Outside-IN

Outside-INblog

Outside voices and views for advisers

Aug 7, 2018, 2:30 PM EST

SIFMA: Regulation Best Interest raises bar on investor protection

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By Kenneth E. Bentsen Jr.

The United States' extensive history of individual investing has resulted in more options, greater competition and lower costs compared to the rest of the world. Just as the mix of financial products has evolved, with great benefit to everyday investors, our regulatory framework also must evolve to ensure those investors are best protected. The Securities and Exchange Commission's proposed Regulation Best Interest (Reg BI) is an important step in that evolution, and one that clearly raises the bar on investor protection. For almost 10 years, the financial services industry has advocated for a heightened standard of conduct for broker-dealers when dealing with retail investors across all accounts. Following the financial crisis in 2008, our industry made clear that we firmly support consistent and high standards for interacting with individual clients, including putting the client's best interest first. Most recently, in 2017, we... Read full post

Aug 7, 2018, 12:28 PM EST

5 principles that set apart top-performing advisory firms

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By Nick Georgis

Independent advisory firms represent $5 trillion in assets under management, and the independent model continues to win considerable market share. According to Schwab Advisor Services' 2018 RIA Benchmarking Study, for firms with over $250 million in assets, total assets under management (AUM) grew 16.2% at the median year over year, revenue growth increased from 3.6% in 2016 to 11.9% in 2017 and, for the first time, average assets per client crossed the $2 million mark. In addition, the median firm recorded a five-year AUM compound annual growth rate of 10.9% — an enviable growth rate for any business. As remarkable as that growth is, some firms are growing at an even greater rate — the top 20% of firms have a five-year AUM CAGR of 16%, meaning they have more than doubled in size in a five-year period. The outperformance of these firms is driven by their innovative mindset and ability to effectively prioritize their... Read full post

Aug 6, 2018, 11:13 AM EST

Solidify client relationships in volatile times by overcommunicating

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By Michael Kim

After the historically low levels of volatility seen in 2017, many investors became accustomed to a lack of bumps in the market. However, the type of predictability simply has not held true so far in 2018. In the current market environment, it's critical that advisers proactively address investors' concerns about volatility and set the expectation that highs and lows are an inherent part of the natural cycle despite last year's performance. Doing so will not only calibrate investors' short-term expectations about the nature of the market, but also help establish strong adviser-client relationships in the long run.Building this level of trust won't happen overnight — it requires a commitment to thoughtful and continuous client conversations, perhaps even overcommunication. Read on for a checklist of tangible strategies you can adopt to begin building solid adviser-client relationships through frequent communication during these... Read full post

Aug 4, 2018, 9:57 AM EST

5 actions underrepresented advisers can take to further their careers

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By Lule Demmissie

For June's celebration of Pride Month, I was part of a valuable discussion about the intersection of LGBTQ and fintech. My fellow panelists and I celebrated Pride and gains in diversity and inclusion, and talked about how to be momentum-drivers, not only in our organizations but in our communities.These conversations are critical because we are still so far behind the curve when it comes to diversity and inclusion in financial services. Part of that is the socioeconomic and demographic reality of wealth management services and the makeup of their consumer base, where shifts happen slowly, even if they should not. (More: The latest news and resources on Diversity & Inclusion in financial advice)But there is some positive movement. Interestingly enough, robo-adviser users are increasingly more diverse than consumers of traditional wealth management providers, according to Corporate Insight. Positive indicators and trends like this show... Read full post

Aug 4, 2018, 6:00 AM EST

5 tips for productive conversations about diversity

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By Brian Thompson

Having difficult conversations sucks. Often you feel like you're running in circles, going over and over the same issues and not being heard. When the conversation turns to race, gender and sexual orientation, discussions become especially difficult. So much anxiety, shame, fear and vulnerability are involved. However, if we really want to move the needle forward on diversity and inclusion, we need to start learning how to make these difficult conversations easier and more effective. Here are some tips on how to do that. FOCUS ON WHY THESE CONVERSATIONS ARE IMPORTANT​ In his extremely popular Ted Talk and book "Start with Why," Simon Sinek argues that the most inspirational leaders motivate others to action by explaining why they do what they do (i.e., the purpose, cause, belief). Only after nailing down the "why" can you address how things need to be done and what the result will be. The "why" behind having difficult... Read full post

