The past few decades presented an outstanding market environment for the asset management industry. Global AUM rose at a steady pace between 2001 and 2021, thanks largely to the strength of the world’s equity markets, which were able to rebound even after several severe downturns. And 2021 was even stronger. Global AUM grew at 12% last year, to more than $112 trillion, a growth rate well above the 7% average of the previous 20 years.
Last week, the Boston Consulting Group (BCG) released its 20th annual report on the global asset management industry, it offers a retrospective analysis of the effects of this strong market – and as the industry enters a more uncertain era, it looks at the expected impact of new technologies such as direct indexing, increasing investor demand for alternative products, and a focus on decarbonization.
Direct Indexing
The Supreme Court May Quash Biden's Student Loan Forgiveness: Here's What Borrowers Should Do
For millions of borrowers, student loan forgiveness will mean the difference between significant relief and ongoing payments. If you’re among them, the question is… what next?
Natural Gas Woes Continue
As we discussed last week in Looking to the Futures, natural gas prices have been plagued by the perfect storm of lower demand and higher production throughout the withdrawal season.
The Pros Fail to Meet the Moment With Bond ETFs
The pitch for an actively managed bond exchange-traded fund can be compelling, especially when there’s market turmoil and uncertainty
Two Sides of Healthcare, One Strong Investment Case
Portfolio Manager Andy Acker explains why the healthcare sector could offer an attractive combination of defense and growth in today’s market.
The Professor's Portfolio
My “five-step investment process” provides an ongoing systematic framework for making portfolio decisions, and further incorporating financial planning and tax considerations into overall portfolio construction.
Moving Averages: S&P Finishes a Volatile February Down 2.61%
Valid until the market close on March 31, 2023.
The S&P 500 closed February with a monthly loss of 2.61%, after a gain of 6.18% in January. At this point, after close on the last day of the month, three of five S&P 500 strategies are signaling "cash" — iShares 7-10 Year Treasury Bond ETF (IEF), Vanguard Real Estate ETF (VNQ), and Invesco DB Commodity Index Tracking Fund (DBC) — up from from last month's single "cash" signal.
What Is a Gold IRA?
A gold IRA is one way to diversify your retirement portfolio. It can protect your savings from plummeting in the event of a stock market crash or high inflation.
Gold versus Silver Investments: Which is Better?
Silver is more volatile, cheaper and more tightly linked with the industrial economy. Gold is more expensive and better for diversifying your portfolio overall.
How AI is Making Advisors More Efficient and Effective
I have no idea how AI will impact the advisory profession. However, I’m confident it will fundamentally change almost every aspect of what you do and how you do it.
The Top Six Investments for Inflation in 2023
With the consumer price index increasing during the last few years at a rate not seen for nearly 40 years, the investing challenge for the coming year is finding ways to generate real returns during exceptionally high inflation.
Using Philanthropic Giving in Your Estate Plan
There are several ways to include philanthropic giving in your estate plan. Here are five common options.
Have Corn Prices Found Support?
Corn futures traded higher to start the month with weekly USDA data showing an increase in exports week over week.
How a Charitable Trust Works
Like all trusts, a charitable trust is a legal entity that you create for the purpose of holding and managing assets. The trust is wholly separate from you. It owns any assets it holds, pays taxes and requires management just like any other legally recognized entity.
Municipal Bonds: Is it Safe to Get Back in the Water?
Investors are still recovering from the municipal market beatdown of 2022, but the current higher absolute yield levels provide an attractive “re-entry” point for municipal market investors.
Fed Up: Can the Fed Accommodate the Market?
2022 was a year of disappointment and negative surprises as economies faced the consequences of geopolitical turmoil and central banks fighting inflation.
Gold Rallies on a Weaker Dollar
Gold prices have increased to start 2023 as the dollar index extends last Friday's losses.
A Primer for Clients to Invest in Commodities
Commodities may seem like just another one of the bunch, but these products offer a unique way to invest your money in the market.
How to Build a Bond Ladder Using ETFs
Build your ladder with multiple target-maturity ETFs representing different segments of the bond market, with different target years.
Crude Oil Slumps on Travel Concerns, Forecasted Production Increases
The February crude oil contract CLG23 was down over 2% in trading early Thursday.
The Ten Best Articles You Probably Missed
Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read investment, planning and practice management articles over the last two days. Below are another 10 that you might have missed, but I believe merit reading.
New Research on Tax-Advantaged Direct Indexing
As investors increasingly seek out more personalized options, many advisors are seeing direct indexing grow in popularity. Direct indexing is a type of separately managed account or SMA, where investors can express their personal values and tax preferences. The personalization and flexibility afforded by an SMA allows advisors the flexibility to manage each client’s tax situation and reflect their values. Dimensional Fund Advisors recently conducted research into the tax management benefits of an SMA. It found that a multifaceted tax management approach that goes beyond tax loss harvesting and considers tax implications at every step of the investing process can lead to more significant, longer-term gains. Here from Dimensional to discuss further is Kaitlin Hendrix, senior researcher and vice president.
