Outside voices and views for advisers

Oct 16, 2014, 3:45 PM EST

Running an advisory practice in the age of the robo-adviser

By Charles Sizemore

Here's a novel idea: Advisers might actually need to earn their advisory fees in the years ahead. With the arrival of online financial planning sites like Mint.com and online investing marketplaces like Covestor, a real in-the-flesh adviser has to offer something more than generic, packaged advice if they are to convince a skeptical investing public to pay them.While this might feel threatening to some advisers, it shouldn't. Yes, the rise of the robos commoditizes entry-level financial planning. But it also allows advisers to scale their practices and to focus their energies on higher-valued services. Used correctly, digital adviser platforms can also be used alongside social media and traditional news media as a powerful marketing tool.THE FLATTENING OF AN INDUSTRYThe internet has flattened industry after industry over the past 20 years as technology has eliminated traditional gatekeepers. First, Napster and its successors destroyed... Read full post

Oct 16, 2014, 3:41 PM EST

Practice your play-calling for the next market correction

By Matt Halloran

Every adviser needs to be prepared for the next correction. Now, I'm not one of those people who's going to be able to tell you when the next correction will happen. If I was, I would probably be making a lot more money than I'm making right now. Most of the advisers I coach say they have no idea when the next market downturn will be, but that they know it is going to happen at some point. There will be a correction, and you will have to take action. Are you prepared? What are you going to say? As a professional adviser, you need to practice. You need to practice for the big game; the big game is the next market downturn. Do you have scripts written out ahead of time for different levels of market decline? Having scripts allows you to practice, which will remove some of the emotion when you need to make these calls. It will also give you clear and succinct talking points so you can update and tell your clients the plan. Have you ever ... Read full post

Oct 15, 2014, 2:27 PM EST

Passive ETFs are not the answer to emerging markets investing

By Tim Atwill

When considering investments in emerging markets, many investors turn to passive exchange-traded fund strategies due to the common perception they offer a low-risk, inexpensive exposure to the equity markets of the developing world. Passive ETFs are typically based on market capitalization indexes, with two popular solutions being Vanguard's FTSE Emerging Markets ETF (VWO) and iShares' MSCI Emerging Markets ETF (EEM). Historically these two funds account for a large portion of the inflows to emerging markets equities. Due to recent strong relative performance and favorable valuations, both are currently experiencing strong inflows, with VWO and EEM seeing a combined $4.1 billion of inflows quarter-to-date, as of Aug. 31.PASSIVE ETFS HAVE CONCENTRATION RISKHowever, there are some fundamental problems with the construction of these ETFs, primarily based on the methods used to build the underlying indexes. While it is hard to argue that... Read full post

Oct 14, 2014, 3:33 PM EST

The endless bond bull market

By Bob Michele

Patient bond investors have been rewarded in 2014. A zero interest rate policy around the world and low volatility are forcing cash into bond markets, continuing to hold down government bond yields and bolster risk assets. It would seem this is proof of the old dictum 'Don't fight the Fed.' For investors, that applies as well to the European Central Bank, the Bank of England and the Bank of Japan, all of whom have pursued coordinated unconventional intervention to pump liquidity into global markets. There are few signs to suggest that this dynamic is going to dramatically shift anytime soon. In our view, the sub-trend economic recovery will continue in 2015, with global GDP growth averaging between 2 and 4% and global inflation remaining benign between 0 and 2%. Central banks will continue to provide the necessary liquidity until they see broader economic strength and/or material wage inflation, although the balance of that transition... Read full post

Oct 13, 2014, 4:21 PM EST

Regional broker-dealers need creativity to keep up in the recruiting arms race

By Gary Martino

It's approaching silly season again, also known as recruiting season. It's typically the time of year that the independent broker-dealer community introduces new incentives to tantalize wayward reps and advisers considering a new affiliation or custodian.This year it seems the broker-dealer community rolled out new incentives earlier than normal. Things appear to be driven by wirehouses getting more aggressive in combating the independent exodus. Think of it as “The Empire Strikes Back” without the light saber and heavy breathing (well, maybe).In our most recent recruiting discussions, we've come across bonus incentives ranging anywhere from 15% to 300% of a representative's trailing twelve months of production. We've also seen reports of wirehouses reporting bonus expenses ranging into the billions to be paid out in the future. Yes, folks, we're approaching a ludicrous stage.With the deep pockets aggressively recruiting... Read full post

Oct 9, 2014, 5:11 PM EST

Pimco's flagship funds: Should you be bullish or bearish?

