FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Why Advisors Need To Turn To A Flat-Fee System (The Wall Street Journal)
Advisors should consider moving to a flat fee system to lower client headcount, writes Bernard A. Unger of New York-based Unger Financial Network, in a new Wall Street Journal column. This is because advisors often spend 75% of their time on “marketing and acquiring new clients,” when they should be spending that time with their clients instead.
“There is a top-down problem in the industry where large broker dealers expect their advisers to meet minimum production requirements through commissions. Not only do these commissions create conflicts of interest, but advisers are left with no choice but to continually try to gain new clients to meet their minimums–leaving them with less time to spend with their existing clients.
“The same argument can be made for advisers who charge a fee that is a percentage of assets under management. You end up constantly looking for clients to increase the assets you manage.
“If advisers instead worked with a set number of clients who were charged a flat fee that met those minimum earning amounts, then they wouldn’t have to keep looking for clients and spend so much time marketing.”
Speaking at IMCA’s annual conference in Chicago, Bob Doll, chief equity strategist at Nuveen Asset Management suggested that advisors should focus on stocks that can grow dividends rather than those that already pay high dividends. Doll pointed out that dividend-paying stocks have performed well in recent years because they have “bond-like characteristics,” reports Evan Simonoff at FA Mag.
Doll said he has a dividend portfolio in which companies are increasing dividend payouts at 21% a year. This compares with two-thirds of dividend-paying stocks that increase their payouts at an annual rate of 5% or less. Embracing more dividend growing stocks will earn a higher total return as the stock price appreciates.
Wells Fargo Gets 2 Teams With Almost $US500 Million In Assets (Investment News)
Two teams of advisors managing almost $US500 million in clients’ assets have joined Wells Fargo, according to Investment News. John Phillips, Darrell Jones and Scott Dickerson joined from UBS Wealth Management Americas, where they had $US219 million in assets and $US1.98 million in fees and other revenue. Meanwhile, father-son duo Michael and Wes Climer joined from The Climer Wealth Management Group where they managed $US220 million in assets and drew $US1 million in fees and other revenue.
Three Wall Street Strategists Explain What Investors Are Missing Right Now (Business Insider)
At the Big Picture Conference today, hosted by Ritholtz Wealth Management, Josh Brown posed the question: “what are investors missing from the big market narrative right now?” Art Hogan, chief strategist at Lazard Capital, Dan Greenhaus, chief strategist at BTIG, and Jeffrey Kleintop chief strategist at LPL Financial were on hand to answer the question.
Hogan said the American investor is missing out on opportunities outside the U.S. Meanwhile, Kleintop said investors going the “passive route” are going to miss opportunities outside the U.S. because it is difficult to get them without an active manager. “I get that active management hasn’t worked in a while,” he continued, “but I think so many investors are going to be behind the curve on this… in bonds and equities.”
Finally, BTIG’s Greenhaus added that the Fed will have to unwind but that we are in an unprecedented situation. No one knows how this will happen, therefore, this is definitely something investors are missing.
In A Few Months, The Stock Market Will Drop 15%, Then Go Nowhere For Years (Societe Generale)
In recent weeks, Wall Street has been raising its S&P 500 year-end targets. The median 2014 year-end target for the index, according to a Bloomberg poll of Wall Street equity strategists is 1900. Societe Generale’s asset allocation team expects the S&P 500 to be at 1600 by year-end but is calling for a 15% correction in the stock market in Q1 2014.
“SG economists expect the January FOMC meeting to be the most likely timeframe for tapering. They look for the first move to be $US20bn (instead of the $US5-10bn previously expected by the market).
“We expect the drop to accelerate at the start of 2014 as the market starts pricing in the end of asset purchases (i.e. well before the market’s Fed tapering expectation). The S&P 500 should dip to 1450 on our estimates, down c.15% from the peak.
“In the two to three years that follow, the U.S. equity index should remain relatively flat, burdened by higher yields (rate hikes in mid-2015), a higher U.S. dollar and limited earnings growth (Return on Equity is already high), but supported by better economic prospects and a new shareholder value cycle, staving off a bear market.”
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