FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
2013 Will Be A Watershed For Financial Reform (Project Syndicate)
Simon Johnson, former chief economist at the IMF and professor at MIT expects 2013 to be a “watershed for financial reform”. He points out that Federal Reserve board member Dan Tarullo has repeatedly said the too big to fail financial institutions are still around and the Fed has already been turning down bank mergers.
The FDIC which wants to protect its insurance fund is “showing intellectual leadership” as well. Moreover, he writes, “the need for banks to finance themselves with more equity and relatively less debt will be the focus of one of the main publishing events in economics in 2013. Anat Admati and Martin Hellwig’s The Bankers’ New Clothes: What’s Wrong with Banking and What to Do About it? will appear officially in March, but advance copies are already being closely read in leading central banks.”
Current Fed policy has helped change the relationship between stocks and bonds, and Gluskin Sheff’s David Rosenberg writes that going into the new year “what broadly worked in terms of delivering high-single-digit risk adjusted returns in 2012, with very few tweaks, should remain intact in 2013.” He advocates safety and income at a reasonable price (SIRP) as his primary investment strategy. He also says there is good reason to be bullish on gold and gold producers. He also thinks “cash flow is king”.
“Being in credit strategies has been a better alternative than cash so far this year and will remain so in 2013.”
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There are better ways to figure out your risk capacity than look to rules of thumb like “100 minus your age equals stock allocation” writes Karin Stifler founder of True Wealth Advisors in Marketwatch. Instead she says investors need to better judge their financial risk capacity by considering 10 important factors that include job security, the strength of your financial safety nets, your debt burden and your future financial commitments.
Brokers Are Increasingly Being Lured To Independent Firms (The Wall Street Journal)
Improved technology, mergers and acquisitions in the brokerage industry, and high-profile additions have lured brokers away from retail brokerages to independent firms. Three high profile independent firms, Dynasty Financial Partners, HighTower Advisors, and Focus Financial Partners have had a terrific recruiting year. “In 2012, HighTower added 10 adviser teams, Dynasty hired 28 advisers and Focus grew by an expected $14 billion in client assets.”
BofA: We’re Losing Hope For A Timely Fiscal Cliff Deal (Business Insider)
The deadline for the fiscal cliff is fast approaching and Bank of America analysts think a year-end deal looks less likely. There are five reasons for this. 1) It is easy to put down general numbers and much harder to come up with specific proposals 2) Raising the debt chilling is still a “sticky issue” 3) The whole package will be hard to swallow 4) There is very little time left 5) Many in Congress believe that going over the cliff will be relatively painless.