Displaying items by tag: clients

In an article for Financial Planning, Victoria Zhuang discussed the brisk pace of recruitment for financial advisors in the second-half of 2022 despite a volatile and challenging market environment. 

According to Diamond Consultants, there was a 12% increase in the number of experienced brokers who switched firms. This is a contrast to the typical pattern of advisor movement and recruitment slowing down in volatile conditions. 

In the first half of 2022, 4,249 experienced brokers switched firms which increased to 4,757 advisors moving in the second-half of the year. In total, more than 9,000 experienced advisors moved which was slightly more than 3% of overall advisors in the US. 

In addition, transition deals were much more generous in the past, indicating that the wealth management industry remains competitive and ambitious in terms of recruitment and growth. This is also reflected in the generous deals offered to entice movement with many signing deals paying more than 300% of 12-month revenue. Another noticeable trend is gains made by independent broker dealers, while the big banks continue to see outflows of experienced brokers to these smaller firms. 

Finsum: 2022 was a banner year for the recruitment of experienced advisors. This is in contrast to the typical pattern of muted recruitment during shaky markets.

In an article for Vettafi, James Comtois discussed some considerations of using direct indexing to build a portfolio. Direct indexing differs from investing in index funds, because the investor is directly owning the securities. It allows for greater customization to account for an investors’ desired factors, values, tax benefits, and concentrated positions.

The trend has accelerated in recent years, as it’s increasingly available to smaller investors. Between 2015 and 2021, direct indexing’s assets under management tripled. Yet, there are some complicating factors that need to be considered for clients and advisors.

An example is the frequency of tax-loss harvesting. Various providers of direct indexing differ in terms of conducting these turnovers on a daily, monthly, or quarterly basis. According to Vanguard, the higher the frequency of these scans, the greater the returns with a difference between 20 basis points to 100 basis points of alpha. 

Another consideration is the possibility of tracking errors. Vanguard estimates that tracking errors can lead to slippage between 75 and 275 basis points. As customization increases, the risk of tracking errors also increases. Therefore, investors need to weigh these downsides against the potential benefits.

Finsum: Direct indexing continues to gain in popularity due to it allowing for increased customization and tax benefits. Yet, there are some downsides to consider.

In an article for SmartAsset, Wola Odeniran shared some lessons for advisors from working with high net-worth clients. 

The first lesson is that nearly everyone needs an estate plan regardless of their financial status. Many instinctively think that such planning is only necessary for wealthier individuals and families. However, estate planning is the foundation for attaining financial security. It can also help advisors build trust and differentiate themselves from competitors. 

The second lesson is that it is always helpful and valuable to get outside advice. Many high net-worth clients are very successful in their fields, yet they are willing to hire and defer to advisors. Advisors can use this as an example when explaining to potential clients about the benefits of working together. 

The third lesson is that index funds can be a foundation for portfolios. Many high net-worth investors stick to indexing given the low costs and forced diversification. However, these are a good fit for any portfolio regardless of net worth, yet many clients fail to take advantage of index funds. 

The final lesson is that money without financial planning does not lead to happiness. Many high net-worth clients see their wealth disappear due to a lack of planning, while those with fewer assets are able to live peacefully in retirement with little financial stress. 

Finsum: Here are some lessons that financial advisors can learn from high net-worth clients to improve their practice and convert prospects into clients.

According to research from WisdomTree Investments and shared in an article by Nick Peters-Golden on VettaFi’s Modern Alpha Channel, the volatile markets and uncertainty about the economy in 2020 yielded some insights and lessons that can be applied today.

2020 was particularly challenging for advisors given the outbreak of the coronavirus and aggressive policies to deal with it, including massive amounts of fiscal and monetary stimulus. There were other practical challenges, such as maintaining communication with clients virtually. 

The research results in some surprising takeaways. For one, investors didn’t seem more panicked despite the steep drop in stock prices amid the initial lockdowns. Additionally, surveys showed that investors were satisfied with their advisors’ performance over this period. 

WisdomTree attributes this satisfaction due to constant communication with clients and reassurance about their long-term plans. Most advisors increased communication with clients and were able to increase confidence by using model portfolios. 

As a result, the number of investors who said advisors using third-party model portfolios was ‘absolutely acceptable’ rose to 86% from 90%. Additionally, advisors got high marks from clients about their accessibility and responsiveness than prior to the crisis. 

Finsum: Research from WisdomTree Investments shows that clients were satisfied with advisors’ performance in 2020 despite a challenging environment.

Vestmark just unveiled its direct indexing offering which is part of its personalized unified managed account that will give its clients more bespoke services like tax optimization and portfolio management according to reporting by Diana Britton for WealthManagement.com.

Initially, the company launched six index-based SMA strategies in January. Now, it’s adding to this with its direct investment platform, enabling direct indexing for customers. This is just one part of its comprehensive, outsourced portfolio management service - VAST. 

VAST includes direct indexing, separately managed accounts, mutual funds, ETFs, and individual securities. It’s already available on the Manager Marketplace which counts 200 managers and 1,000 strategies. Additional offerings include daily optimization to maximize tax loss harvesting.

Another feature is values-based investing which allows clients and advisors to screen out investments based on certain criteria. The current minimum for VAST is $250,000. While Vestmark’s offerings are similar to other institutions, the primary differentiator is the daily tax loss harvesting as other companies tend to harvest tax losses on a monthly or quarterly basis.