FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financialadvisors.
Asian Consumers Still Prefer Local Brands (AllianceBernstein)
Investors in big chains like Starbucks shouldn’t automatically get excited when they announce plans to move into emerging markets.
Asian consumers are proud of and still prefer “their distinct tastes and traditions.” As a result, homegrown restaurant franchises and consumer companies “with a deep knowledge of local appetites” are legitimate competition to major international brands in Asia, argues AllianceBernstein’s Liliana Castillo Dearth.
This is especially true in Southeast Asian countries like Vietnam, Indonesia, and the Philippines.
“We think that local companies have a leg up on their global competitors, thanks largely to their strong distribution networks. These are critical because these markets are highly fragmented, with significant parts of the population living in rural areas, where modern retail outlets such as supermarkets are rare.”
Although incomes are rising, local companies have developed such strong brand loyalty that consumers still prefer them. Even younger consumers who are more likely to go to “western” themed establishments, prefer “products that appeal to local tastes.”
“Catering to tastes of those consumers … will be a tall order for competitors such as Starbucks,” writes Dearth.
Rates for long-term care policies have risen on average 4.8%, and some have increased by as much as 60% over the last year, according to Financial Planning.
And there are several things that clients can do. Their gut reaction might be to cancel the policy, but financial advisors should remind clients that “even paying $US500 in premium per year will probably cost less than the cheapest care available.” Other clients may decide to let the policy lapse and then buy a new one. Although this sounds smart, the problem here is that if client have only had their policies for a year or two, then it will be difficult to find a better rate.
If clients do drop their policy, advisors should tell them that most insurers will pay out benefits equal to the premiums paid.
Advisors should recommend the following strategies to their clients instead. Some clients can pay the old premium with lost benefits — which is “better than nothing.” Others can get reduced inflation protection for a lower premium. And finally, some might be able to pay the new higher premiums.
Investors who are unsure about their core bond holdings and are thinking about reallocating their funds should look at ETFs.
The ETF will provide investors with a “bridge between your old investment and your new one, and preserves your market exposure along the way,” writes BlackRock’s Matthew Tucker. Investors can sell out of the old fund and then use proceeds to purchase an ETF with similar exposure. And when they eventually find a new manager, they can see the ETF.
Tucker says that specifically the ETF should be used for this, rather than “any core fund.” ETFs are the better choice because they “shield you from style drift.” Plus they are traded on exchanges and their prices are available to all investors. This leads to lower transaction costs than trading directly. “In the case of the US Aggregate Bond (AGG), it has typically traded with a spread of about 2 basis point,” adds Tucker.
Wunderlich Securities Buys Its Rival Dominick & Dominick LLC (The Wall Street Journal)
Memphis-based Wunderlich Securities, a full-service brokerage firm, has agreed to acquire its New York based rival Dominick & Dominick LLC. This acquisition will expand the firm to 600 associates with $US10 billion in client assets.
Wunderlich was founded in 1996 has often grown its business by acquisitions. In 2007 it acquired Capital Securities of America and in 2012 bought three branches from Sanders Morris Harris Inc.
“The latest growth spurt has been partly helped by a $US40 million capital injection from a group led by private-equity firm Altamont Capital Partners late last year,” writes Michael Wursthorn.
Don’t Shy Away From Out-Of-State Muni Bonds (Charles Schwab)
Municipal bonds are one of the few investments that pay interest that are generally exempt from federal income taxes, but there are several taxes that could apply to muni bonds.
Generally, if investors buy bonds from their home state they are exempt from state income taxes. “However, interest paid on bonds from outside of your home state is generally subject to state income tax”, which will reduce the net income received from the bond.
For those who live in a state with low tax rates (or one that issues a minimal amount of muni bonds), “we would suggest looking outside of your state. The added benefits of diversification and higher yields may make up for the hit you would take by paying state income taxes,” write Cooper J. Howard and Rob Williams.
Business Insider Emails & Alerts
Site highlights each day to your inbox.