FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
5 New Year's Resolutions That Advisors Should Take On In The New Year (WealthManagement.com)
The end of the year is a time when financial advisors meet with clients to review the past year and put together a plan for the new year writes Ted LeClair, president of Natixis Global Asset Management. Drawing on research findings from a Natixis report he suggests advisors stick to these five resolutions in 2014.
1. "Focus on risk first in you client reviews." Have an honest conversation with your clients and have "risk audits" to keep tabs on whether they have taken on too much or too little. 2. "Engage clients in frank discussions about retirement needs and expectations." Many clients underestimate how much they will need in retirement and future health care costs. 3. "Research and adopt new technologies that can maximize your time." Spend some time to find technologies that will help you manage your administrative tasks so you can focus on helping existing clients and finding new ones. 4. "May auld acquaintances… become younger." Make an effort to seek out younger investors. 5. "Satisfy your yearning for learning." Make more of an effort to understand complex alternative strategies and issues that matter to your clients.
Index funds have the upper hand when it comes to tax efficiency, when compared with actively managed funds. This is in part because they change their holding less often than actively managed funds.
"Because an active manager makes decisions based on a security's potential to outperform, he or she is more inclined to make specific concentrated purchases in fewer stocks and to liquidate entire holdings more often than a manager of a broad-market index fund would.
"In making wholesale liquidations, active managers are much more likely to realize capital gains, since an entire position's gain could be realized at once. The tax efficiency of actively managed funds could therefore be much less stable, and the lack of depth and breadth of share lots within an actively managed fund could bode poorly for its future tax efficiency. An actively managed fund also has the potential for a manager change, resulting in a new manager completely restructuring the portfolio, which would cause realization of gains generated from past investment success."
The Two Main Reasons Advisors Seek Out Alternative Investments (The Wall Street Journal)
As stocks have enjoyed a good run up since they bottomed out in 2009, many think there are limited opportunities in the area. At this point many are considering alternative investments — nontraditional investments like hedge funds for instance. In a new WSJ column, Lee Partridge of Houston-based Salient Partners writes that there are really only two reasons advisors seek out alternative investments.
"From the perspective of a fund manager, there are two objectives we're seeking with alternative investments. The first is to add return strains that are diversifying to a portfolio because they are less-than-perfectly correlated with market-based exposures. The second objective is pursuing alpha. Both are legitimate applications of alternative investments."
The Labor Department's efforts to push a proposal that seeks to expand the definition of fiduciary to include anyone who offers investment advice about retirement plans, have been delayed until August. The plan was expected to be considered in Spring of 2014. This is because Labor Secretary Tom Perez promised, during his confirmation hearings, that he would take bipartisan concerns into consideration before moving forward with the proposal. The concern is that this would raise regulatory costs for brokers who will be required to take on fiduciary duty and push them away from clients with smaller retirement assets.
"In October, the House of Representatives passed a bill written by Rep. Ann Wagner, R-Mo., that would force the DOL to delay its fiduciary regulation until the Securities and Exchange Commission acted on its own fiduciary-duty rule for retail investment advice," reports Mark Schoeff Jr. at Investment News. "Critics said that the bill would effectively kill the DOL rule because the SEC might decide not to proceed. The Obama administration issued a veto threat."
When the Fed first mentioned that it would taper its $85 billion asset purchase program earlier this year emerging-markets stocks, bonds, and currencies took a beating. Bloomberg LP's global head of economics, Michael McDonough, said that the evolution of economists' GDP growth forecasts for various regions in the world was the most important chart of the year.
"We are on pace to see the long-standing trend of the emerging market growth outpacing developed market growth reverse," he told Business Insider. "Investors are going to have to be a lot smarter about their emerging market investments over the next several years and this chart illustrates that trend."
More From Business Insider