Wealth Management
Municipal bonds are not exactly the most exciting part of the market. Most investors usually only think of them when there is a crisis or high-profile downgrade.
Yet, in today’s environment it makes sense why there is renewed interest in the category. They are one way that investors can take advantage of higher rates, but they also provide a greater degree of safety given that default risk is much lower.
Todd Rosenblum discusses why the successful resolution of the debt ceiling could be a catalyst for further gains in a blog post for ETFTrends. Prior to the resolution, there was a surge of demand for Treasuries as investors were looking to de-risk their portfolios.
Now, there is outflow from Treasuries and expectations of more weakness given strength in equity markets and increased supply coming online over the next few months. Thus, there is a rotation into other types of fixed income products.
Municipal bonds are one recipient of these outflows especially as they offer tax benefits. Investors also can buy a municipal bond ETF which is a diversified, low-cost way to get exposure to the asset class.
Finsum: Municipal bonds are one way that investors can take advantage of high yields, while also offering tax benefits. They are seeing renewed interest following the debt ceiling resolution.
While ESG investing has boomed over the past decade, there are some drawbacks. One is the lack of clear definition of ESG, and what qualifies an investment to be sufficiently deemed ESG. For instance, some ESG funds have much wider latitude, while others are much more discriminating. In an article for Vettafi, James Comtois discusses why some investors who believe in ESG investing are nevertheless unsatisfied with many ESG investment options.
Another issue is greenwashing which is when a company is deceptive or gives false information about its products or processes. As an example, some ESG funds will contain fossil fuel companies, or companies with a record of pollution.
This also brings up a broader criticism of ESG that asset managers are forcing their views on investors, markets, and companies. For investors who believe in ESG investing but are wary of greenwashing, direct indexing offers a solution.
With direct indexing, any ESG index can be replicated, and any companies can be excluded that merit concern. With direct indexing, investors can ensure that their values are reflected in their investments, while retaining the benefits of investing in a diversified index with low fees.
Finsum: Direct indexing solves one of the major concerns about ESG investing which is that it includes many companies with poor environmental records who are engaged in greenwashing.
Someone say ‘yeesh?’
Well, it wouldn’t exactly come out of left field considering how difficult it is to conceive of more challenging circumstances for fixed income investors, according to lazardassetmanagement.com.
After all, bear in mind the cocktail of incoming fire it’s facing: burgeoning inflation, spikes in the rates, shutdowns. On and on it goes, sparking volatility and forcing returns for broad fixed income market indices into negativity,
Sure, with volatility comes risk. But it also can kindle opportunity. So, instead of ducking it, it could be that by facing it, eye to eye, investors in fixed income will reap the benefits.
Meantime, among the ultra rich, it’s not just about feasting on caviar and chugging the finest wines. They’re also fretting about a possible recession, according to barrons.com.
So, what are their advisors doing in turn? According to a survey of family offices conducted by UBS, they’re moving toward more defensive holdings, like high quality, short duration fixed income. A total of 239 family offices were surveyed by the wealth manager. The family offices had a net worth of $2.2 billion.
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In an article for SmartAsset, Patrick Villanova clarifies some misconceptions about annuities and whether they are protected in the event that the insurance company which issued the annuity goes out of business.
Annuities are essentially an insurance contract that offers a guaranteed income in exchange for payment. These can only be issued by insurance companies which means that there is regulation at the state level and protection for buyers. Unlike bank deposits, there is no federal guarantee.
In essence, each state has a guarantee organization, composed of insurance companies operating in the state. In the event of an insurance company going out of business, the organization will make sure that outstanding claims are good.
However, it’s important to understand the exact amount that is protected. In most states, it’s up to $250,000 per person. More often, the failing insurer’s claims would be bought by competitors who would make good on the contract.
Investors interested in an annuity should also check how various insurance companies stack up in terms of ratings by authorities. Typically, insurers with lower ratings will offer higher yields, reflecting the greater risk.
Finsum: Annuities are seeing a surge in interest given higher yields and market volatility. Here are some points to understand about various risks and protections.
A financial advisor practice’s long-term success is dependent on building a pipeline of prospects given that attrition and turnover is a given. While there are many paths to accomplishing this goal, one of the most effective is social media. In an article for WealthManagement, Doug Wilber shares some tips on how advisors can leverage social media.
This is especially true for advisors looking to connect with Generation Z and Millennials as these demographics are more comfortable and receptive to messages on these platforms relative to traditional media. Social media also gives advisors an opportunity to share their expertise, personality, and build trust with potential prospects.
On social media, authenticity is the most important metric. Over time, an advisor can build relationships with potential clients. According to surveys, about half of investors say social media influences who they choose as their financial professional.
Another benefit of social media is that these channels are on 24/7 which means that these interactions can happen at any time. These platforms also have infinite scale which means that the effort of producing content is the same with a small or large audience.
Finsum: Having a social media strategy is essential for financial advisors who want to bolster their pipeline of prospects and/or connect with Millennials and Generation Z.
In remarks at the BNY Mellon Pershing Institute covered by InvestmentNews’ Jeff Benjamin, former SEC Chair Jay Clayton shared his thoughts on the current regulatory environment, and why he believes that the SEC is doing many investors a disservice by preventing them from investing in private markets.
Clayton served as SEC Chairman under former President Trump between May 2017 and December 2020. He drew some differences from his tenure and the current administration, noting that “it’s pretty clear we’re in a very highly business-skeptical and commercial-skeptical regulatory environment.” Currently, Clayton serves as the nonexecutive chair at Apollo Global Management.
Clayton also sees alternative investments as another area where the SEC is being overly restrictive, and it’s hurting retail investors by depriving them of opportunities that are available to institutional and high net-worth investors. He said that it’s hypocritical that retail investors are able to buy leveraged ETFs or options but not private investments that have significantly less risk.
In order to make alternatives available to all investors, he said that regulators would have to change their approach, and asset managers would also have to introduce appropriate products.
He did acknowledge a conflict of interest, since Apollo has a major presence in private markets.
Finsum: At a recent conference, former SEC Chair Jay Clayton shared his thoughts on the current regulatory environment, and why he believes alternative investing needs to be further democratized.