By Daniel Kern and Gerard Cronin

The departure of Bill Gross from Pimco may provide the most interesting industry gossip we've seen since the acrimonious departure of Jeffrey Gundlach from TCW. The headlines surrounding Mr. Gross are less lurid than those surrounding Mr. Gundlach, though we are amused by reports that Mr. Gross compared himself to Kobe Bryant and Mr. Gundlach to LeBron James in their discussions about creating a “Dream Team” of bond legends. We'll save debate over whether we should anoint Dan Fuss as the Michael Jordan or Magic Johnson of the bond market for a later date. All jokes aside, we think this is a momentous transition given the prominence of Mr. Gross and Pimco in the fixed income markets as well as the continuing debate about whether mutual funds should be considered systemically important financial institutions. Should I stay or should I go?We've seen much debate about whether investors should abandon the Pimco Total Return... Read full post

Oct 9, 2014, 4:49 PM EST

Just because you can work doesn't mean you should

By Sheryl Rowling

I have a bad cold and sore throat. For the benefit of myself and others, I stayed home from work the last two days. This was obviously not planned. Naturally, I was concerned about work piling up. Since I am on the "getting better" side, I decided to get some work done from home. I had four meetings scheduled, all internal, so I planned to go ahead and participate. The first was a team meeting with my RIA employees. It lasted about half an hour and I honestly can't remember anything that was said. Next came the big powwow with the TRX people. This was conducted through GoToMeeting because we have participants in four different locations in three different states. I listened. But when it was my turn, I couldn't think of anything to say.(See also: Sheryl's experiment: Can an adviser work remotely for a month?)Meeting No.3 was a demonstration of our new internal project management software. From what I could tell between dozing off, it... Read full post

Oct 8, 2014, 3:26 PM EST

Stocks' correction could continue but bear not sighted

By Paul Schatz

A few weeks ago, I wrote about the most negatively seasonal period of the year for stocks, coupled with strongly negative trends post the Fed meeting and September options expiration. And let's not forget that the market worried about the Scottish vote and the Alibaba IPO as well. From that time until now, the widely watched S&P 500 has pulled back 4% while the broader market indexes are down much more. I would not call that an overpowering market or ringing endorsement for the bulls. The short-term picture remains murky for the next few weeks but looking out beyond that, markets should regain their solid footing and march higher later this quarter. October has a reputation of being a bad month for stocks. Most people recall the great crash of 1929, crash of 1987, mini-crash of 1989, crash of 1997, crash of 1998 and Lehman collapse of 2008, which all occurred in October. Keep in mind that some macro news event usually was given the... Read full post

Oct 7, 2014, 2:46 PM EST

Bob Doll: While markets look sloppy, high volatility will persist

By Robert C. Doll

U.S. equities declined again last week, with the S&P 500 Index losing 0.7%, although the damage was mitigated by a rally on Friday that followed a stronger-than-expected employment report. The pending completion of the Federal Reserve's quantitative easing program was one catalyst for the sell-off, as were broader concerns about global economic growth and the continued strength of the U.S. dollar. Oil prices declined sharply, driven by the rising dollar, growth concerns and increasing supply. Market Correction Fears Are RisingEquity prices have been falling for the past couple of weeks and from peak to trough are now down around 5%. This exceeds the 4% sell-offs we saw in August and April, but is less than the 7% downturn we witnessed in January. Since economic and market fundamentals haven't shifted notably in recent weeks, it appears that this pullback is being driven by a heightened focus on previously existing risks, chiefly... Read full post

Oct 7, 2014, 2:17 PM EST

The ultimate payoff of advisers striking strategic partnerships

By Charles Goldman

Most independent advisers spend almost half of their working hours on non-client-facing projects, such as office administration and management, investment research and asset management, and professional development.In other words, advisers dedicate barely half of their time to serving clients!Why? It's simple: business complexity. For advisers, the most significant cost of this complexity is the time lost that could be spent with current and prospective clients. Other than adding more hours to the day, the best solution to this problem can be to leverage strategic partners who can provide both scale and expertise.(Related read: Helping advisers unlock their true value)DEFINING YOUR VALUE PROPOSITIONBeyond the time constraint, few advisers excel at all of functions required to run a successful advisory practice. From sales and marketing, portfolio management, operations, client service to HR, the complexity of running a wealth... Read full post

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