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10 Questions Advisors Need To Ask Before Jumping Ship (WealthManagement.com)
The end of the year typically sees a “migration of investment professionals to head out to the broker-dealer hunting grounds,” writes Gary Martino of online-broker dealer MoneyBlock. But advisors should also ask themselves and their recruiters key questions before jumping ship. Martino identifies 10 key questions.
1. “Does the technology offering match what my business and my clients currently need and may want?” 2. “What are the broker-dealer’s primary revenue sources?” 3. “Does the firm allow me to use the investments I want to use now and as my clients’ needs evolve?” 4. “Do you have a complete fee schedule for me and my clients?” 5. “How flexible is the advisory fee and/or commission schedule?” 6. “Is it really my business if I decide to leave?” 7. “What is the B-D doing to save me time, so I can grow and manage my book?” 8. “Does my input not only reach the broker-dealer’s decision makers, but does it have an impact?” 9. “Can you walk me through your account opening and management process?” 10. “How does your compliance and supervisory processes work?”
The next leg of the Great Rotation — the shift out of bonds and into equities is about to begin writes BofA Merrill Lynch head of U.S. equity strategy Savita Subramanian. Until now the rotation has been out of bonds but into “bond proxies.” While there will be continued inflows into taper-proof yield, she writes that the next leg will be “Quintile 2.”
“As managers move down the yield spectrum, they are likely to stumble upon what may be one of the market’s best-kept secrets: Quintile 2 by dividend yield of the Russell 1000. These stocks still offer competitive yields, but unlike Quintile 1, enable investors to avoid yield traps and invest in stocks that generally have lower payout ratios, more globally-diversified revenues, less rate sensitivity, and better/more stable growth. Quintile 2 has offered the highest average return and the lowest downside risk over time. Additionally, many of these stocks are household names that even the most gun-shy equity investor may feel comfortable owning.”
There Is Some Flexibility With Roth IRAs (Vanguard)
Investors should take the time to realise if Roth conversions are right for the Individual Retirement Accounts (IRAs). But, if for instance investors go forward with the conversion and realise it wasn’t right for them they could still opt out, according to Mario Bruno at Vanguard.
“Well there is some flexibility with Roth conversions, and this doesn’t happen very often with the IRS, they do allow a do over. So you can, if you do — if you realise you don’t want to do it or maybe you don’t have the income to pay the taxes, you can undo the conversion by re-characterising it back to a traditional IRA. So you do have some flexibility. There are some time constraints to do that but you have until, typically if you file a timely tax return or file for an extension, you have until October of the following year to actually do the re-characterization. So there’s some flexibility there for a do-over. It can get a little complicated in terms of deciphering what the earnings might be and what not, if you’re doing a partial re-characterization. So you might need a little bit of help, but absolutely you can undo it if that’s something that you feel you need to.”
Advisors Need To Think Of What The Next Generation Of Advisors Wants (Investment News)
The average age of advisors is 57 and Mark Tibergien, chief executive of Pershing Advisor Solutions thinks it is important for those in the industry to think of the next generation of advisors and what they want. Speaking at the InvestmentNews Best Practices Workshop Tibergien said it isn’t just compensation that counts.
Jeff Benjamin at Investment News reports: “Mr. Tibergien emphasised what he called the ‘hygiene factors,’ including factors such as working conditions, commute and job security as considerations on which candidates often focus. ‘I don’t believe you can motivate people, but I do believe you can de-motivate people. As the saying goes, companies hire people and managers lose people.’
“Investor demand for ‘value’ has been pervasive,” writes Goldman Sachs David Kostin. “Low valuation stocks have outperformed higher valuation peers by 12% in 2013 on a sector-neutral and equal weight basis.” Because of this S&P 500 P/E multiples are at their tightest in 25 years. “With valuation clustered together we believe there are attractive relative value opportunities where companies with different fundamentals are trading at very similar valuation levels.”
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