now moving away from advisor-constructed portfolios. In the future, they see advisors serving more as ‘holistic financial planners’ rather than stock-pickers or portfolio managers. Over long periods of time, model portfolios outperform most advisor-generated portfolios with much less risk or concerns about compliance or conflicts of interest. 

Finsum: Large brokerage firms are encouraging advisors to embrace model portfolios especially given lackluster returns of many advisor-built portfolios and the extra time and energy it gives for client service.

For SmartAsset, Rebecca Lake CEFP shares some tips for financial advisors when it comes to hiring new employees and building a team. This is usually an indication that an advisors’ business is growing and that she is ready to offload some responsibilities. Often, many advisors wait too long to hire someone given the time and cost involved, however hiring the right people is paramount to helping your practice succeed.

Lake recommends implementing a team structure with small groups working together and responsibilities clearly defined and distributed. This can help people focus on their strengths and gain more expertise with their tasks. For instance, a member can be in charge of outreach to new clients to ensure the practice has a steady pipeline of prospects.

Depending on the size of the firm, teams can be organized differently with 3 common approaches - vertical, horizontal, or hybrid. A vertical team structure allows the advisor to focus on meeting clients and managing portfolios, while other employees provide support and handle other tasks. This is the way that most practices are set up. 

In order to find the best structure for your firm, Lake suggests making it consistent with how your firm is currently organized. For example at a small practice with a sole advisor, a vertical approach is ideal. She also suggests defining key roles for each member, outlining team goals, and selecting appropriate members for each team based on skills, personality, and experience. 

Finsum: Growing a financial advisor practice requires going beyond just client outreach and portfolio management. It requires setting up efficient and scalable systems.