Enjoy the current installment of “Weekend Reading For Financial Planners” – this week’s edition kicks off with the news that a new study from research firm Cerulli has found that investors’ willingness to pay for financial advice has risen over the last 15 years, with more investors reporting using a financial advisor (and a decreasing share considering themselves “self-directed”), in spite of the proliferation of DIY investing options in the internet era – which highlights the value that advisors provide in giving advice on client’s financial decisions beyond the investment portfolio itself.
Also in industry news this week:
- In a new whitepaper, industry consultant Mark Hurley predicts that the environment for wealth management firms will grow much more competitive amid higher interest rates and greater PE funding of advisory firms, although opportunities exist for RIAs that can successfully attract and serve younger clients at scale
- According to Charles Schwab’s most recent Compensation Report, RIA firms are increasingly concerned about retaining their top talent, and seeking to articulate the value they provide to their employees in a written Employee Value Proposition document
From there, we have several articles on practice management:
- As the pace of retirements in the RIA industry exceeds the number of experienced advisors who can replace them, advisory firms will need to focus on developing and training less-experienced advisors, or risk going to war with other firms in a competition for more experienced talent
- Mergers and acquisitions activity in the industry has remained strong in 2023, defying expectations for a major slowdown as interest rates rise – and PE investors see more room for continued acquisitions as the pace of new firms being established exceeds the number of firms being acquired
- A growing number of investors are buying minority stakes in RIA firms, which in theory could be a win-win in that it provides capital for firms to grow and scale while allowing the existing owner to keep their majority control; however, some minority owners may demand more of a say in how the company is run than majority owners may be willing to give them
We also have a number of articles on investments:
- With cash and short-term T-bills providing positive returns over inflation for the first time in more than a decade, it can be tempting to “chill” in short-term assets for their risk-free return – however, history suggests that the relatively high returns of short-term assets (at least compared to riskier assets like stocks and longer-term bonds) aren’t likely to persist for the long term
- 3 years after Dimensional Fund Advisors introduced ETF versions of its most popular investment strategies, it has become one of the biggest active ETF providers in the industry – although questions remain about whether DFA can keep pace with Vanguard and Blackrock’s passive ETFs (which advisors can combine to implement their own DFA-like strategies, at a lower overall fee)
- Investors in diversified portfolios have found themselves lagging the S&P 500 for over a decade, which serves as a reminder that the overall cost of diversification is missing out on the best-performing assets (while also avoiding the worst-performing ones)
We wrap up with 3 final articles, all about gift-giving:
- How advisors can find unique gifts for their clients without going over the $100 limit for FINRA-registered broker-dealer representatives
- How giving clients non-“stuff” gifts like experiences or donating to charities of the client’s choice can be a powerful way for advisors to show their appreciation
- Which “luxury” gifts high-net-worth clients might be buying as the holidays approach
Enjoy the ‘light’ reading!