Online Banks versus Traditional Banks: Which Is Best for Your Clients?
Here’s a breakdown of the pros and cons of trading in your traditional bank for a virtual banking experience.
FOMC Slows Rate Hikes as Expected
The Federal Reserve raised interest rates by a half point (50 basis points) on Wednesday in line with forecasts.
529 Plans: Custodial versus Individual
One thing to consider when opening a 529 plan is whether it should be a custodial or individual account. While both allow you to save for college costs and enjoy some tax breaks, they differ in terms of who has control of the account and the assets in it.
Why Direct Indexing? What to know in 2023
Over the coming years, Direct Indexing is expected to grow at a faster rate than traditional financial products such as mutual funds, exchange-traded funds (ETFs), and separate accounts.* But what does it have to do with you and your clients?
The Best 529 Plans for 2023 and Beyond
We’ve broken down nine of the best 529 plans.
Build-Your-Own-Index Boom Could Hit $825 Billion in Four Years
An index strategy that’s all about customization is expected to grow faster than other investment vehicles over the next four years as investors’ desire for personalization intensifies.
Equities Move on Fed Commentary
Although off their Thursday lows, equity index prices closed lower yesterday.
Student Loan Forgiveness May Hit You With a Heavy Tax Bill
Depending on where they live, student borrowers may soon face an unexpected tax burden.
Crypto Outlook: More Bearish Than Bullish
Despite crypto markets being one of the hardest hit throughout the bear market that has engulfed almost all risk assets over the past 12 months, we have seen crypto not only hold up relatively well since the June lows but indeed be one of the better performing asset classes.
VettaFi Names Peter Dietrich Head of Sales for Index, Data, and Analytics
Dietrich spent the previous 15+ years in senior business development roles with Morningstar and brings extensive experience in indexing and direct indexing across the asset management and wealth spaces
Tax Planning in Difficult Markets: Creating Silver Linings When Clouds Are Gray
When markets are challenging, your clients look to you to help manage their expectations as well as their hard-earned money.
The Latest Developments in Direct Indexing
Direct indexing is the most powerful trend sweeping through the advisory profession. When done right, it lets clients build low-cost, tax-efficient, and highly customized portfolios. Those portfolios can track a broad market index or implement a factor-based strategy. They can follow an ESG or sustainability mandate. Here to discuss the latest developments in the direct indexing world are two members of Envestnet’s management team.
A Case for Direct Indexing Using Rising Dividend Stocks
One investment with the ability to provide current income, inflation protection, and even the potential for capital appreciation has been largely overlooked – rising dividend stocks.
Direct Indexing and the Shift to Personalized Portfolios
Join us as we share everything you need to know about the advisor’s answer to this: direct indexing. We’ll dive deep into why we believe this investment strategy is a trend that is here to stay and why it matters for advisors and all of their clients, not just high net worth.
The Plunging Pound
Bleeding into this week, the British pound reached its lowest level ever Monday, relative to the U.S. dollar.
Guaranteed Lifetime Income Isn’t Free
Insurance protects against losses – fires, floods or a wrecked car. Because of the life-altering consequences of such as loss, clients rarely question the cost of the insurance. When viewed through an analogous framework, the cost of lifetime-income insurance, such as a GLWB, is fairly priced.
The Impact of Taxes on the 4% Rule
How do taxes impact the 4% rule for retirement spending?
How to Talk to Clients About Thematic ETFs
Here are some key points that advisors should keep in mind when dispensing advice and recommendations on thematic ETFs.
Direct Indexing in a Changing Environment for Advisors
Direct indexing is the fastest growing segment of the asset management industry. In this interview, Brandon Thomas of Envestnet explains how direct indexing helps clients gain low-cost, tax-efficient exposure to asset classes, ESG and quantitative strategies.
Silver Up, Then Down
Silver rallied to start the week as all contract months were up four percent or more.
Personalized Managed Accounts: The Next Level of Customization in SMAs
Investors increasingly want more control and customization of their portfolios. Personalized managed accounts give them the opportunity to do that.
Powell Pivot
Federal Reserve Chair Jerome Powell’s hawkish comments dominated the markets on Friday, with the major indices all seeing a drop of over 3%.
Hedging
Equity markets plunged to start the week based on increased FOMC pressure to raise rates to combat inflation.
Muddling Through Stagflation
Our own government cannot afford a short end of the curve much higher than it is now, and our own fiscal and monetary decisions have held down the long end of the curve in what I believe is a multi-decade period ahead that is best referred to as “Japanification”
Crude Oil Unable to Rebound
Crude oil prices dropped substantially to start the week after the dollar rallied.
