FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Many investors are behind on their retirement savings following bear-market setbacks. Others have just started saving late. Charles Schwab’s Rande Spiegelman recommends several strategies in order to catch up and make the most of what investors have.
He writes that investors should save more now and spend less — “it’s as simple as it is unpopular.” Additionally, he suggests that investors should spend less money during retirement, especially if the mortgage is paid off and the “kids don’t move back.” Investors should also consider retiring later and even working part-time after retirement age.
Finally, soon-to-be retirees can max out their 401(k) or other employer retirement plans, and contribute to a deductible traditional IRA or a Roth IRA if they are eligible.
Lawyers: The Finra Arbitration Panels Lack Diversity (The Wall Street Journal)
The Finra arbitration panels lack diversity, according to lawyers who represent investors in disputes with their brokers. Unfortunately, that could be bad news for investors because these homogeneous arbitration panels can lead to one-sided rulings.
The average age of arbiters is 67. 40% are over the age of 70 and 17% are older than 80. Plus, approximately 80% of the arbiters are men.
“A study of the roster of arbiters showed they were also chosen from too narrow a group of professionals, such as lawyers, and had a ‘socioeconomic status that put them out of touch with the average investor,'” according to the The Public Investors Arbitration Bar Association.
There Is A Growing Divergence Between Market Sectors (BlackRock Blog)
Different market segments respond differently to changes in monetary policy. Those that are more affected by monetary policy changes have been suffering recently.
And “their performance is likely to continue to diverge from less impacted segments,” writes BlackRock’s Russ Koesterich.
Generally, it’s the small-cap valuations that are more sensitive to monetary changes than the large-cap valuations. This trend continued last week when US large caps never dipped down more than 5% from their highs. On the flip side, US small caps got into “correction territory,” meaning that they declined by at least 10%.
Advisors Are Turning Their Backs On Alternatives (Wealth Management.com)
When the financial crisis hit, investors turned to liquid alternative funds — they wanted to have greater portfolio diversification and lower volatility. But now, investors are starting to consider other options.
“Some advisors may have become disillusioned with how alternative investments perform in a bull market as investors clamor for performance over low-volatility portfolios,” reports Diana Britton.
“2013 was definitely a year where the S&P 500 did absolutely phenomenal, and liquid alternatives obviously lagged as they should in any extreme bull market,” said Josh Charney, alternative investments analyst at Morningstar.
Advisors Need To Market To The Next Generation (Advisor Perspectives)
Marketing to the next generation is “high priority” for financial advisors, according to Bob Veres. “If you want your firm to survive long-term, it will need to have a healthy, diversified portfolio of clients,” he adds.
“When Accredited Investors in Minneapolis recently projected its AUM growth over the next 10 years, the conclusions were disturbing: the client base was ageing, and based on who the firm was attracting, a greater percentage of the firm’s clients would be retired each year. AUM growth would slow, then gradually contract, then contract rather quickly 10 years out,” writes Veres.
There are two things that advisory firms can do. First, they should hire younger advisors, or give more responsibilities to young staffers. And second, they should loosen up the client minimum.
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