Wealth Management
One of the biggest challenges for financial advisors is growing your client base. Rebecca Lake, CEPF recently penned an article for SmartAsset providing strategies on how to get more clients. According to Lake, the first step is to know your audience. Knowing whom you want to serve can help shape your marketing efforts in appealing to your ideal client. This can include demographics such as age range, marital status, children, and average annual income. Lake also recommends niching down in terms of your advisory services. This can help grow your client base by focusing on a smaller number of potential clients and offering a specialized service that they're seeking. Lake notes that the smaller the niche, the “greater the opportunity you have to grow your client base if you're one of only a handful of advisors who are meeting the needs of that market segment.” The next strategy is to fine-tune your brand. This can include a good logo, especially when it's linked to a catchphrase or slogan. Next, networking with other individuals in the financial services community can boost your visibility. The final strategy is to leverage your existing clients by asking for referrals, which can be a highly effective way to get new clients, but make sure to frame the ask carefully.
Finsum:Rebecca Lake wrote an article for SmartAsset on how to grow your business, including strategies such as knowing your audience, finding a niche, fine-tuning your brand, networking, and asking for referrals.
With many economists predicting an economic downturn, investors may wonder how ESG investments will perform in a major recession. To find the answer, Portfolio Adviser asked a cross-section of industry commentators for their views. According to Max Richardson, senior director, of wealth planning at Investec Wealth & Investment, research on ESG performance during recessions is limited, but available studies suggest mixed results. For instance, a study by MSCI found that ESG stocks outperformed traditional ones during the 2008 financial crisis, with a lower decline in stock prices and a faster recovery. However, a study by the London School of Economics found that ESG stocks performed no better or worse than traditional stocks during the 2008 crisis. In fact, the impact of the crisis on ESG stocks was largely dependent on the specific industries and companies, not their ESG status. Amanda Sillars, fund manager and ESG director at Jupiter Merlin believes funds that exclude entire sectors on ESG grounds, which are typically oil, gas, miners, and defense, "run the risk of delivering weak absolute performance if those sectors outperform.” In contrast, “Fund managers who retain a broad investment universe and select companies that generate strong cashflows, minimal debt and are valued cheaply, while keeping company engagement at the heart of their investment strategy, are likely to fare better during a recession.
Finsum:According to a wealth planner, studies on ESG performance during a recession are mixed, but a fund selector believes that managers who focus on engagement and not exclusion will fare better in a recession.
Allan Roth, founder of Wealth Logic LLC recently penned an article for etf.com where he provided his opinion on direct indexing vs. ETFs. While direct indexing is forecasted to attract assets at a faster pace than ETFs, according to a recent report by Cerulli Associates, Roth believes that direct indexing is not better than ETFs. While he does mention the benefits of direct indexing such as tax advantages, customization, and low annual costs, he asked, “But is direct indexing better than ETFs?" He added, "Generally they are not, in my view, at least not compared to the best ETFs.” He uses the S&P 500 as an example. Vanguard’s VOO ETF has a 0.03% annual expense ratio, while direct indexing typically has an annual fee of at least 0.40% annually. Roth does say that the 0.37 percentage point differential could be made up from the benefit of tax-loss harvesting in the early years, but he believes it likely won’t continue. That is because the stock market “generally moves up in the long run, so each year there is less and less tax-loss harvesting. Yet the fees continue.” In addition, after a few years, he says that “the tax benefit is minimal, and all that is left are fees and complexities.”
Finsum:Financial planner Allan Roth recently wrote an article for etf.com where he stated that direct indexing is not better than ETFs since direct indexing is more expensive and its tax benefits are minimal after a few years.
