Outside voices and views for advisers

Jul 28, 2014, 4:28 PM EST

Nontraded REIT liquidity events bring profits, transparency

By Scott Crowe

Over the last two years, nontraded REIT liquidity events have totaled more than $21 billion and we see nearly $20 billion worth of additional events on the horizon — with some of the most successful likely contributing to the record nontraded REIT capital-raising that occurred since 2012. (See Bruce Kelly's take on the summer of liquidity events.)The best type of liquidity event is when nontraded REIT investors tend to make a profit on their initial investment. Traditionally, liquidity events were often engineered to create an exit for the sponsor, not the investor. The new dynamic of liquidity events reflects a greater emphasis on investor total return and a timeline for return of principal, rather than just income from yield. They are increasing because publicly-traded REITs and nontraded REITs are, in a sense, coming together. Most liquidations happened in one of three ways:1) An IPO into the REIT public market2) A sale to an ... Read full post

Jul 27, 2014, 12:15 PM EST

One adviser's takeaway on the importance of planning

By Todd Clarke

Lessons learned at his father's side in the practiceLet's dispense with the discussion about whether you need a succession plan, as it would be a waste of everyone's time. Take it from me, it's not “if” but purely a question of “when” you need to have it in place. (More: Why not having a continuity plan in place is reckless)I had the opportunity to work with my dad, who died in a plane crash in 2012, in his financial planning business for over 20 years. As we worked side by side, we had the good fortune to see the business flourish, growing from a financial planning firm to a financial services business that includes asset management and asset servicing companies. We watched it expand from seven employees to more than 500. We guided it from $50 million in assets under management and advisement to $200 billion.Along the way, I'd ask my dad when he was going to retire. I was very curious about his plan and how,... Read full post

Jul 27, 2014, 12:01 AM EST

Nine steps for putting together a continuity plan

By Corey S. Kupfer

1. Identify a licensed individual capable of stepping in if you are incapacitated. 2. Give that person a limited power of attorney that allows him or her to act on behalf of the firm in specific areas, such as investment management decisions. It should also provide for the economic deal for such services.3. Determine whether you also will give that person authority over such aspects of the business as finances, check writing and personnel matters, or whether those powers will be given separately to an employee or family member, or to another person.4. Identify a person to take over in the case of your death or permanent disability. This can be the same or a different person as the one who will take over in case of temporary emergency.5. Enter into a buy-sell agreement with that person to purchase your firm or clients upon your death or permanent disability, or into a limited power of attorney that grants that person the power to sell... Read full post

Jul 25, 2014, 2:24 PM EST

How investors should factor global unrest into their portfolios

By Todd Rosenbluth and John Krey

Geopolitical developments of late may be having little or no injurious effect on the capital markets of the world's most mature economies.In fact, if anything, they have triggered considerable risk aversion that is apparent in significant investment flows of a safe-haven nature into the credit markets of the U.S., the UK, the eurozone and Switzerland. Regardless of repeated warnings from the Federal Reserve and the Bank of England of impending credit tightening sometime this year or next, declining bond yield trends of the advanced markets show no sign of reversing even in reaction to the most calamitous occurrences — like the flagrant July 17 attack on a civilian Malaysian airliner above the disputed territory in Eastern Ukraine.(What about bonds? Amid global turmoil, bond managers' patience is tested)With the Israeli naval and aerial assault on July 8 followed by the ground offensive on Gaza beginning July 18, as well as the... Read full post

Jul 23, 2014, 12:52 PM EST

Betting on your business, the best odds in the house

By Brad Johnson

Imagine you just stepped off a plane into the hot desert air of Las Vegas. As you drive down the Strip, you can already feel the excitement and anticipation growing. After checking into your hotel, you decide to try your luck at the slot machines. You find what looks like the luckiest slot machine in the house, and you say, “This is my first pull of the trip. I'm going to go big.” You put a $100 bill into the machine and you pull the lever. Cha-ching! You win $400 on the first spin; a four-to-one payout! You're excited and you high-five your friend. You think, “What the heck, I'm going to try it again.” You put another $100 bill into the machine and pull the lever. This time you win $350! Now you're starting to wonder what's going on. You glance over your shoulder for the casino security personnel because the machine is obviously broken. Just to make sure, you put another $100 bill into the machine. This time... Read full post

