FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Advisors Need To Avoid The Temptation Of Short-Term Performance (The Wall Street Journal)
Bringing prospective clients is always a difficult task. This is because they will focus on short-term results, while the advisory firm is focused on the long-term goals of its clients, writes Clark M Blackman II, of Texas-based Alpha Wealth Strategies. There is also the temptation to replace fund managers that have had a few bad quarters with new higher but this is a mistake he writes. “Research at institutional portfolios has suggested that 60% of the time the hired gun performs worse than the manager that was replaced,” he writes.
“Sometimes we have to convince our clients of this too: They need to stay the course. Sometimes we must convince them that the stock market is going to come back. This last time around is the best example of that. Fear is never a good reason for making an investment decision.
“We shouldn’t make financial decisions for marketing reasons or try to better our short-term performance numbers if it’s not absolutely the best thing to do for our current clients. We must always do what’s right for them, even if it’s to the detriment of recruiting new clients.”
Retirement Planning Is A Core Part Of Business For 73% Of Advisors (Russell Investments)
Retirement planning is now a “significant or core part of business” for 73% of financial advisors surveyed in the Q3 Financial Professional Outlook survey by Russell Investments. 81% said they relied on a total-return approach i.e. where the focus is “on the overall return of an investment portfolio — including capital appreciation, dividends and interest — to provide income.”
“We are encouraged to see that so many advisors say they view retirement income through a total-return lens. However, one of the most common questions we hear from advisors regarding retirement portfolios is about yield,” said Rod Greenshields, consulting director for Russell’s U.S. advisor-sold business in a press release.
“Reaching for yield at the expense of sound fundamental analysis can often lead to portfolios with significant credit risk, as well as industry and style biases. To help investors sustain a retirement lifestyle, we believe that generating return through capital appreciation, dividends and income yield in a diversified, multi-asset portfolio is likely the most sensible approach.”
Broker Wins $US4.2 Million Arbitration Award Against Former Firm (Investment News)
Former Wedbush broker Michael Farrah wont a $US4.2 million arbitration award against his old firm over collateralized mortgage obligations that dated back to 2005, reports Investment News. In his claim, Farah alleged that “Wedbush made misrepresentations and omitted material facts in connection with the collateralized-mortgage-obligation investments that he recommended to his clients, causing Farah to lose clients and annual income.”
The panel’s decision to award Farah was awarded punitive damages as part of the arbitration award was considered “unusual” in Finra cases involving a former broker and a broker-dealer. Farah was with Wedbush Securities from 1995 to 2005.
Investors Aren’t Worried About The Debt Ceiling Debate At All (Goldman Sachs)
Investors don’t seem too antsy about the debt ceiling debate. “We estimate that little or no volatility premium for the debt ceiling debates is priced into the options markets on stocks most exposed to government spending cuts,” said Goldman Sachs’ Robert Boroujerdi in a new note to clients.
“Complacency is even more pronounced on stocks with high government exposure,” he added. “Fear priced into options on these stocks dropped over the past few months to new lows vs. SPX options.”
Financial advisors need to be more cognisant of how they spend their time, time management consultant John Anderson told FA Mag. Anderson thinks advisors should push tasks that don’t involve time with their clients to the end of the day, and he writes that other tasks should be delegated to others. “The more contact you have with clients, the better you are at solving their financial problems,” he said. “If they think of you first when it comes to finances, they will refer you to others and your business will grow.”
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