Aug 4, 2018, 6:00 AM EST

Why investors should diversify more than just their assets

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By Peter T. Grauer

The next generation of investors demands more from their portfolios. While they still expect to generate returns that will fund a home, their children's education and retirement, a growing number also expect their investments to make a difference. They believe the power of their portfolios can be harnessed to positively impact the issues they care most about, building more diverse, more sustainable and higher-performing companies.Investors engaging in sustainable, responsible and impact investing — which reached $8.72 trillion in assets in the U.S. in 2016 — rely on information like a company's energy emissions, employee policies or executive pay structure to better evaluate the long-term health and future financial performance of their investments. Many are broadening their focus to include corporate governance, invoking investing's fundamental tenant — diversification — as one measure of a board's ability... Read full post

Aug 4, 2018, 6:00 AM EST

Why a lack of diversity among financial planners persists

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By Marilyn Mohrman-Gillis

A recent Pew Research Center study found that the majority of Americans say growing racial and ethnic diversity makes the U.S. a better place to live. While the country is experiencing an increase in diversity, the financial planning profession has been slow to evolve at the same pace. The CFP Board Center for Financial Planning and other organizations have taken a proactive approach to addressing diversity — not just because it's the right thing to do but because the market demands it. With the country becoming more and more diverse we are seeing greater accumulation of wealth among people of color. In response to this business opportunity, firms are seeking to diversify their ranks.Currently, blacks and Latinos represent 13.3% and 17.8% of the U.S. population, respectively, and those numbers are continuing to grow. Yet blacks and Latinos make up less than 3.5% of all certified financial planner professionals. These statistics... Read full post

Aug 4, 2018, 6:00 AM EST

Race is hard to talk about at work — here's how to make it easier

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By Phuong Luong

I'm Asian-American and grew up in a racially diverse city, but this doesn't mean I've always understood what race was or how to talk about it. During my first career as a public school teacher, the impact of racism, housing segregation and economic inequality on my students' academic achievement forced me to grapple with my racial identity and learn how the United States has been shaped by racial rhetoric and racism. I know now that if I don't actively work against racism as a financial planner and educator, I'm perpetuating it. Race is hard to talk about. But working toward diversity, equity and inclusion at work requires honest and open conversations about race and racism. Here are some strategies I use to make conversations about race more informed, meaningful and authentic. UNDERSTAND YOUR GOALYou might want to retain people of color in your company, improve business performance or connect more deeply with others. For generations,... Read full post

Aug 3, 2018, 3:29 PM EST

The SEC proposal does not protect Americans from 'harmful practices' by broker-dealers

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By Elizabeth Warren

Your lawyer can't take money from your opponent to give you bad legal advice. If you're on Medicare, your doctor can't take kickbacks from drug manufacturers for prescribing their drugs. But, under current law, your broker-dealer can receive monetary rewards and other perks for recommending certain investment products, even if those products aren't in your best interest.Each year, Americans lose billions of dollars because of brokers who are looking out for their own financial interests instead of their clients'. The Securities and Exchange Commission recently proposed a new set of rules, supposedly to address this problem — but the SEC has fallen far short of giving American families the protection they need and deserve.The SEC's proposal claims to address the broker conflict-of-interest problem by stating that brokers must act in the "best interest" of their clients. But the proposal doesn't define what that means, creating... Read full post

Aug 2, 2018, 3:17 PM EST

Fidelity's zero-fee funds unleash the power of free

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By Nir Kaissar

Fidelity Investments fired a shot heard around the investing world Wednesday: It announced it would roll out two index mutual funds Friday that charge no fees.Both funds will track market cap-weighted Fidelity indexes. The Fidelity Zero Total Market Index Fund will invest in the largest 3,000 U.S. companies based on float-adjusted market cap, and the Fidelity Zero International Index Fund will hold the top 90% of stocks within various developed international and emerging countries.It's tempting to dismiss the move as a marketing stunt. Fidelity doesn't need the money. I counted more than 1,000 Fidelity mutual funds, including the various share classes, with close to $1.9 trillion in assets and an asset-weighted average expense ratio of 0.46 percent a year. That translates into roughly $9 billion of annual revenue. And that's just the beginning because Fidelity does more than manage mutual funds. As Russel Kinnel, director of manager... Read full post

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