FA insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Identifying a closet indexer (Wealth Management)
Fees on exchange traded funds and actively managed mutual funds continue to slide, making it even more important for an advisor to find an active manager who outperforms the benchmark to fulfil their clients’ needs. Wealth Management recommends advisors look to Bloomberg, Morningstar or Yahoo Finance to identify “a fund’s correlation, or R-squared.” According to researchers Martijn Cremers and Antti Petajisto, “Funds with the highest Active Share significantly outperform their benchmarks, both before and after expenses, and they exhibit strong performance persistence. Non-index funds with the lowest Active Share underperform their benchmarks.”
Apple to replace AT&T in the Dow Jones Industrial Average (Wall Street Journal)
Apple will replace AT&T as a member of the Dow Jones Industrial average at the close of business on March 18. The addition of Apple, which is up 0.6% at $US127.20 in afternoon trade, will help soften the blow of the upcoming 4-for-1 split in shares of Dow heavyweight Visa. The Wall Street Journal notes, “The change in the Dow’s composition is unlikely to lead to a big shift of money, since the blue-chip index isn’t linked to as many funds or ETFs as the S&P 500.”
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How to lure top tier wealth management talent (Financial Planning)
“The bigger firms just have more resources, and desirable candidates are busy and already being paid well so they’re not answering calls. Independent firms have to do something to get their attention,” notes Kathy Freeman, president and founder of executive search firm Kathy Freeman Company. So how can you hire top talent away from the bigger firms? Freeman says, “Equity continues to be a top priority for executive talent,” and that the culture and vision of a new firm are also important.
A look at 2016 potential presidential candidate Marco Rubio’s tax plan (Investment News)
With the 2016 election less than two years away potential candidates are beginning to lay out their platforms. Florida Senator Marco Rubio has teamed up with Utah Senator Mike Lee to introduce a proposal which would streamline the tax code. According to Investment News, the proposal would “establish two individual tax rates — 15% for incomes up to $US75,000 and 35% for earnings above that level — and would eliminate all tax deductions except those for mortgage interest and charitable giving.” The plan would also “end the estate tax and taxation of capital gains and dividends while dropping business taxes into a 25% rate.”
Housing and rate hikes (Charles Schwab)
Charles Schwab’s Jeffrey Kleintop observes since the start of the Great Recession none of the major central banks raised interest rates until their housing markets fully recovered their losses suffered during the crisis. Kleintop points to Australia and Norway hiking in 2009, Canada raising rates in 2010, and the European Central Bank moving in 2011. Of course, the rate hikes caused some of those economies to weaken, and they eventually had to be reversed. So can the Federal Reserve hike rates? Kleintop believes, “it may seem premature for the Fed to raise rates, given the lack of a full recovery in U.S. home prices and the risk of a negative reaction in the stock market,” but he also notes, “other factors — such as a firming labour market and strengthening economic growth — seem to be taking precedence over home prices for the Fed.”
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