FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
4 Things Advisors Can Do To Calm Clients Worried About Rising Rates (The Wall Street Journal)
Clients are worried about the impact of higher rates on their portfolios. In addressing their concerns, W.J. Rossi of Florida-based Koss Olinger Financial Group thinks advisors should address this in terms of the clients’ long-term goals and not around what’s in the headlines.
First, advisors should remind clients that the bond market is less volatile than the stock market. “The Barclays U.S. Aggregate Bond Index, for example, had a standard deviation of returns of 3.57% over the last 15 years whereas the S&P 500 had a standard deviation of 16.19%,” Olinger writes in a WSJ column.
Second, the bond market has only had “two calendar years of negative returns.” These occurred in a rising rate environment, and to address this advisors can pull “bonds with a duration or maturity lower than the benchmark you are using for your client,” or hold cash for liquidity. Third advisors can help them diversify into corporate and international bonds. And finally, they shouldn’t lose sight of the client’s long-term goals.
29% of financial advisor clients surveyed by Securian Financial Group said they don’t tell their advisors about everything that could affect their finances, reports FA Mag. 52% said the information was too personal to share. 45% said these wouldn’t impact their financial strategies and 20% said the secrets were too embarrassing. The secrets were typically about health concerns, private investments or marital woes.
“If they keep secrets, they likely have duplication in their investment portfolios, are underinsured or carry debt that eats away at their net worth,” Nicole Winter Tietel of Winter & Associates told FA Mag. “Ultimately, they are taking more risk.”
UBS Gets Veteran Advisor From Morgan Stanley (Investment News)
Former Morgan Stanley advisor John Rasweiler has joined UBS Financial Services. Rasweiler’s team handles $US4.8 billion in assets. John Cusate, Jack Riley, Michael Jordao, Jesse Kent and William Burke joined his team.
Hedge Funds Would Be Doing Great If They Weren’t Shorting Stocks (Goldman Sachs)
While the S&P 500 has been up 15% since the start of the year, the average equity hedge fund has been up 4.1% through August 9. In a new report, Goldman Sachs’ Amanda Schneider writes that it is hedge funds’ short positions that have been hurting them.
“Unfortunately, many widely-held short positions continue to outperform, offsetting the strong performance of popular longs and hampering overall hedge fund returns. Our basket of S&P 500 stocks with the largest dollars of shorts has returned 20% YTD, in line with the S&P 500. In addition, the 50 stocks over $US1 billion market cap with the highest short interest as a percentage of market cap returned an average of 30%. Fully 12 of the 50 key short positions have returned more than three times the S&P 500 return.”
Clients Want More Face-Time With Their Advisors (WealthManagement.com)
Registered independent advisors (RIAs) spend 52% of their time with client-facing, while independent broker dealers (IBD) spend about 56% of their time on such activities, according to Cerulli Associates. “If you don’t handle your time with clients right, you become more reactive, and that’s dangerous to your practice,” Bob Patrick or Raymond James told WealthManagement.com. “Clients want more individualized communication than ever before.”
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