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According to the third annual Alternatives Watch (AW) Research Investor Compendium commissioned by Vidrio Financial, there was a strong uptick in the amount of alternative investment mandate activity across some of the largest institutional investors. In 2021, AW's second annual compendium tracked a total of $130 billion in new capital across more than 900 individual institutional investor mandates from 50 of the top alternative allocators. That figure jumped to $144 billion in 2022, an increase of over 10%, across more than 1,000 individual mandates. There was also an increase in investor interest across infrastructure and real asset strategies to $6.9 billion and $4.9 billion, respectively, as those strategies act as inflation hedges. Other key findings include a muted slowdown in private equity assets, while there was a pick-up in activity in hedge funds as large institutional players sought to purchase risk-mitigating assets throughout the year. In addition, total private equity and venture capital mandates accounted for over half the mandates in the compendium and were spread out across the world, as investors embraced life sciences and technology sectors. Mazen Jabban, Chairman and CEO, of Vidrio Financial, stated, "As we saw in this year's Compendium performance data, Vidrio Financial continues to observe alternative asset classes growing in importance for institutional investment teams who work to take advantage of illiquidity premiums in the private markets while also seeking greater transparency into these types of investments."
Finsum:According to the third annual Alternatives Watch Research Investor Compendium, there was a 10% uptick in the amount of alternative investment mandate activity across some of the largest institutional investors.
LPL Financial scoops up three Wells Fargo Advisors teams who are partnering up in Charlotte, North Carolina, to create a single $1.45 billion practice. The three teams, which generated $10.5 million in revenue at Wells, moved on March 2 and joined LPL’s Strategic Wealth Services channel, which launched almost three years ago and is aimed at attracting teams from full-service firms. The new practice, Carnegie Private Wealth, is led by Angie Ostendarp, Jordan Raniszeski, and Mary Sherrill Ware, whose team at Wells had $1.1 billion in assets. Ostendarp started her career at Wells’ Wachovia predecessor in 1994. Raniszeski spent all 16 years of his career at Wells, aside from a short stint at Deloitte & Touche Investment Advisors in 2004. Ware was at Wells for her whole 16-year career. Mitch Mayfield, who has nearly 30 years of experience, all at Wells and its predecessors, is partnering with Ostendarp’s team. He had known Ostendarp from the training program at Wachovia. Jeff Vandiver, who has been friends with the other advisors for 20 years and has thirty years of experience, rounds out the new practice. He started his career at Wells predecessor First Union Brokerage Services in 1993. Raniszeski said the following in a statement, “The opportunity to create our own firm at LPL with a culture that prioritizes clients’ needs and interests above everything else just felt like the right way forward.”
Finsum:LPL recruited three separate Wells Fargo teams, who are joining together to form a new combined practice at LPL as they believe its culture prioritizes clients’ needs and interests above everything else.
In a recent article for the Wall Street Journal, author Mark Hulbert defends the use of ETFs in opposition to people who say direct indexing is a superior method of investing. Many brokerage firms that have created direct-indexing platforms say direct indexing is better as it allows investors to create a customized index without stocks that they don't want and also can strategically harvest tax losses. However, Hubert believes that most of direct indexing’s supposed advantages can be duplicated by ETFs at a lower cost. For instance, customizing an index can be duplicated. According to Lawrence Tint, the former U.S. CEO of BGI, the organization that created iShares, now part of BlackRock, anybody could achieve the same result by buying a generic index ETF and then selling short the stocks that we want to avoid. Tint also doubts that direct indexing’s ability to harvest tax losses outweighs the cost savings of investing in a low-cost ETF. He stated that, over time, an investor who sells his losers from his direct-index portfolio will increasingly be left with a portfolio of mostly unrealized gains. So, the benefit of being able to decide when to take tax losses will fall over time. An investor will also have to pay higher fees each year to maintain the direct index. In addition, he also noted that tax-loss harvesting is only applicable to taxable accounts.
Finsum:In an article for the Wall Street Journal, author Mark Hulbert defends the use of ETFs against direct indexing as its ability to harvest tax losses outweighs the cost savings of a low-cost ETF, while customization can be replicated by buying an index and shorting the stocks you don’t want.