59% Of Advisors Expect Their Compensation To Grow Over 10% (REP. Magazine via WealthManagement.com)
A new survey by REP. Magazine found that financial advisors are more optimistic about their compensation this year than last. 59% expect their compensation to grow 10% or more this year, compared with about 50% in 2012. The survey also found that advisor revenue had a 59%-41% fee-commission break up. But a massive correction in markets would deliver a blow to their income.
“If the markets decline by more than 10 per cent, most firms are no longer profitable,” Philip Palaveev, CEO of The Ensemble Practice. “Anything beyond a 20 per cent decline and most firms don’t have enough cash flow to operate normally, often resulting in drastic reductions in workforce. Now we’re not just talking income; we’re talking lost jobs and people laid off, careers interrupted and drastic changes,” he says.”
Stocks have had a great run this year but Byron Wien doesn’t expect this to last much longer. “The market has already given you a full-year’s performance and we’re only at the beginning of June,” he told Fox Business. “It’s unrealistic to think the market could continue to go up at the rate it’s gone up so far this year. There’s bound to be a correction. You have earnings problems, you have the economy slowing, you have all the economies around the world slowing, demand for U.S. products are slowing, so my view is it’s time to be cautious.”
A Rapid Rise In Interest Rates Will Hurt REITs (Advisor Perspectives)
Eric Rothman, of Urdang Securities Management spoke with Advisor Perspectives on Real Estate Investment Trusts (REITs) will respond to rising rates and inflation. They also argue that there is little correlation between the performance of REITs and interest rates over an extended period of time when those rises are anticipated.
“Rapidly rising interest rates, in the absence of an accompanying economic expansion, would be bad for many asset classes, but particularly so for real estate which is a capital-intensive industry. If interest rates are gradually rising in response to an improving economy, real estate and REITs can fare quite well. REITs have used the current low interest rate environment to lock-in very attractive, long-duration financing. REITs have well-laddered maturities and use little floating-rate debt. As such, their balance sheets should be insulated from the immediate impact of rising interest rates.
“…REITs own hard assets. In an inflationary environment we would expect REITs and real estate to perform reasonably well. As prices rise, replacement cost rises, thereby bolstering real estate values. Rents are often tied to increases in CPI, thus protecting landlord’s cash flow by ensuring rents rise as prices rise.”
Here Are Our Interest Rate Forecasts For 7 ‘Taper’ Scenarios (Morgan Stanley)
Investors and advisors are anxious about when the Fed will begin to wind down its asset purchase program. Morgan Stanley’s Matthew Hornbach came up with seven different scenarios for Treasury yields depending on when the taper begins. Hornbach expects the taper to begin in December.
The Financial Industry Regulatory Authority (FINRA) has fined Wells Fargo and Bank of America a total of $2.5 million and ordered them to pay an additionally $3 million to “customers for losses incurred from unsuitable sales of floating-rate bank loan funds.”
“FINRA ordered Wells Fargo Advisors, LLC, as successor for Wells Fargo Investments, LLC, to pay a fine of $1.25 million and to reimburse approximately $2 million in losses to 239 customers. FINRA ordered Merrill Lynch, Pierce, Fenner & Smith Incorporated, as successor for Banc of America Investment Services, Inc., to pay a fine of $900,000 and to reimburse approximately $1.1 million in losses to 214 customers.”
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