Wealth Management
Based on the results of a Broadridge survey fielded between September 29th to October 10th, advisors with a marketing strategy brought on an average of 41 new clients, compared to 17 new clients for advisors without a strategy. The survey queried 401 advisors overseeing at least $10 million in client assets. The survey also revealed an increase in marketing, as advisors spent an average of $743 in marketing for each new client and added 23 new clients on average over the past 12 months. Those figures are both up from last year when the average advisor spent $719 per client and gained 21 new customers. Kevin Darlington, general manager, and head of Broadridge Advisor Solutions had this to say about the results, “Having a defined marketing strategy, that is the single biggest differentiator [for] how the advisors that are reaching their growth goals [are] doing it. They're much more confident in reaching their goals, they're acquiring clients, and they're just getting much better ROI on their marketing.” The survey underscores the benefits of a well-executed marketing strategy. Gordon Abel, chief marketing officer of Dynasty Financial Partners, told Financial Advisor IQ, that “Advisors also need to remember that a marketing plan requires careful thought and patience.” He added, “Building awareness means familiarizing potential clients with the advisor's brand and name. They need to understand who you are and what you do.”
Finsum:A recent study revealed that advisors who have a well-executed marketing strategy get 2.4 times more new clients than advisors who don’t.
Amid volatility that wreaked havoc on the market last year, hedge funds lost almost $125 billion worth of assets from performance losses, according to Hedge Fund Research (HFR) data. Investors also pulled their money from hedge funds last year, leading to a net outflow of $55 billion, the largest capital flight from hedge funds since 2016. This is a sharp reversal from 2021 when hedge funds saw $15 billion in net inflows. Volatility in the markets was triggered by high inflation, interest rate hikes, and Russia's invasion of Ukraine. Investors pulled $40.4 billion out of hedge funds that buy and sell stocks, a strategy that posted the worst performance for the year, losing $112.5 billion. Even macro funds that saw strong performance last year dealt with outflows. Institutional investors pulled $15 billion from these funds, according to HFR. In fact, the only hedge fund strategy that did see an increase in money was event-driven mergers and acquisition and credit funds that saw $4.3 billion in inflows. It was a tough year for performance overall for the hedge fund industry, as the HFRI 500 Fund Weighted Composite Index fell 4.2%. The index tracks many of the largest global hedge funds, marking the worst performance since 2018.
Finsum:The hedge fund industry lost $125 billion last year amid market volatility triggered by high inflation, interest rate hikes, and Russia's invasion of Ukraine.
Last year was a notable year for ESG investing. While ESG funds dealt with underperformance, anti-ESG initiatives, and regulation, demand continued to be strong for these funds. This year could be just as eventful for the strategy. First, there were record numbers of shareholder resolutions filed at public companies last year due to the SEC’s friendlier stance on them. That is expected to continue as companies set climate-related targets and shareholders press them on ESG matters. Second, while 57% of institutions expect the energy sector to outperform the market again this year, according to Natixis’ Global Survey of Institutional Investors, 46% said that they are increasing investments in renewables, twice the rate of those increasing investments in fossil fuels. Third, while the SEC has proposed a set of rules designed to help curb greenwashing, firms have a bigger motivator to stop, sweep examinations. According to Michael McGrath, a partner at K&L Gates, “That has had a greater impact on the approaches of firms to their ESG marketing actions thus far than have the new rules. That’s really because firms have an immediate concern that needs to be addressed.” The last theme to watch is anti-ESG initiatives. Asset managers that are focused on sustainable investing will have to accept the fact that they may not be competitive in some markets.
Finsum:2022 was a highly eventful year for ESG investing and this year will be no different due to themes such as shareholder resolutions, increased investments in renewables, SEC sweep examinations, and continued anti-ESG initiatives.
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While some alternative managers have been benefiting from the market volatility, it’s been a challenging environment for fundraising. In fact, some of the top brand-name firms are having trouble hitting their targets, let alone their hard caps, according to industry insiders. While there are several reasons for this, liquidity issues among limited partners from the "denominator effect" is high on the list. The denominator effect is when volatility in the public markets impacts fundraising in the private markets. It occurs when the value of one portion of a portfolio decreases drastically and pulls down the overall value of the portfolio. Last year, capital commitments were down 1.4% to $497.3 billion as of Dec. 22 compared to $504.3 billion in all of 2021, according to Pensions & Investments data. Private equity was the only alternative category in which both the number of funds and the amount of capital committed increased in 2022. However, fundraising by private equity funds worldwide was down 41.8% year over year in the third quarter of last year based on data from Preqin. According to Adam Bragar, New York-based head of the U.S. private equity practice of Willis Towers Watson PLC, “Whether the slowdown in commitments will continue into 2023 depends on investors' current and projected liquidity.”
Finsum: It’s been a challenging fundraising environment for alternative managers stemming from liquidity issues among limited partners due to the denominator effect.
Rockefeller Capital Management recently announced that it has nabbed a team of advisors from UBS. Ladage, Smith, Garcia Wealth Partners joined Rockefeller Global Family Office in Austin, Texas. According to the company, this marks Rockefeller’s first private advisor team to be headquartered in the city. The team is led by managing directors and private advisors Alex Ladage and Landon Smith, and also includes senior vice president and private advisor Jorge Garcia, as well as senior client associates Monica Vallejo and Carl Pavlich. Ladage started his career in 2001 at Merrill Lynch and joined UBS in 2009. Smith began his career in 2003 at Edward Jones. He moved to Merrill in 2005 and joined UBS in 2009. According to Forbes, Ladage’s team managed $1.4 billion as of April 2022. Christopher Dupuy, co-president of Rockefeller Global Family Office, said the following in a press release announcing the move, “As we’ve expanded the reach of Rockefeller across the United States, we see significant opportunity to deliver premium and differentiated wealth management services to clients and prospects in Greater Austin and beyond.” In September, Rockefeller CEO Greg Fleming told Reuters that the company aims to more than double its assets under management over the next three to five years.
Finsum:With Rockefeller Capital Management looking to increase its assets under management by more than double over the next few years, the firm lured a $1.4 billion advisor team away from UBS.
Frontier Asset Management and 55ip are combining their areas of expertise to offer financial advisors a unique set of model portfolios that will minimize risk and seek ideal tax management solutions. The two firms inked a deal this month that will apply 55ip’s tax management solutions to Frontier’s risk-averse ETF strategies so advisors can utilize both techniques within model portfolios. While Frontier does not have any proprietary ETFs, it publishes investment strategies that are used by advisors. The firm establishes a downside risk target for each strategy representing the expected one-year loss potential over 12 months. Their strategies are built around the idea of not losing more than the downside risk target 95% of the time. 55ip, on the other hand, offers tax management for an array of products such as model portfolios, ETFs, direct indexing, and active SMAs. It achieves this through proprietary algorithms, which keep track of the different portfolios the firm oversees along with every tax position and tax law related to those portfolios. Rob Miller, CEO of Frontier had this to say about the deal, “Being able to utilize 55ip’s tax overlay service within our risk-managed services gives a really unique product in the investment advisor space. We’re hoping that investment advisors will get the best of both worlds with tax and risk management for their clients.”
Finsum:Frontier Asset Management, which provides risk-management strategies, and 55ip, which offers tax management solutions are combining their expertise to provide advisors with a unique set of model portfolios.