Outside voices and views for advisers

May 8, 2018, 1:08 PM EST

All that smart beta can obscure the big picture


By Nir Kaissar

A battle is raging among finance theoreticians, and investors should stay out of it.There's a growing recognition that a handful of active investing styles — also known as factor investing or smart beta — can be expected to beat the market over time. Among them are value (buying cheap stocks), quality (buying profitable and stable companies), momentum (following the trend) and size (buying small companies).The evidence is compelling. The cheapest 10% of U.S. stocks — sorted on price-to-book ratio and then weighted by market capitalization — returned 11.9% annually from July 1926 through March, including dividends, according to numbers compiled by Dartmouth professor Kenneth French. That's 1.8 percentage points a year better than the S&P 500 Index during those nine decades and 3.1 percentage points a year better than the most expensive 10% of stocks.Value also won over shorter periods. The cheapest 10% of... Read full post

May 8, 2018, 12:52 PM EST

Four challenges in using annuities for retirement planning — and how to overcome them


By Paula Nelson

Over the years, I've had countless conversations with advisers about retirement planning and the use of guaranteed income products. While some embrace annuities and their ability to offer consistency in retirement income, others are more dismissive. It's not hard to see why these advisers are skeptical, especially if their experience with annuities is limited to commission-based, variable annuities. These products may seem complicated, expensive and hard to use in the fiduciary era. But these aren't the only type of annuities advisers should have at their disposal, and one size definitely does not fit all. Here are four common challenges advisers face when using annuities for retirement planning, and some practical tips for overcoming these challenges. Challenge #1. The world of annuities is confusing. Over the years, insurers have added features (and complexities) to annuity products to stay competitive, launching a variety of... Read full post

May 7, 2018, 4:11 PM EST

Time: An asset to be invested, not spent


By Donald G. Bennyhoff

The investment advice industry is a constantly evolving ecosystem. Few trends, however, are as pervasive as the secular shift from commission-based compensation models to asset-based fee structures. The future of the fiduciary rule may be uncertain, but the industry has continued its steady march toward improved fee transparency, clearly influencing investors' and advisers' preferences for lower-cost investments strategies.But investment selection isn't the only side effect of the trend toward fee-based compensation. Advisers are starting to think about relationship management beyond the scope of customer service and more from a business development angle. Relationship management has become the focal point for a successful and growing practice as asset gathering and retention outweigh the emphasis on transaction volume. Furthermore, the advice industry largely hinges on referrals. In fact, in a Vanguard survey of nearly 4,000... Read full post

May 3, 2018, 10:45 AM EST

Redefining efficiency in your business


By Joni Youngwirth

There is no question that a few core concepts are fundamental to efficiency in any business:• Documented processes addressing the most effective sequence of tasks to complete everything a firm does are a logical first reaction when thinking about efficiency. All businesses are made up of processes, whether it's preparing for a client review meeting or the steps to take when a client passes away. The better a firm documents those processes, the more efficient it will be. • Time management is vital. A to-do list, whether it's manual or automatic, is key to efficiency for every person on the team. • Defining your ideal client (or the minimum requirement for new clients) is important, and abiding by your definition is critical. After all, trying to be all things to all people interferes with efficiency.• Scale and capacity refers to the number of households you have and the type of services provided to each household or ... Read full post

May 2, 2018, 10:52 AM EST

The Super Bowl, advice and the markets


By Jim DeCarlo

Super Bowl 52 was nothing short of spectacular. The New England Patriots, stacked with Tom Brady and Bill Belichick, looking to win a sixth Super Bowl and make history in front of our eyes … against the Philadelphia Eagles. Phila-who? The underdog won. The Eagles victory seems almost unreal. However, if you look deeply into the history of football and the NFL record books over the past 23 years, whenever the spread is tight, the underdogs are the more likely victor. In fact, according to NFL records, the underdogs won outright in almost 70% of all games where the spread was under seven points. (Suggested reading: "David and Goliath: Underdogs, Misfits, and the Art of Battling Giants," a Malcom Gladwell best-seller that captures why the improbable is not what it seems.)In behavioral terms, NFL spectators were confident the New England Patriots would beat Philadelphia because they were under the influence of recency bias. Most... Read full post

