FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
The Biggest Mistake Investors Make (Vanguard)
Vanguard interviewed financial advisor Allan Roth, founder of Wealth Logic, about the biggest mistake clients make and the top question they ask him.
He said the biggest mistake is chasing risky sources of income, whether it’s emerging market bonds, utilities, or master limited bonds because they are afraid to reach into their principal.
He said the number one question he gets is about generating income. To that he says, that goal of a portfolio is not to produce income but to support their lives. “Money is stored energy that lets you determine what you want to do with the rest of your life. …The goal isn’t to be the richest guy in the graveyard,” and that’s the a difficult message for clients to digest.
Advisors Need To Get Couples To Air Their Dirty Financial Laundry (The Wall Street Journal)
Advisors should get couples to air all their dirty financial laundry before starting the financial planning process, Therese Nicklas, wealth manager at Massachusetts-based U.S. Wealth Management, writes in a new Wall Street Journal column. Whether this is about student loan debt or poor credit ratings, couples should communicate about their financial issues and habits to avoid destroying trust.
“Be their sounding board,” Nicklas writes. “When you can walk couples through the labyrinth of a financial nightmare, you’ll be their partner for life. They’ll look at you as a person who gave them a service they can’t get anywhere else.
The financial advisory industry is in the midst of a generational change as a large chunk of advisors are set to retire. Raymond James has launched a training program to “bridge the gap between working as an associate and as a financial adviser,” reports Mason Braswell at Investment News. “We are excited as well as confident that this will help Raymond James address two industry challenges,” Tash Elwyn, president of Raymond James & Associates. “The first being attracting more women to the profession and also positioning us as we build scale over time to have the right quality and quantity of potential successors for our retiring advisers.”
Speaking at the CFA Institute’s wealth management conference in California, Roger Gibson, founder and CIO of Gibson Capital said that advisors using tactical strategies based on valuation measures will be disappointed, Dan Jamieson at FA Mag reports. “The irony of tactical allocation that is valuation-based is that, because [of the way investors react], it prevents anyone from taking advantage of it,” he said. Gibson pointed out that in 1930, 1954 and 1990, stocks had 10-year normalized P/E ratios of 16.6 but had varying returns over the next decade in each of those instances. “More than 15 per cent compounded from 1990, but less than 5 per cent after 1930,” Jamieson reports.
The Difference Between Recruiting Practices At Big Banks And Family Offices (Mergers & Inquisitions)
Brian DeChesare at Mergers & Inquisitions spoke with a former soccer player who transitioned to finance and knows about private banking. He pointed out some of the key differences in the recruiting process at family offices and at larger banks.
1. Family offices care more about analytical rigour and investment ideas.
2.Large banks “large banks like to recruit undergraduate interns to help with all the client reporting work that’s required, whereas many family offices barely try to recruit anyone.” It’s harder to get into a family office but easier to move up the ranks once you’re in.
3. Banks also want candidates that are good at speaking with clients while in family offices ” they care less about client relationship skills since you’ll be doing mostly research and analysis when you first start.”
4. Banks care about the Series 7 and Series 66 licenses because they are need to place trades, family offices care less about licenses because the roles tend to center on research.
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