FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
A private equity giant explains why brilliance isn’t an essential trait in the finance industry (Wealthmanagement.com)
Speaking at the CFA Institute’s annual conference in Montreal, David Rubenstein, the founder of private equity firm The Carlyle Group, argued that the key to success in the finance world is the people you hire.
Notably, he argued that brilliance isn’t necessarily a great skill for the industry. “It’s very hard to manage brilliant people,” he said, according to Diana Britton. “Every time I’ve tried to hire brilliant people, it hasn’t worked out.”
Rather, he said that he looks for six attributes in new hires starting with reasonable intelligence (rather than brilliance), good work ethic, the ability to focus, the ability to make oneself indispensable, the ability to communicate well, and “well-developed” ethical skills.
Investment fees can eat into future savings (NerdWallet)
A new analysis from NerdWallet found that investment fees can seriously cut down future savings. “Just like the accelerating effect of compound interest has on the growth of savings, the same thing happens — only in the opposite direction — when investment fees compound,” Dayana Yochim and Jonathan Todd wrote.
NerdWallet played out different scenarios for a 25-year-old investor who has $25,000 in a retirement account and adds $10,000 per year, earns a 7% average annual return, and wants to retire in 40 years.
“In one of the scenarios analysed, paying just 1% in fees would cost a millennial more than $590,000 in sacrificed returns over 40 years of saving,” the report notes. “A millennial with the option of investing in either of two commonly held funds can save nearly $215,000 in fees — and, through the magic of compounding, retire nearly $533,000 richer — by choosing the one with fees that are 0.93% lower.”
Studies suggest that there’s a correlation between ageing and cognitive decline — and this could affect the financial matters of some individuals.
Some academic research suggests that older individuals lose some of their financial literacy as they grow older, according to Christopher Robbins. However, at the same time, these folks remain as confident in their financial knowledge as before — which makes addressing this issue a bit difficult.
Sometimes out-of-state munis make sense (Charles Schwab)
“Municipal bonds issued in your home state are generally exempt from state income taxes, while munis from other states are usually subject to state income taxes. … Limiting your muni holdings to in-state issuers only may reduce your state income tax bill, but could also leave you concentrated in issuers with similar risk characteristics,” note Cooper J. Howard and Rob Williams.
As such, the duo presents five examples when out-of-state munis might make sense such as living in a state with low or no income taxes, if economic conditions in your home state make out-of-state munis more attractive, or if you could earn a higher yield even without state tax breaks.
An LPL team jumps over to Wells Fargo (Financial Planning)
A team of three LPL Financial advisers managing $380 million have moved over to Wells Fargo, citing concerns over the DOL’s new fiduciary rule and LPL’s recent regulatory issues, reports Ann Marsh.
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