FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisers.
There Are Four Big Changes Coming That Might Tank The Global Economy (Wealth Management)
The global economy is going to change drastically over the next several years, and no one is prepared for the changes. First, technology is evolving at an unprecedented pace, and, as a result, robots will be replacing 100 million young people’s jobs.
Second, demographics are changing. Americans are getting older (meaning there will be fewer quality workers in the population), while emerging markets are overwhelmingly young — 60% to 70% of EM populations are under age 25. Third, income inequality is getting worse. And, finally, natural resources (including water, minerals, oil, and energy) are shrinking, as is arable land.
“There’s been talk of a global depression before, but this time is different … [these are] four headwinds that the world hasn’t dealt with previously. And many policymakers don’t have the fiscal or monetary tools to deal with these,” writes Diana Britton.
Japan’s Suddenly Looking Good (Advisor Perspectives)
Recently, the Bank of Japan announced that it would increase its monetary target by 80 trillion yen and will purchase stock assets. That’s up from what the bank had said in the past — before its target was 60 to 70 trillion yen per year. Additionally, the BOJ is thinking about buying ETFs that track the Nikkei Index 400.
On top of that, Japan’s Government Pension Investment Fund (GPIF) has a new target asset mix. As a result, “the allocation to Japanese stocks has risen to 25% from 12%” and the allocation to non-Japanese equities has also doubled which might provide a “boost to the global equity markets,” writes Nick Niziolek.
Right now, export-oriented Japanese companies “positioned to benefit from asset reflation” are looking good. However, given the weaker yen and increasing taxes, it may be wise to stay cautious on companies that are “tied to the Japanese consumer,” writes Niziolek.
Larry Elkin spent eight years as a reporter for the Associated Press — today he’s the president of a $US1.3 billion advisory firm. Interestingly, he credits “communication skills he honed as a reporter” for his success in the financial-advisory business.
“Look at the job description. You need to figure out what somebody wants or needs to know; gather the information and communicate it accurately and clearly so they can use it. It’s exactly the same for both professions.”
He adds that there is one difference between being a reporter and a financial adviser: the audience. Reporters have to know how to communicate information to a mass audience of strangers, while advisers have a small audience with whom one is well acquainted, says Elkin.
The consumer discretionary sector — which includes the nonessentials like hotels, restaurants, cars, luxury goods — tends to outperform the market when the economy begins to recover, and starts to wobble as people begin to get nervous about the economy. Basically, when people start worrying about finances, they are less inclined to splurge on the nonessentials.
On top of that, people are worried about the upcoming Fed rate hikes, ongoing geopolitical tensions, and the sluggishness of the housing recovery. All these factors may contribute to a continued decrease of the consumer discretionary sector.
Although it’s more “muted,” all hope is not lost. “Consumers have reduced their debt loads, the job market still appears to be picking up and we are starting to finally see some signs of wage growth, particularly among professionals,” so people will still be buying from the sector, writes Brad Sorenson.
Schorsch Brokerage Doesn’t Want Its Advisers To Recommend Its Stock (The Wall Street Journal)
“Real-estate investor Nicholas Schorsch’s broker-dealer, Cetera Financial Group, has told its 9,200 financial advisers to restrict their sales to clients of stock in parent company RCS Capital Corp. and in American Realty Capital Properties, both of which are chaired by Mr. Schorsch,” reports Michael Wursthorn.
Recently, both companies revealed “accounting irregularities,” which has led to shares of both companies to nosedive.
Originally, the two companies had a deal in place, but last week it fell through. Two executives were forced to resign from one company, and federal prosecutors are now investigating the matter. There is a feud between the two companies resulting from the failed deal.
Business Insider Emails & Alerts
Site highlights each day to your inbox.