Outside voices and views for advisers

Nov 26, 2014, 12:01 AM EST

5 steps to building enterprise value

By Ray Sclafani

As advisers you have the job of measuring value: The value of assets, the value of a trade, the value you bring to your relationships with your clients. But the ultimate value, that all of these things build to, is the total value of your business. A financial advisory firm's business is measured in several ways, and a recently prevailing one is what's known as enterprise value. Enterprise value is the theoretical takeover price for your firm in the event that you are selling it. It varies significantly from standard market capitalization because it takes into account more measurements of your business, including debt and what might be considered by some to be less tangible measurements of your firm's success.For advisers, this means calculating a very different kind of value and understanding that value needs to be consistently and conscientiously contributed from the moment they start building their business, not when they're... Read full post

Nov 24, 2014, 2:33 PM EST

How to avoid the unexpected capital gain gift

By Todd Rosenbluth

For many Americans, this week is the start of their holiday shopping season and lower gasoline prices could help spur greater spending. Unfortunately, depending on what mutual funds or ETFs they hold in their portfolio, they might soon receive the unexpected gift: a capital gain that incurs a tax. Equity and fixed-income mutual funds or exchange-traded funds hold a basket of securities. When the securities appreciate in value, as many have in the 2014 up market, and are sold by the fund manager, they accrue capital gains that are passed along to the shareholder. Even if an investor did not sell shares in the fund during 2014, when the manager takes profits in a holding or more likely trims it to meet redemptions from other shareholders, the investor shares in the tax burden. Such short- and long-term capital gains are more common for mutual funds than ETFs for a few reasons, including lower turnover and differences in how ETF shares... Read full post

Nov 21, 2014, 2:48 PM EST

New managed volatility funds aim to protect client portfolios from market swings

By Thomas Hoops

When clients walk into a financial adviser's office, they usually bring along dreams of major upside. They want the next Microsoft, Google or Tesla — the big ideas everyone wants to hear about at cocktail parties. We discourage them at our peril, but it is just as important to guide clients to investments that will help manage their risk. Creating a balanced portfolio isn't sexy, but it is smart.To this end, a new generation of products is gaining popularity. We characterize them as multi-asset, outcome-based or solutions-based. These products can appear inscrutable — and yes, repeating words like “solutions” does nothing to explain what they are — but they have much to offer. They can be difficult to judge by classic standards, including cap-weighted Morningstar boxes, because their goals are broader than merely producing returns against a benchmark, including mitigating risk against downside in widely... Read full post

Nov 19, 2014, 4:07 PM EST

Using your imagination to help you move your book to a new firm

By Mark Elzweig

Wouldn't it be great if you just could curl up on a yoga mat, close your eyes, repeat your favorite mantra and magically transport client assets to your new firm? Well, I'm not suggesting that you can move your book so easily. But advisers can use simple visualization techniques to help them move client assets with more confidence and serenity.Back in the '90s, a friend of mine gave me a copy of Shakti Gawain's book "Creative Visualization". The basic premise of the book is that we can use our imagination to create what we want in life. In other words, by imagining positive outcomes, we can create the mental attitudes that can make us more likely to achieve our goals. Despite some of the book's New Age-y perspective, I found myself intrigued by the power of the technique. I liked the idea that an experienced meditator could shape his emotions by choosing what to think about and when to think about it.Somehow, it dawned on me that... Read full post

Nov 19, 2014, 3:02 PM EST

A road map for navigating the changing financial planning landscape

By Larry Roth

Change is a constant in our industry, and financial advisers must learn and adapt continuously to keep up with changes in the economy, technology, the regulatory environment and a range of other areas.What is not constant, however, is the pace of change — and as advisers are realizing, that pace is accelerating more rapidly than ever. This is especially true in the complicated but crucial world of long-term financial planning for clients, where secular trends such as longer lifespans for retirees, greater complexity in the tax code and the rising prevalence of nontraditional wealth transfer arrangements are converging to create challenges that require increasingly specialized skills on the part of advisers.The best practices and industry knowledge that, by themselves, enabled advisers to build their businesses in the past may no longer help them succeed next year — or even next month. In order to provide clients with the... Read full post

