FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Inflation is hitting senior citizens the hardest (Wealth Management)
Senior citizens are experiencing a higher rate of inflation than any other age group. Wealth Management cites research from JP Morgan Asset Management that concludes,” From 1985 to 2014, the Consumer Price Index ran 5.1 per cent behind the CPI-E, an experimental measure created by the U.S. Bureau of Labour Statistics to measure the inflation affecting elderly Americans.” What is behind the dramatic increase in the cost of living for the elderly? Health Care. Despite being relatively tame for the past couple of years, averaging a rate of 1.5%, JP Morgan says the average 65-year-old last year “paid $US4,400 in premiums for Part B (outpatient services), Part D (prescription drugs), Medigap supplemental coverage, out-of-pocket expenses, vision and dental services,” and that those costs “will rise at an annual rate of 6.1 per cent over the next 20 years, to $US17,000 at age 85”
Raymond James is making a push for diversity (Financial Planning)
Raymond James is continuing its efforts to improve diversity. The wealth manager has created a Black Financial Advisors Network, which is modelled after its Women Advisors Network that was created more than 20 years ago. Financial Planning says, “The group, led by [Tony] Barrett, financial advisor Kaon Nelson and Miami branch manager Joel Burstein, will also work hard at retaining existing black financial advisors and helping them develop their practices.”Only 5.9% of the firms advisors are African American, compared to the 13.2% of the US population.
Advisors and their staff want better pay (Think Advisor)
Advisory firms know they need to increase employee compensation or risk losing top performers to competitors. A new report from Financial Planning Association and Financial Advisor IQ showed less than one-third of advisory firms believe they offer competitive compensation to their employees, and less than 25% provide competitive benefits. Think Advisor says of the advisors that responded, “Only 26% of respondents said they were very satisfied with their compensation, and just 27% were very satisfied with their benefits packages.”
Fund expenses are falling (Morningstar)
Expenses are falling because investors are choosing lower cost funds. A report from Morningstar concluded, “The asset-weighted expense ratio across all funds was 0.64% in 2014, down from 0.65% in 2013 and 0.76% five years ago.” However, the industry brought in record fee revenues of $US88 billion in 2014 thanks to strong market performance and steady inflows.
Defined contribution plan borrowing is common (Financial Advisor)
A report released by the National Bureau of Economic Research shows roughly 40% of people who contribute to defined contribution plans for retirement borrow money from their account within five years. According to Financial Advisor, “20% of of 401(k) holders have outstanding loans at any one time,” and “86% of plan participants who have loans outstanding default on them when they leave their jobs.” The researchers dismissed worries about 401(k) lending, calling them overstated.
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