FINANCIAL ADVISOR INSIGHTS: Investors Who Say Diversification Failed During The Financial Crisis Have It All Wrong
Why Investors Saying Diversification Failed During The Financial Crisis Have It All Wrong (Morningstar)
You often hear the complaint that diversification didn't work during the financial crisis. But Samuel Lee, strategist at Morningstar, writes that this argument has no leg to stand on. "The problem was that while investors felt diversified by investing in many different types of bonds and equities, their portfolios were heavily reliant on economic growth and ample liquidity (that is, they were heavily loaded on the growth and liquidity risk)," he writes.
"When the economy fell into a recession and the parlous state of the financial system spurred a flight to liquidity, conventional portfolios suffered. Most investors weren't diversified by the true drivers of returns: risk factors." Bottomline - investors looking for real diversification need to do so at the "risk factor level" not by just diversifying into different asset classes.
Three Advantages To Being A Small Advisory Firms (The Wall Street Journal)
While we're seeing a lot of consolidation in the financial advisory industry, there are still benefits to a small boutique firm, writes Lee Baker, president of Georgia-based Apex Financial Services in a new Wall Street Journal column.
1. "Smaller firms are more nimble and able to adapt to change more quickly than big firms." 2. "Large firms are also constrained by compliance concerns in other ways. Compliance fears can also keep advisers at large firms from speaking with reporters, even about something vanilla." 3. "You get exposed to different ways of thinking about things. A firm can get so big that it becomes insular and begins to suffer from "group think."
Morgan Stanley Wealth Management Announces Management Shake-Up (Reuters)
Morgan Stanley just announced a shake-up of its wealth management unit. It "named three executives to new roles as part of its strategy to sell more products to clients and increase its loan book," reports Lauren Tara LaCapra at Reuters. Doug Ketter will now be head of strategy and client management. Shelly O'Connor will now take over Ketter's former position, overseeing 16,456 financial advisors. Eric Heaton will be in charge of the private banking group.
Every Intra-Year Move In The 10-Year Treasury Yield Since 1962 (Deutsche Bank)
Deutsche Bank's Brett Ryan points out that since July 2013 the yields on the U.S. 10-year Treasury note have been in a 50 basis point range. "History suggests that such periods of low volatility are the exception rather than the norm."
"Over the last 52 years, there have been only 10 occasions where the intra-year move was less than 100 basis points. Moreover, there have been only six periods when the intra-year move was less than 90 basis points. Thus, if the 2014 growth outlook remains largely intact, 10-year rates have significant scope to move higher." Deutsche Bank has a 4% year-end target on the 10-year.
Investors Are Loving Stock ETFs Again (Bloomberg)
In the past two weeks investors put $21 billion into ETFs that buy and sell American shares, report Lu Wang and Nick Taborek at Bloomberg. This compares with January, when investors yanked $14 billion from stocks. "Equities still remain the more attractive assets class and headwinds for bonds will continue," Ernie Cecilia, CIO at Bryn Mawr Trust Co. in Bryn Mawr, told Bloomberg. "Consumer confidence is hanging in there pretty well. We see signs of broadening economic growth."