FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
'In Or Out' Isn't An Investment Strategy Its Gambling With Time (Charles Schwab)
After the amazing year the S&P 500 had last year, many investors worried that they had missed out one of the best bull runs. But after the recent volatility many are wondering if they should get out. "Popping in and out of markets trying to catch the wave at just the right moment rarely works for the vast majority of investors," writes Charles Schwab. "Neither 'get in' nor 'get out' are investment strategies; they're gambling on a moment in time."
"Millions of Americans pulled their money out of the stock market during the painful crash in September and October of 2008; and more followed them in early 2009 and the outflows even continued well into 2012, with their assets flowing into cash and bonds. In fact, the five years from 2008 through 2012 was record-breaking in terms of equity fund outflows; with nearly four of those years experiencing a strong bull market.
"The pervasiveness of pessimism and/or skepticism is understandable; but it's been to the great disadvantage of investors' portfolio returns. Simply keeping steady was a better strategy..."
Advisors Targeting Wealthy Business Owners Have To Be Patient (Investment News)
A report from CEG Worldwide and Wealth Engine has found that a third of America's wealthy investors are business owners. 74% of the super-affluent, those with $5 - $20 million in investible assets are business owners, and 89% of those with $25 million or more in investible assets are business owners. But advisors targeting these wealthy business owners have to be patient writes Liz Skinner at Investment News. "Many business owners' wealth initially is tied up in those companies, so there may not be many assets for an adviser to manage at the onset of a relationship. The payoff typically comes when the owner sells or takes the business public."
The Top 5 Reasons Advisors Jump Ship (WealthManagement.com)
WealthManagement.com has drawn on REP.'s 2014 Independent Broker/Dealer Report Card to point out why advisors jump ship. We highlighted the top five.
1. Service - "Advisors unanimously pointed to poor service as the most important factor influencing their decision to leave," especially when it impacted how the client views them.
2. Technology - This was the second most important factor for those moving. Advisors gave their independent broker dealers (IBDs) a score of 5.7 out of 10.
3. Payout - Compensation and other special perks are another key reason advisors jump.
4. Business support - "Defecting advisors also gave their current IBDs a failing grade for practice support and professional development (5.7 out of 10)."
5. Product selection - While advisors didn't feel the pressure to sell proprietary products, they did think their firms "could do a better job on the quality of the investment research, giving firms an average 8.5 rating (out of 10) here."
Advisors Need To 'Beware Of The Overlap Trap' (Vanguard)
Advisors need to beware of the 'overlap trap,' according to Rodney Comegys, a principal at Vanguard. While some might think that picking a large cap, mid-cap and small cap ETF will make their portfolio market-proportional this isn't the case. Stocks like Chipotle appear in different indexes. "Take the S&P 500 Index and the CRSP US Mid Cap Index: Fully two-thirds of the companies classified as mid-cap by CRSP are also in the large-cap S&P 500 Index (where they represent a much smaller share of the index of corporate giants)," writes Comegys.
A Global Investment Portfolio Shouldn't Ignore Europe (The AllianceBernstein Blog)
Non-US regional equity fund flows into Europe jumped to €37 billion, turning positive for the first time since 2009, writes Mark Phelps at The Alliance Bernstein Blog. That being said the earnings we're seeing out of European companies don't support the investor optimism. Phelps writes that investor optimism could be explained by two things. 1. The economic recovery. 2. The hope that the European Central Bank will "ultimately follow the examples of the US and Japan, where extraordinary monetary policies have helped kick-start the private sector." Meanwhile, he thinks "the current environment creates an excellent backdrop for discerning, stock-picking approaches."