FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisers.
Bernanke: Everyone, Relax, Inflation Isn’t Going To Happen (Financial Advisor Magazine)
Everyone’s freaking out now that QE is over. They’re expecting major inflation, which happens after massive amounts of money are poured in. However, Bernanke is assuring everyone that serious inflation isn’t going to happen. “There was ‘no risk of inflation,’ it was ‘never a risk,’ and it is ‘not a risk now,'” Bernanke said on Wednesday, reports Evan Simonoff.
Additionally, Bernanke noted that both the US and the UK were doing relatively better than Europe at the moment. He attributes this to the fact that both the US and the UK embraced QE. On the other hand, Europe did not implement a similar course of action — and could not have since Europe does not have “Eurobonds” — and thus is relatively struggling.
But if inflation does happen, Bernanke doesn’t seem too worried. “The Fed can deal with inflation if it happens,” he said.
Long-Term Care Hybrids Are Lower Cost Alternatives (Financial Planning)
Long-term care policies are becoming increasingly expensive, so advisers may want to suggest long-term care hybrids. One option for clients is to purchase a fixed annuity with long-term care benefits for a lump sum. Even clients who have been turned down for stand-alone policies can go for this option.
Unfortunately, this policy requires a large upfront pay, and “the cost of the LTC rider eats into the annuity’s interest income.”
The second option is a universal life-insurance policy with a long-term-care benefit rider. In this case, clients can avoid paying for long-term-care policies that they will never need; however, the policy tends to be on the expensive side, and covers only three to four years.
Financial Advisers Are Seriously Mis-using Liquid Alternative (Wealth Management)
Liquid alternatives are supposed to reduce the overall risk to a portfolio, without drastically affecting the portfolio’s performance. However, many financial advisers are not using liquid alternatives correctly. Instead of using them to diversify portfolios, advisers are “guilty of performance chasing,” writes David Armstrong.
And the number of advisers misusing liquid alternatives has significantly grown over the last decade. “Advisers don’t know how to determine whether a fund is doing what it says it will do,” said Nadia Papagiannis, the director of alternative investment strategy at Goldman Sachs.
Additionally, she suggests that advisers “may want to look at investing in hedge funds themselves” to get at strategies they cannot otherwise pursue, or to “access them through a multi-strategy fund.”
Tap Into The Power Of Consistency To Woo Prospective Clients (Advisor Perspectives)
There are several key strategies advisers should follow to get prospective clients “off the fence.” First, advisers need to show super-wealthy (and super-busy) clients that there is a concrete benefit to meeting with them, writes Dan Richards. One way to do that is to contact the prospects and walk them through questions regarding financial readiness.
Additionally, there’s an interesting phenomenon when people who have made a small commitment often feel the need to be consistent, and then continue making a commitment. So advisers should “introduce an intermediate step on the route to asking for [a prospective’s] business,” which may in turn hook the prospective for the long term.
The SEC Fines 13 Brokerage Firms For Selling Junk-Rated Puerto Rico Bonds (The Wall Street Journal)
The SEC “fined 13 brokerage firms for improperly selling junk-rated Puerto Rico bonds in increments below $US100,000, the agency’s first action under a rule designed to protect mum-and-pop municipal-bond investors from high-risk debt,” reports Aaron Kuriloff.
The firms didn’t admit or deny whether or not they were guilty, but they paid fines ranges from $US45,000 to $US130,000.
The SEC has been working on better protecting the smaller investors in the municipal bond market, who make up the majority of investors in that category. The SEC’s direct and public involvement in this case may be indicative of a longer trend in the future.
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