Nov 18, 2014, 2:59 PM EST

Stock market's October slingshot rebound impressive

By Gene Peroni

The short-lived selloffs in the major stock market indexes earlier this year proved to be springboards for short-term rebounds to record high levels. The deeper the decline and the more reactive the CBOE Volatility Index (VIX) becomes, the more sensational the recoveries. October's decline was dramatic. The intense selling last month reached near panic levels and was beyond the varying shades of fear witnessed in the prior two corrections. This was depicted in the VIX's meteoric ascent to 31 from 15 at the height of selling on Oct. 15. The selling rout in mid-October resulted in a slingshot rebound that catapulted the stock market toward all-time record highs by Halloween.October delivered on two historical points for which the month is renowned: a dramatic selloff and a pivotal rebound. The decline may have satisfactorily addressed the question of when a 10% correction might unfold. Although the major indexes held short of... Read full post

Nov 17, 2014, 2:17 PM EST

Advisers need to crack fund managers' narrative

By Tom Brakke

Asset managers need to create a narrative about what they do and how they do it. Lacking a story, it’s all about the numbers.You might say, “Well, that’s the way it should be. This is a performance game.” Except that’s unrealistic. Everyone has periods of underperformance, and clients who lack understanding of an asset manager’s approach are more likely to bolt at the wrong time. That’s typically bad for the clients and obviously bad for the manager.To be clear, creating a narrative that is dishonest and manipulative is not a tenable long-term strategy (in addition to being just plain unethical). On the contrary, trust is built through transparency, awareness and education about the real way an asset manager navigates the markets.The narrative should be effective and truthful. If you don’t have a powerful story to tell, you’re going to have a hard time of it and will be fighting a... Read full post

Nov 13, 2014, 5:08 PM EST

3 traits the best investment cultures all share

By Michael Roberge

If you don't think culture matters, take a look at the team-first San Francisco Giants, who recently won their third World Series in five years. Sure, the Giants have a few big name players, but their run of championships is defined by a roster of players who are solid contributors but certainly not household names outside the Bay Area. This has driven a consistent, complementary culture of team-first players, an impressive and refreshing achievement in an era of big-name player movement in most professional sports. Team chemistry in the corporate environment is no different. A CEO will tell you that culture – the values, behaviors and beliefs that pervade the entire organization – is what differentiates a company today. A strong culture matters — particularly for an investment firm, where people and judgment are your greatest assets. In fact, research done by Focus Consulting Group showed improved decision-making, ... Read full post

Nov 11, 2014, 5:29 PM EST

It's time for a revolution in how advisers work with couples

By Kathleen Burns Kingsbury

The financial services industry needs a couples revolution. This revolution would result in a real shift in how the advisory field views and work with couples. No longer would it be commonplace for advisers to meet with just one partner to discuss the family finances.Instead, all advisers would require joint couples meetings where they would assist partners in resolving financial differences, making financial decisions together, and empower them to talk openly with their children about money.The byproduct of this revolution would be healthier couples and stronger families. Advisers would benefit as well as they would increase client loyalty, retain more assets and be the next generation's logical choice as their trusted adviser.My fear is that without a couples revolution, well-intended advisers will continue to collude with the idea that it is okay for intimate partners to discuss all aspects of their lives together, except money. Our ... Read full post

Nov 10, 2014, 4:56 PM EST

Bill Gross' move to Janus not likely to have long-term ripple in bond market

By Stephen J. Huxley

News surrounding 70-year-old Bill Gross's switch from Pimco to Janus has generated a good deal of speculation as to the potential impact on bond markets. When put in perspective, however, it is doubtful there will be much impact for anyone not directly involved with the specific funds he managed.(More: Meet the new bond kings)One perspective is the relative magnitude of the fund Mr. Gross managed for Pimco, its Total Return Fund. PTTPX, the firm's largest fund, had about $200 billion in fixed income securities, or about one-half of one percent of the total outstanding U.S. bond market debt, which now stands at about $38.1 trillion (see table). Nearly half of this is U.S. government debt. Pimco's overall assets are a significant percentage of the total ($1.9 trillion or about 5%), but he directly managed only PTTPX. The fund he will now manage for Janus, its Global Unconstrained Bond Fund (JUCIX), has a miniscule $80 million. Nearly... Read full post

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