Indexing is Not Worse than Marxism
I often hear that indexing has become so popular that it is destroying “price discovery” – making it impossible for investors to know that they are paying a fair price for a security. Some say that makes indexing worse than Marxism. New research shows that this concern is unjustified.
Active Versus Passive: Market Pros Weigh In on the Best Strategy for Retail Investors
The long-running active versus passive debate has become even more heated than usual during the recent stock market turmoil.
Quantifying the Impact of Direct Indexing
We apply five levels of customization to four developed-market equity strategies to quantify the impact of customization (or direct indexing).
Looking to the Futures: GDP Declines for a Second Straight Quarter
The U.S. has experienced another quarter of reduced output, in the face of high inflation and rising interest rates.
Is Your Marketing Honest? The 17-Point Test
I have a vision of a profession where the most straightforward advisors, not the coolest ones with the best spiel, rise to the top. To achieve that ideal, here are 17 ways that acting more honestly than the competition will win more clients.
The Upside of Buying Individual Bonds
Buying individual bonds takes more work but is usually worth it in the long run.
Direct Indexing: An Efficient Way to Turn Tax Losses Into Tax Assets
While a direct indexing strategy is a great addition to an investor’s portfolio, you’ll want to ensure your clients are properly diversified and also poised to reap the benefits of active management, while recognizing that active management doesn’t generate as many tax losses as tracking the index does.
Bitcoin Tests $19,000
The crypto investing front has taken another barrage of body blows, pushing Bitcoin to test the $19,000 per coin level once again.
2022 Mid-Year Corporate Credit Outlook
After the steep drop in prices during the first half of this year, yields on many corporate bond investments are at or near 12-year highs.
Lies, Damned Lies, and Advisor Payouts
I am not implying that brokerage firms that pay their advisors via a “payout” are lying, but there is no shortage of misleading when it comes to payouts.
The Overarching Themes in the Asset Management Industry
The past few decades presented an outstanding market environment for the asset management industry. Global AUM rose at a steady pace between 2001 and 2021, thanks largely to the strength of the world’s equity markets, which were able to rebound even after several severe downturns. And 2021 was even stronger. Global AUM grew at 12% last year, to more than $112 trillion, a growth rate well above the 7% average of the previous 20 years.
Last week, the Boston Consulting Group (BCG) released its 20th annual report on the global asset management industry, it offers a retrospective analysis of the effects of this strong market – and as the industry enters a more uncertain era, it looks at the expected impact of new technologies such as direct indexing, increasing investor demand for alternative products, and a focus on decarbonization.
Looking to the Futures: Natural Gas at New Highs
Low inventories drove natural gas prices to their highest level since 2008, while above normal temperatures are putting additional stress on natural gas supply.
Looking to the Futures: Natural Gas Spikes on Hot Temps
Natural gas prices traded higher to start the week after forecasts show hotter than average temperatures in the United States.
19 Reasons to Run Like the Wind from Direct Indexing!
I don’t care how many PhDs are going to argue against me; direct indexing is Wall Street’s attempt at squeezing more fees out of the America public using advisors as the pawns.
GARP Stocks: Common Sense in an Age of False Narratives
This post explains why we believe GARP Investing may be another powerful way to protect and grow capital amid a speculative frenzy that appears to be on its way out.
Stock Market Volatility: Schwab’s Quick Take
U.S. stocks fell Friday, extending a run of weekly losses into its third straight week, as investors reacted to a handful of disappointing earnings reports and the Federal Reserve’s increasingly aggressive language about future interest rate increases.
Is Direct Indexing Active Management “in Drag”
The surging popularity of direct indexing has led to confusion. Some believe it is barely indistinguishable from indexed investing, while others claim it is active management “in drag.”
There's a Bull Market in Macro Doom
There is a genre of investment research that continuously predicts economic disaster that I call “macro doom.” It has become very popular. It seems that everyone is an expert in macroeconomics today, and they’re all predicting a bust of some kind.
Mom and Pop Buying Fewer Muni Bonds Directly as ETFs Heat Up
The value of bonds directly owned by households fell by $18 billion in the fourth quarter of 2021, dropping to the lowest level since 2008, according to Federal Reserve data. Instead, those buyers are moving toward mutual funds and exchange traded funds, which have roughly doubled their muni holdings over the last decade.
Building the Family Office Farm
Reflecting on the history of our family office, our investing philosophy mirrors how previous generations built their wealth through farming. They patiently waited to harvest the crops they planted; we buy securities and patiently wait for them to appreciate.
