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How Robo-Advisors Are Changing The Wealth Management Playing Field (Advisor Perspectives)
Wealth Management is changing with the emergence of “robo-advisors” i.e. “a new breed of startups that directly connect tech-savvy investors with suites of analytic tools to create financial plans or investment portfolios,” writes Rael Lee, managing director for the SEI Advisor Network, in Advisor Perspectives. And there are five key ways in which robo-advisors will change the playing field for more traditional advisors.
1. Robo-advisors increase the pressure for advisors to charge lower fees. 2. Investors will begin to expect more transparent fee structures. 3. Robo-advisors are more young-investor-friendly, and younger investors could stick with robo-advisors as they become wealthier. 4. Investors will start expecting newer ways of interacting with their advisor, like “web conferencing” and “intuitive ways of working on documents together.” 5. They will ask for more “comparative data.”
Advisors Are Considering Replacing Bonds With Business Development Companies (The Wall Street Journal)
As investors get anxious about their bond holdings, advisors are wondering what to replace them with. Russ Conrad of New York-based Princeton Equity Partners favours privately traded business development companies (BDC). In a new WSJ column, he writes that private BDCs invest in debt and equity, “nontraded funds that invest in debt and equity in private, middle-market companies in the U.S..”
“We prefer to invest in BDCs that themselves invest in the top performing sectors of the economy like business services, hospitality, food and beverage, health care and energy and power.
“We look for BDCs that hold loans at a floating interest rate so that when rates rise you’re not stuck in the same position that a lot of bond portfolios are in right now. Look for investments that are in senior secured debt, so that if something happens to the companies in the BDC there is a better opportunity to regain investments. For us, it’s also important to find BDCs that underwrite their underlying loans. Do your homework. Find out who the originator of the loan is and who will underwrite them.”
European Stocks Have Their Best Run In 11 Years But This Signals Short Term Caution (BofA Merrill Lynch)
Investors began diving into European stocks as the euro-area economy emerged from a recession. This is the fifteenth straight week of inflows into EU equity funds, write BofA Merrill Lynch investment strategists led by John Bilton, the best run in 11-years. “”Long Europe” is popular, but it may be more a verbal consensus than a practical one — real money is just starting to buy, only 1/7th of cumulative outflows since 07 have reversed, and many investors are wanting to call the top.”
Six Things Advisors Should Know About Managing Millennials (WealthManagement.com)
Younger advisors have different expectations than their older colleagues. Susan Konig at WealthManagement.com has highlighted six key things to managing millennials. 1. While they expect their compensation to be competitive they also expect to their compensation to reflect their performance. 2. As long as they meet their goals they expect to have more control over their schedules. 3. They value “formal and informal training opportunities that will increase their value.” 4. They want “access to decision makers.” 5. They also want credit for their work. 6. They want control of their projects.
MARC FABER: There Are No Safe Havens For Investors (Bloomberg TV)
With the debt ceiling deadline fast approaching and uncertainty about when the Fed will begin tapering its $US85 billion monthly asset purchase program, some investors are looking for safe haven investments to protect their wealth. But Marc Faber, author of “The Gloom Boom And Doom Report,” told Bloomberg TV there is no safe haven and investors are better off with diversified portfolios.
“There is no safe haven. Bank deposits are not safe, which used to be safe. Money in treasury bills is not 100% safe because there is inflation in the system and you hardly get any interest. Bonds are not very safe anymore because eventually interest rates will go up. Equities in the US are relatively expensive by any valuation metrics you might use. I don’t see anything particularly safe. The best you can hope for is that you have a diversified portfolio of different assets and that they don’t all collapse at the same time.”
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