Wealth Management
The SEC has introduced new disclosure requirements and registration processes for registered index-linked annuities (RILAs) and registered market value adjustment (MVA) annuities in hopes of bringing clarity to the industry. The final rule mandates issuers of non-variable annuities to use Form N-4, updating the framework for these products.
This change aims to help investors make informed decisions, as the market for these products has grown significantly, with RILA sales reaching $47.4 billion in 2023. The amendments include a summary prospectus framework and extend Rule 156 to non-variable annuity advertisements to prevent misleading materials.
While SEC Commissioner Hester Peirce supports the general approach, she expressed concerns about potential biases and the need for creative disclosure techniques to enhance investor understanding. The amendments will take effect 60 days after publication in the Federal Register, with full compliance required by May 1, 2026.
Finsum: Annuities seem bogged down by more complexity, and this ruling could help the industry in the long run.
Bias is a huge problem for high-net-worth individuals (HNWIs), with nearly two-thirds acknowledging that biases influence their investment decisions and 79% seeking relationship managers (RMs) to help mitigate these biases, the need for wealth managers to modernize their profiling tools is more pressing than ever.
AI-powered behavioral finance offers a sophisticated solution, providing RMs with deep insights necessary for crafting hyper-personalized financial plans, portfolios, and client experiences.
Traditional demographic profiling methods are inadequate, often leading to incomplete client profiles and unsatisfactory experiences, as evidenced by the same percentage of HNWIs concerned about personalization. Embracing this technology can transform how wealth managers engage with clients, offering tailored advice and capturing a larger share of the HNWI market.
Finsum: Technology is really allowing advisors more flexibility than ever which can help tailor strategies for HNW clients.
Strategic inflection points often build up gradually before causing sudden change, reflecting the need for constant innovation and adaptation in business. Embracing technology, such as direct indexing can create efficiencies, scale operations, and enhance investment processes which is crucial for asset managers.
Understanding and meeting complex client demands, especially in retail, is essential as clients seek value, not just investment vehicles. The rise of ETFs and SMAs shows the importance of offering cost-effective, customizable solutions, while active management must justify its value in a fee-compressed environment.
Indexing and alternatives have gained traction due to their reliable and affordable returns, but asset managers must continue to adapt and price their offerings appropriately. Ultimately, leveraging technology and maintaining a client-centric focus are key to navigating disruption and ensuring long-term success.
Finsum: Direct indexing should really be thought of as alpha that is on the table ready to deliver to clients that can afford the sizeable investment.
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When considering fixed income ETFs, active strategies offer notable advantages over passive ones. Unlike equity indexes, replicating a bond index like the U.S. Agg is "impossible" due to smaller bond quantities, infrequent trades, and varying maturities and credit ratings.
Active management allows flexibility to adapt to shifting bond markets and interest rate environments. The T. Rowe Price QM U.S. Bond ETF (TAGG), for example, charges eight basis points and seeks to outperform the U.S. Agg through a diverse range of investment-grade U.S. bonds.
As fixed income ETFs grow in popularity, active strategies present a valuable alternative. This trend reflects a broader move towards active management within the ETF space.
Finsum: When thinking about the advantages of active bonds its important to consider this index replicability that you can’t get in fixed income.
The traditional leisure activities have shifted in the last couple of years and one of the most prominent is cycling. The summer months highlight the many benefits of cycling, with enthusiasts like 65-year-old Brooks Boliek calling it his "longevity drug."
Research supports cycling’s health benefits, including reducing the risk of osteoarthritis and knee pain by age 65. A new study involving 2,600 participants found that cyclists were 21% less likely to show signs of osteoarthritis. The study, published in the journal Medicine & Science in Sports & Exercise, emphasizes cycling as a low-impact exercise that strengthens knee muscles and circulates joint-lubricating synovial fluid.
While the study was observational and cannot prove cause and effect, it aligns with advice from healthcare providers promoting non-weight-bearing exercises. Despite risks like overuse injuries and accidents, cycling is associated with increased longevity and can be a lifelong activity.
Finsum: Cycling also presents wonderful opportunities to engage with larger groups of enthusiasts as the communal aspect is very strong.
WisdomTree Inc. has launched Portfolio Solutions to help advisors create and manage client portfolios efficiently. With $109 billion in assets under management, WisdomTree offers three distinct services: portfolio consultations for advisor-built portfolios, CIO-managed model portfolios, and a shared CIO service for collaborative portfolio management.
These services aim to streamline asset allocation, save time, and enhance advisor-client communication. Thomas Skrobe, head of product solutions at WisdomTree, emphasized the growth opportunities these services provide for advisors.
The firm has seen significant adoption, with 2,000 U.S. advisors using WisdomTree managed models and aims to add 1,000 more by the end of the year.
Finsum: The new technology is abundant for portfolio construction, and advisors can lean on the analytics they provide to garner deeper insight.