FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Do-it-yourself investors are missing out (Think Advisor)
A study conducted by Northwestern Mutual has found 69% of US adults are neglecting the use of a financial advisor and opting to go at it alone. According to Think Advisor, the study showed 68% of those with an advisor felt “financially secure” while only 35% of those without an advisor shared that feeling. Additionally, 72% of those surveyed who use an advisor said they are financially disciplined, compared to 46% of those who don’t have one. “Financial security shouldn’t be left to a roll of the dice as the stakes are too high,” Northwestern Mutual’s vice president for field growth and development, Steve Mannebach, said in a statement.
Millennials have more stock than they realise (Bloomberg)
Millennials have been known to hate stocks. However, they might be more exposed to the stock market than they know. According to Bloomberg, many firms have begun to enroll new employees in their 401(k) plan automatically and a lot of those plans use target funds with stock allocations as high as 90%. Data Bloomberg obtained from FinaMetrica shows the average millennial is comfortable with a stock allocation of between 43% and 63% of their portfolio.
Warren Buffett’s favourite model says stocks are overvalued (Dr. Ed’s Blog)
Warren Buffett’s favourite valuation model, the ratio of market cap to gross domestic product, suggests stocks are overvalued. While Bank of America Merrill Lynch highlights three problems with the ratio, Ed Yardeni doesn’t necessarily agree. BofAML says 1) It doesn’t take into account structural changes in profit margins, 2) Approximately 50% of S&P 500 revenue is from overseas so the comparison is flawed and 3) It doesn’t use an apples to apples comparison because the industry mix of the S&P 500 is different from that of GDP. According to Yardeni, valuations are in the eye of the beholder and lots of them look to be stretched at this stage in the game.
Advisors are embracing the robots (Investment News)
Financial advisors are warming up to the invasion of the robots. Investment News says, “Today’s new generation of robo-advisers can be a valuable tool to help advisors grow their practice and better serve their clients.” The latest Advisor Authority Study found that approximately one-third of respondents have at least heard of robo-advisors and one-third of those advisors already use one. Another 15% expects to enter the space in the coming year.
How to help your clients save on Social Security taxes (Financial Planning)
Everyone would like to pay as little on taxes as possible. Those collecting Social Security should combine their adjusted gross income (AGI) with any nontaxable interest income and one-half of Social Security benefits t0 construct their ‘combined income.’ Financial Planning says, “Depending on filing status, a series of combined income thresholds ranges from $US25,000 to $US44,000; the portion of Social Security benefits subject to income tax grows from 0% to 85%, as combined income clears those thresholds.” Doing so will help reduce AGI and might lower the tax on Social Security benefits.
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