FINANCIAL ADVISOR INSIGHTS: Falling Oil Prices Is Good, But What It Reflects Is Not Good
The Falling Oil Prices Are A Bad Omen For The Global Economy (Morningstar)
"Falling oil prices are yet another indicator of falling world economic activity," write Robert Johnson and Roland Czerniawski. "So while the US consumer might be doing better, the world, in general, is slowing down. That will continue to reduce US export growth."
Additionally, a robust US economy and higher interest rates could strengthen the dollar further, which would cause US exports to be less competitive and would decrease US export growth further.
And finally, "for now, the asset price drops [in the energy sector] are mainly based on fear, but if low prices are sustained, there will clearly be more defaults than usual in the energy and junk bond sectors," they add.
Citi Was Fined $3 Million For Failing To Send Prospectuses To 250,000 Clients (The Wall Street Journal)
"Citigroup Inc. has to pay a $3 million fine for failing to send prospectuses for exchange-traded funds to more than 250,000 brokerage clients," reports Matthias Rieker. The bank failed to deliver prospectuses for about 160 ETFs from 2009 through April 2011 in over 1.5 million ETF purchases.
The bank is "pleased to put the matter behind us," a spokesman for Citi said.
Citi is not the only firm that has struggled with prospectus-delivery problems. Morgan Stanley also recently stated that it has experienced glitches with delivering prospectuses electronically.
Unless Gold Completely Collapses, Oil Should Bounce Back In The Year Ahead (Advisor Perspectives)
What's going on with oil isn't a sign of economic weakness, writes Brian Wesbury, but rather a rightward shift in the supply curve followed by a lower-than-expected demand.
"Stocks and oil have fallen too much. Stocks should rebound soon and, barring a collapse in gold, we look for stability and then rising prices for oil in the years ahead," writes Wesbury.
There's traditionally been a relative-price relationship between gold and oil. Over the last 30 years, it's averaged around 15.8 - where one ounce of gold buys 15.8 barrels of oil. In 2005, the ratio got as low as 6.7, and in 1986, it was at a high of 30.1. Today, it's about 21.2.
Most Advisory Firms Have No Idea How To Get Client Referrals (Investment News)
Only about one-third of firms have a formal process with which they ask for referrals from third-party professionals and existing clients, according to research by Investment News. This suggests that firms are extremely passive when it comes to getting client referrals, even though they account for a large portion of the business, according to Matt Sirinides.
"When it comes to referrals, the subset of top-performing firms in our study really stood out - 42% of them had a formal referral process with clients, and they also exceeded their peers in formalizing a process with third-party professionals as well (37%)," Sirinides writes.
Schorsch Out (Wealth Management)
"Nicholas Schorsch has stepped down from his role as executive chairman and director of American Realty Capital Properties, the nontraded REIT [real-estate investment trust] sponsor he cofounded. Schorsch remains a majority shareholder in the company. He will also no longer serve on the board of directors at Cole Capital REITs," reports Diane Britton.
"The actions taken today will stabilize the company and are necessary to strengthen future leadership and strategy, improve governance, and complete a separation from Nick Schorsch and his affiliates," said interim CEO William Stanley.
Back in October, ARCP announced a $23-billion account error, which led numerous broker/dealers and firms to suspend sales of ARCP products.