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What The Financial Services Industry Could Look Like In 2030 (Tiburon Research via Nerd's Eye View)
The size of the financial markets hasn't grown in the last six years even as the industry has tried to grow, reports Matt Lynch of the Tiburon Strategic Advisors. This has been complicated by other industry trends like 1. Increased expectation for a fiduciary standard. 2. Shrinking pool of advisors that has to deal with "intergenerational transfer of wealth." 3. The growth of "women as a major market" when women advisors market up only 30% of the industry. 70% of widows change financial advisors within a year of their husbands' deaths. 4. Increasing social diversity. 5. Changing technology.
This leads Lynch to posit two 2030 growth scenarios. The first is the "continued growth in the wealth management business" that is "driven by independent advisors, online tools and advice companies, and emerging international markets." The financial industry will have consolidated through mergers and acquisitions. The second sees the industry lose the trust of consumers, prompting them to turn to a self-service model that excludes "advisors and major financial institutions."
He projects four major outcomes. 1. "Leading fee-based financial advisors increasingly will dominate the market. 2. "Retail banks will continue to lose power." 3. "Wirehouses will embrace the fee-based channel and direct resources into acquisition and organic growth of registered investment advisors." 4 "Direct distribution models are also likely to grow as consumers continue to embrace technology to help them meet their financial services needs."
BLACKROCK: Three Things Investors Should Consider Before Turning Defensive (Advisor Perspectives)
Despite the U.S. avoiding a default on its debt, there is a lot of policy uncertainty. So it's no surprise that many investors are still turning to 'defensive' investments writes BlackRock's Russ Koesterich in a new Advisor Perspectives column. These investments involve buying short-term bonds, blue-chip stocks, and other low risk investments. But Koesterich thinks investors need to ask themselves three things before they turn to defensive investments.
1. "What they’re trying to defend against." 2. "How has a company or sector changed over time?" 3. "The cost of the defensive strategy."
Investors poured $21.4 billion into global equity funds this week, according to data from EPFR Global.
"Fed goes AWOL...investors go All-In. Big, frothy inflows to stocks," writes Michael Hartnett, chief investment strategist at Bank of America. "Since June, $83 billion into equity funds versus $80 billion out of bond funds; investors beginning to worry about a repeat of Q4 1999, when the Fed left the liquidity gates wide open because of 'Y2K' fears with tech bubble outcome."
BofA Merrill Lynch Global Investment Strategy, EPFR Global
Biotech Stocks Are Losing Favor With Some Advisors (The Wall Street Journal)
Biotech stocks are losing favor with advisors, reports Murray Coleman of The Wall Street Journal. High valuations and "disappointing clinical trials and regulatory reviews" have caused some advisors to change their opinion on bio-tech stocks. Not everyone thinks the tide has turned however.
"We aren't seeing any reasons to believe that the biotech market is facing any significant slowdown--the industry's pipeline for new drugs is strong and late-stage clinical trials are still very active," Christopher Raymond of Robert W. Baird & Co. told the the WSJ. But others think the recent blow to biotech stocks should be a "reminder of how volatile the biotech market can be at times," reports Coleman.
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