Apr 30, 2018, 5:29 PM EST

SEC advice rule faces arduous journey


By Blaine F. Aikin

On April 18, the Securities and Exchange Commission released its much-anticipated "fiduciary" rule proposal, "designed to enhance the quality and transparency of investors' relationships with investment advisers and broker-dealers while preserving access to a variety of types of relationships and investment products." The realities of the rulemaking process, substantive aspects of the proposal and surprisingly negative comments from most of the commissioners all suggest that the proposal will face a long and arduous journey forward.The path to implementation of the SEC advice rule starts with a 90-day public comment period ending in late July. Following that, the SEC will evaluate the comments, make refinements (if not wholesale changes) and release a revised version that will almost certainly undergo at least one additional round of comments and subsequent revisions. If the DOL fiduciary rule's past is prologue for the future of the... Read full post

Apr 30, 2018, 5:09 PM EST

The next generation of advisers don't just want a job – they want inspiration


By Janine Wertheim

With the age of the average independent adviser remaining stubbornly high, firms that support these professionals have become more resourceful and focused in reaching out to the younger generation. From supporting more CFP programs at the college level to developing career training programs for service members leaving the military, independent advisory and brokerage (IAB) firms are devoting more attention to the challenge of finding and training the next wave of advisers.When we think about how to bring more young people into our profession, though, we must not forget what makes a bright, ambitious student choose one career over another, or the element that separates a dream job from one that simply provides a paycheck: inspiration. In addition to being comfortable and secure, young people want a profession that gives them a path to their ideal future.What does it mean to inspire young people to join our industry?1. Provide them with... Read full post

Apr 26, 2018, 4:55 PM EST

Financial advisers need steady learning to keep earning


By Nir Kaissar

It's time for financial professionals to become a profession in substance, not just in name.The Securities and Exchange Commission proposed new rules for brokers and financial advisers last week. Observers have understandably focused on the big change, which requires brokers to disclose their conflicts and look after clients' best interests.But a more modest proposal deserves discussion. Namely, the SEC would subject financial advisers to continuing education requirements. It's a wise move. Financial innovation is happening at a dizzying pace. More investment options are available today than ever before, spanning many different types of assets, geographies and investing styles, and new products are coming to market all the time.That's a challenge for an aging industry. The average age of financial advisers is 50, according to Cerulli Associates, and just 11.7% of advisers are younger than 35. Whatever advisers learned when they were... Read full post

Apr 26, 2018, 2:28 PM EST

Why your top producers aren't happy


By Donna Bristow

The J.D. Power 2017 Advisor Satisfaction Study contains a counterintuitive finding: There's an inverse correlation between top advisers and their overall satisfaction: "Higher producers are the least satisfied employees," according to the report. "Among advisors with more than $1 million in annual production, overall satisfaction is 683 [on a 1,000-point scale], down 27 points from 2016. In contrast, among advisors with less than $250,000 in production, overall satisfaction increases to 799 from 764 in 2016." Wouldn't you expect the exact opposite? The reality is that top-performing advisers are entrepreneurial and enterprising — they need independence to thrive. And when they feel constrained, job satisfaction declines. Here are the constraints that can significantly impact an advisor's sense of independence: Support infrastructure. Tier One firms, deploying for 20,000+ employee advisers, typically provide a huge, sprawling... Read full post

Apr 26, 2018, 11:03 AM EST

401(k) record-keeper consolidation is about to heat up


By Fred Barstein

Though there have been a few recent high-profile 401(k) record-keeper acquisitions — think Transamerica's purchase of Mercer's defined-contribution business and Blackstone's acquisition of Aon Hewitt's — there has been a lull in the consolidation. That's likely to change soon as a result of escalating costs, low interest rates and the natural maturation of the 401(k) record-keeping business.It is widely reported that Newport Group, which is owned by private-equity firm Stone Point, is on the market, and there are also rumors about another, unnamed record keeper that oversees 2 million to 3 million participants being shopped. How do plan advisers stay ahead of the curve and avoid placing new business with exiting providers?There are currently almost 40 national 401(k) record keepers, most of which service plans with less than $250 million in assets — the sweet spot for advisers. This number is unsustainable. Record... Read full post

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