Jul 22, 2014, 1:55 PM EST

An in-depth talk with Jeffrey Gundlach

By Stu Bilton

Aston Asset Management's Aston Doubleline Core Plus Fixed Income Fund (ADLIX) will mark its three-year track record this week. The fund is managed by Jeffrey Gundlach of Doubleline Capital. Aston chief executive Stu Bilton sat down with Mr. Gundlach recently to discuss a number of issues related to the state of the current market. Mr. Bilton: Jeffrey, the name DoubleLine is a metaphor for lines you should not cross when investing. What lines are you currently afraid to cross?Mr. Gundlach: At DoubleLine, we always try to ensure that we understand the risks we are taking and to avoid the risks for which the potential return is likely to be inadequate. For example, there are times when ideas become too popular and investors don't understand the risks of an asset. Today the biggest area of unrecognized risk is low volatility. Consider the measures of market volatility, the VIX index on the S&P 500 or the MOVE index on bonds: both are... Read full post

Jul 22, 2014, 8:19 AM EST

The bond market is beginning to look like a textbook definition of a bubble

By Scott Colyer

The age of zero interest rates has had a number of intended consequences as well as some unintended ones. Historically low rates are meant to make credit cheap and plentiful to assist the economy in recovering from the Great Recession. The greatest unintended consequence is likely the complete mispricing of risk in the debt markets. Whether you consider sovereign debt, municipal debt or corporate debt, there is a strong argument that the current level of reward available is not adequately paired with the risk involved. In fact, we would argue that the risk/reward analysis of the debt market is the most mispriced in history. A huge amount of money has sought refuge from risk in the bond markets. Smart money doesn't stay in dumb places forever.Risk in the debt markets is essentially measured by two types of risk.1. The first risk is referred to as “credit risk,” which is really just the risk that the obligor of the debt will... Read full post

Jul 22, 2014, 7:08 AM EST

The ongoing rot in the economy

By Eric Sprott

While most have been conveniently blaming the tepid first quarter -2.9% GDP growth figure on the weather, we believe that it is just another symptom of a much deeper malaise. As we have argued many times before (see, for example, the March 2014 Markets at a Glance report), the U.S. economy has been on life support, graciously provided by central planners. However hard they try, they will soon realize that no amount of money printing can cleanse the rot of the U.S. economy.Most tellingly, in a recent interview with Reuters, Bill Simon, Wal-Mart's Chief Executive Officer for the U.S., said “We've reached a point where it's not getting any better but it's not getting any worse — at least for the middle (class) and down.”Indeed, if one looks past headline figures, things are not really getting better. Real disposable income per capita in the U.S. has increased only modestly since the Great Recession. However, all of this... Read full post

Jul 15, 2014, 8:20 AM EST

The downsides of laddered bond portfolios

By Terry Hults

We think investors who build laddered portfolios to protect against rising rates will be disappointed — by locking in low yields with traditional ladders or by hidden risks of higher-yielding ladders. In our view, actively managed portfolios are better able to take advantage of changing markets.Laddered portfolios are built with bonds spaced evenly across maturities so that bonds mature and their proceeds are reinvested at regular intervals. These portfolios are assumed to be simple, provide return certainty and capture higher yields as interest rates rise. They're definitely simple, and they do provide a relatively certain return. But in today's low-yield environment, that return is likely to be locked in at below-inflation yields for the next few years. A portfolio laddered from one to 10 years yields only about 1.5 percent before accounting for the costs of trading and other annual fees. At that low yield, there's little... Read full post

Jul 14, 2014, 3:42 PM EST

The reasons why human and robo-advisers will soon converge

By Steve Sanduski

Robo-advisers and real advisers each have what the other wants.Robo-advisers, for all their bluster about empowering do-it-yourself investors with high-tech portfolio management wizardry, will ultimately morph to advice-giving firms with cool technology.Real advisers, the flesh and blood professionals who meet eye-to-eye with clients to give investment and non-investment advice, covet the slick interfaces and operational efficiency afforded by the robo-advisers.At some point in the future, like husband and wife, the two shall become one.Over time, robos will add advice and real advisers will add an online option. In fact, it's already happening.Robo-adviser Betterment has partnered with superstar RIA Steve Lockshin to launch Betterment Institutional, which, according to Lockshin, “reinvents the consumer experience and exponentially increases advisory efficiency.”Real advisers, such as the ubiquitous Ric Edleman and the fine ... Read full post

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