Wealth Management
Turnkey asset management platform and fintech provider GeoWealth has signed a deal to buy First Ascent Asset Management, a Denver-based registered investment advisor overseeing nearly $1.4 billion. Colin Falls, President, and CEO of GeoWealth, told FundFire that the deal is expected to close early in the second quarter. First Ascent, which also provides TAMP services, specializes in providing investment management and consulting services to independent advisors. The firm also provides non-discretionary model portfolios to technology platform providers. First Ascent will move to the GeoWealth platform and have access to its proprietary integrated tech stack, including back-office capabilities and customizable unified managed account offerings. GeoWealth’s platform includes advisor-managed models alongside a suite of third-party-manager-built models from about 40 providers, according to Falls. The firm also offers ETF model portfolios created by third-party ETF sponsors, including J.P. Morgan Asset Management. According to a news release, First Ascent’s investment offering and service model will remain unchanged, as will its flat-fee schedule. The firm charges a flat fee rate or percentage of assets under management, and annual fees range from .15% to .30% for accounts with at least $50,000.
Finsum:Managed-model providerGeoWealth is buying First Ascent Asset Management, an RIA that also provides TAMP services such as model portfolios.
According to a recent study, advisors are moving away from revenue-sharing products such as mutual funds and toward products such as ETFs and SMAs due to regulatory pressure and changing investor preferences. In fact, advisor use of mutual funds is expected to decrease by 13% by 2024, according to research by Cerulli Associates. Dennis Gallant, associate director at Boston-based analytics firm ISS told FA-IQ that affluent clients tend to expect products that can be personalized, such as separately managed accounts, and capabilities such as direct indexing could bring that personalization down market” Iraklis Kourtidis, co-founder and chief executive officer at Rowboat Advisors, a direct indexing provider told the magazine that there are three main reasons why custom portfolios are preferential for advisors. He said one is to meet clients’ environmental, social, and governance preferences, “which you can’t do within a fund because it’s one-size-fits-all.” The second reason is tax efficiency, particularly tax-loss harvesting, “which you also can’t do with a big fund where you lump all the money together.” According to Kourtidis, the third “much less talked about” reason is the concept of “completion portfolios.” He said, “If someone has a lot of tech exposure through stock with their employer, for example, you can give people a custom portfolio that offsets that.”
Finsum:According to research by Cerulli Associates, advisors will be moving away from mutual funds and towards ETFs and SMAs due to regulatory pressure and changing investor preferences such as personalization.
According to a report released this month by the Investment Company Institute, only 2.5% of defined contribution plan participants stopped contributing to their plans last year. This suggests that despite market volatility, Americans are still exhibiting disciplined savings habits. The report, titled “Defined Contribution Plan Participants’ Activities, 2022,” examined participant-directed changes in DC plans by tracking activity through recordkeeper surveys and comparing it to data going back to 2008. Based on the results, DC plan participants remained committed to making contributions like they had in previous years. For instance, only 2.2% of participants stopped contributing in 2021, 2.3% in 2020, 2.3% in 2019, and 3.4% in 2009. In fact, the withdrawal activity of defined contribution plan participants was 4.1% in 2022, the same as in 2021. In prior years, the percentage of plan participants who took withdrawals was 3.8% in 2020, 3.9% in 2019, and 3.1% in 2009. While levels of hardship withdrawal activity increased slightly last year, they were still low in absolute terms. This indicated that despite a challenging market environment, Americans are set on protecting their retirement savings, which was the conclusion of the ICI report.
Finsum:According to the results of a recent ICI report, only 2.5% of defined contribution plan participants stopped contributing to their plans last year despite a challenging market environment.
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While direct indexing might be ready for added use this year, according to one expert, it’s hasn’t quite hit prime time when it comes to the majority of the wealth management industry, reported fa.mag.com.
“I’m not necessarily of the view that 2023 will be the year that direct indexing becomes broadly democratized,” said Anton Honikman, CEO of MyVest. “There’s a different discussion about bringing direct indexing to a broader market. What’s hindering that is the need for more of an experience with direct indexing.”
He continued: “I’m a fan of direct indexing,” said Honikman. “I think it will continue to grow, and I think it’s emblematic of an inexorable trend towards more personalized solutions.” That said, he also noted it’s “emblematic of the real interest and desire for more tax management -- particularly among the affluent and high-net-worth investors. For those reasons, I’m really positive about its future.”
But this year, however, when it comes to wealth management, direct indexing won’t be omnipresent. Thing is, the technology that will abet the ability of direct indexing to maximize its potential isn’t in place, he noted. The personalization of financial plans and portfolios at scale would be enabled with such technology.
Rather, this year’s game plan will see technologists and wealth management firms remain on the road toward investing in overcoming issues evolving around personalization, added Honikman.
Based on a report by Cerulli Associates, over the next five years, direct indexing’s assets are expected to spike by more than 12% annually, according to investmentnews.com.
There are numerous ways for an advisor to expand his or her client list, but approaching people you know might be one of the lowest-hanging fruit. However, approaching them in the wrong way will only end up in rejection. Bryce Sanders, President of Perceptive Business Solutions Inc. recently wrote an article for ThinkAdvisor on how best to approach people you know for business. According to Sanders, the first step is to identify their need and research the issue. For instance, if you’re talking with someone, listen carefully when they speak. You may realize they have a problem on their mind. The next step is to discuss the issue and demonstrate an understanding of it. You know there is something on their mind and as a friend, you are concerned. Try to “tactfully” draw it out. Next, assess their level of comfort or unease. They might be thrilled you spoke up or ask you to back off. The fourth step is to view the situation as a third party. Make a list of all the potential solutions or approaches to their issue. Then offer to do something for free. You could say it’s not the first time you heard about the problem and then connect your friend with a specialist at your firm. After you meet with the specialist, present your friend with a turnkey solution. If they say no, gently follow up.
Finsum:Bryce Sanders, President of Perceptive Business Solutions Inc. recently wrote an article for ThinkAdvisor on the best steps for approaching your friends for business, including identifying their needs, demonstrating an understanding, offering them free advice, and gently following up.
Jonathan Foster, president, and CEO of Angeles Wealth Management, recently penned an article on MarketWatch where he listed the benefits of direct indexing for retail investors. Foster noted that while direct indexing is primarily used by high-net-worth investors that are seeking to optimize their after-tax returns, the widespread elimination of brokerage trading fees and the growing availability of fractional share trading have led to greater adoption of direct indexing. According to Foster, the advantages that direct indexing can bring to a portfolio include ‘dirty money,’ outmoded mutual funds, and personalization. Foster says that ‘dirty money’ refers to investors expressing concern about how the companies they invest in make money. For instance, direct indexing offers advisors the ability to craft portfolios that exclude what their clients believe to be “dirty money.” Foster uses tobacco as an example. In this instance, direct indexing can help an investor craft a tobacco-free portfolio. Outmoded mutual funds refer to investors using mutual funds in taxable accounts and not having the benefit of starting with their own individualized cost basis, which can lead to distributable annual taxable gains. With direct indexing, investors can take advantage of tax-loss harvesting. Direct indexing can also offer investors an opportunity to customize portfolios with strategies such as ESG.
Finsum:A wealth management executive recently wrote an article on MarketWatch advocating for direct indexing due to benefits such as excluding certain securities, employing tax-loss harvesting, and customizing a portfolio for certain strategies.