FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Three Things You Should Know Before You Work With Generation Y Clients (The Wall Street Journal)
As baby boomers retire and advisors see a generational shift in their client-base, there are a few key things they need to remember about advising Millennials or Generation Y clients writes Brandon Moss of Dallas-based United Capital in a new WSJ column. 1. Don’t pander to them but remember that they are focused on how you can help them. 2. Make them a part of the financial planning process and know that they will take longer to invest because they are “very information- and research-oriented.” 3. They are less likely to give up things they enjoy to save, so “teach them to automate bill paying and saving and have the rest be discretionary spending.”
43% of advisors are over 55, and the average of advisors is 50.3, according to a report from Cerulli. The financial advisory industry faces a generational shift in terms of its clients and retiring advisors.
“As the advisor population ages, broker-dealers and custodians are at risk of losing AUM as advisors exit the industry,” Cerulli’s Kenton Shirk told FA Mag. “Broker-dealers continue to struggle to recruit new young advisors into the industry to offset those advisors who are nearing retirement.”
People Are Way Under-Invested In The Bond Market (Sober Look)
“Directional investors/traders remain heavily short or under-invested in the bond market,” writes Walter Kurtz at Sober Look. “Institutional investors are also heavily under-invested in bonds. The so-called “real money”, such as pensions, endowments and insurance firms were overweight duration (holding higher bond positions than their targeted allocations) when yields were the lowest (back in 2012). Now with higher yields, these same investors (after being whipsawed by the market) are running duration levels that are the lowest since 2008.”
Morgan Stanley’s Wealth Management Unit Has A Strong Quarter (Morgan Stanley)
Morgan Stanley reported a 70% drop in Q4 profit but its Wealth Management unit did well. Net revenue came in at $US3.7 billion, up from $US3.3 billion a year ago. Asset management fee revenues were up 7% on the year to $US2 billion, “primarily reflecting an increase in fee based assets and positive flows.” Total client assets came in at $US1.9 trillion. Client assets in fee based accounts increased 26% on the year to $US697 billion. Fee based asset flows were $US11.6 billion in the quarter. For the full year, wealth management net revenue climbed to $US14.2 billion, from $US13 billion a year ago.
Three Reasons You Should Still Have Bonds In Your Portfolio (LPL Financial)
After a stellar stock market rally in 2013, and in a rising interest rate environment, many investors shed their bond holdings. But there are three reasons they should still stay invested, writes Anthony Valeri at LPL Financial. 1. Bonds offer good diversification benefits. “During stock market pullbacks in excess of 5%, bonds outperformed stocks on average by a double digit margin, a significant difference. Excluding the historic mid-2008 to early-2009 sell-off, the performance differential narrows but is still notable at a 9.6% advantage in favour of high-quality bonds. 2.”Even in a low-yield environment, bonds provide a buffer as price movements, not yields, are the primary buffer to equity movements.” 3. “An allocation to core bonds, in addition to less interest rate sensitive sectors such as high-yield bonds and bank loans, may make sense for investors.”
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