Why to Consider Preferred Securities Now
Preferred securities prices have fallen sharply, presenting an attractive entry point for income-oriented investors who can ride out the volatility.
25 Years in Risk Management
Quick – where were you 25 years ago?
Understanding Direct Indexing
This article, which is written for clients, explains that direct indexing portfolios are broadly diversified with individual stocks that are personalized to meet the needs, values, and preferences of an investor.
Preferred Securities: Balancing Yield with Risk
Preferred securities are a type of investment that generally offers higher yields than traditional fixed income securities, such as U.S. Treasury securities or investment-grade corporate bonds.
Direct Indexing: What Exactly Is It And Why Are So Many Talking About It?
The term direct indexing is somewhat of a misnomer.
12 Stocks in the Industrials Sector
This is the 7th in a series of 11 videos where I will cover each of the 11 sectors looking for value.
Stay Flexible as Rates Rise
When rates are rising, investors need portfolio protection. But it’s no time to sit idly in cash and wait things out. Every day spent on the sidelines means income and opportunities lost. A passive, set-it-and-forget-it investing approach isn’t ideal either. Buy-and-hold laddered portfolios tend to lock in low yields that disappoint if the market begins to offer more.
Personalized Managed Accounts: Putting Investors in the Driver’s Seat
In this interview, Kevin Knowles and Nick Zylkowski discuss Russell Investments’ Personalized Managed Accounts (PMA) program, a suite of advisor-sold customized SMAs that support tax-loss harvesting and ESG mandates.
Direct Indexing versus ETFs – Which One Will Dominate?
Direct indexing has gathered a lot of buzz in the headlines and for good reasons; this advancement makes it possible for advisors to customize their clients' portfolios down to the individual security level. Direct indexing offers tax efficiency benefits and granular customization that ETFs can't match. But there's a tradeoff; it's not as accessible, requires account minimums, and is more work for investors to manage. Rahul Sen Sharma of Indxx is here to discuss whether direct indexing has bright future, or whether ETFs will remain the preferred vehicle given their ease-of-access and hands-off management.
Anatomy of a Bubble
We have become famous (or infamous) regarding our views that there is a bubble in long-duration assets. In this report, we investigate what’s causing such widespread bubbles, their potential effects on the overall economy, and the interesting investment opportunities resulting from the bubble’s misallocation of capital.
Explore a Diverse Life – Including a Career Change
If I was still a wealth advisor, I’d consider another career.
China vs. Brazil
Investors are increasingly looking outside developed countries for investment opportunities, but it’s important to remember that not all Emerging Market countries are the same. In this report, we compare the opportunities in China & Brazil.
How SMAs and Interval Funds Can Help Meet Municipal Investor Needs
There are many potential advantages to investing in tax-exempt municipal bonds, but not all advisors are aware of additional strategies and investment vehicles that can help them meet muni-focused client needs.
Let’s Bury the Term “TAMP”
For almost three decades the acronym TAMP, for turnkey asset management program, has stuck. It’s time to kill it.
C Is For A Customized Client Experience: Looking At The Holistic Planning Services Advisors Now Provide
If there is one experience common to us all during the global pandemic, it is that the spread of COVID-19 around the world caused everyone—young or old, rich or poor, male or female—to reassess our priorities.
How Advisors Can Maximize After-Tax Returns
Frank Pape is the senior director, portfolio consulting for Russell Investments’ advisor and intermediary solutions business. In this interview, he discusses the latest research on how advisors can maximize the after-tax income for their clients.
Are Market-Cap-Weighted Indexes Too Concentrated in the Biggest Stocks?
The top ten stocks in the S&P500 add up to 27% of the index. Is that a problem?
A $15.3 Billion Quant ETF Loses Out in Badly-Timed Rebalance
A comeback by megacap growth stocks and the stalling of the value trade arrived at exactly the wrong moment for one $15.3 billion exchange-traded fund.
Preferred Securities: High Income, but Near-Record Prices
For investors considering preferred securities today, there is good news and bad news.
Momentum Investors Will Be Buying Energy and Materials in a Year
The global economy is changing, yet many investors seem to have static portfolios. RBA explains why we believe the current shift in market leadership will last longer than investors are expecting.
Dimensional Converts $29 Billion of Mutual Funds Into ETFs
Dimensional Fund Advisors just became one of the biggest players in the $6.5 trillion exchange-traded fund arena.
Happy Birthday to the Dow!
Today marks, in many ways, the birthday of my profession.
Game Changer: How the American Rescue Plan Improved the Outlook for Munis
In a complete reversal from what was expected roughly a year ago, the outlook for muni issuers is much brighter.
A Golden Era for Active Equity Management
This “fat, juicy pitch down the middle” stock-picking opportunity could stretch many months into the future. Professional managers and investors should embrace this opportunity for as long as it lasts.