Archive for September, 2014

Advisors: Confidence in Gross Wavers, But PIMCO Will Recover

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While many had already joined the recent exodus of investors from PIMCO funds, some financial advisors said they could see investors pulling more money from the bond shop following the news this morning that Bill Gross would leave PIMCO after 43 years to join Janus Capital Group. The fifth largest fund family, PIMCO currently has $519 billion in retail assets, according to Morningstar. Other advisors said this clears the deck for PIMCO to make amends to investors and right the ship.

Advisors’ knee-jerk reaction will be to sell PIMCO funds, said Alan Rosenfield, managing director of Harmony Asset Management in Scottsdale, Ariz. “Bill Gross has been the public image of Pimco for some time, with him gone, the immediate reaction is the brains are gone. They will have to prove their depth, which will take time.”

Gross and PIMCO have been hit with negative headlines this year, starting when Mohamed El-Erian stepped down as the firm’s CEO and co-chief investment officer in March. The announcement triggered a wave of stories about El-Erian’s departure and his relationship with Gross.  

PIMCO’s Total Return Bond Fund was the world’s largest mutual fund for many years, amassing $18 billion in new assets in 2012, according to Morningstar. But in May 2013, the fund started bleeding assets following poor performance. August marked the 16th straight month of withdrawals, with $3.9 billion in outflows during the month. Year-to-date through Sept. 25, the fund returned 3.59 percent, Morningstar says.

And just this week, reports surfaced of an investigation by the Securities and Exchange Commission into the inflated returns of PIMCO’s Total Return ETF, run by Gross.

Some advisors believe Gross’ move could have lasting negative effects on the firm; some have already started to withdraw assets.

“It is not good for PIMCO by any measure,” said David Maurice, vice president at Carrier, Maurice Webb Wealth Advisors in Johnson City, Tenn, who has a significant portion of his clients’ bond portfolio in PIMCO. “They will lose market share although it’s too soon to say that we will participate in redemptions driven by this.”

“Any objective advisor would not be fooled by Mr. Gross’s so-called star power,” said Douglas Stone, wealth advisor with SeaCrest Wealth Management in Medford, Ore. “For many of us, the results are what matters and clearly his fund has lacked that for some time now.”

Mark Stys, chief investment officer at WS Wealth Management in Tyson’s Corner, Va., has been pulling out of PIMCO funds over the last two to three years.

“I sit on a board and as a investment committee member overseeing the investment portfolio, I strongly encouraged the consultant to diversify away from the one-third weighting they had in PIMCO Total Return Fund,” said Lynne Kinney, principal at CKW Financial Group in Honolulu. “The allocation was foolish and an inappropriate bet on one fund’s ability to make interest rate/duration calls.”

“We exited PIMCO Total Return over a year ago, and have the other PIMCO funds on our watch list for performance issues or internal management changes, which could impact them,” said Kris Maksimovich, president of Global Wealth Advisors in Dallas.

But Maksimovich and other advisors say his departure will blow over, and ultimately be a positive thing for PIMCO.

“He, to many, is still the ‘bond king,’ and I would imagine some assets will be leaving with him,” he added. “But his staying could have also impacted PIMCO negatively after the very-publicized and vocal ‘disagreements’ between he and El-Erian, his public comments whether understood correctly or not, etc.”

“The first few days will see money outflows from the firm but eventually things will settle down as a new leader comes in,” said Jon Larsen, portfolio manager at Albion Financial Group in Salt Lake City, Utah. “A change in leadership has been needed even if it at first the biggest effect is an increased employee morale.”

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Friday, September 26th, 2014 EN No Comments

Wealth Management News – September 26

Sat Sep 27, 2014 1:58am IST

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Friday, September 26th, 2014 EN No Comments

Bill Gross leaves Pimco for Janus Capital

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Bill Gross gave the keynote address at the Morningstar Investment Conference in June.

SEC Probes Pimco Chief Bill Gross’s ETF Bond Fund

Bill Gross, one of the bond market’s most renowned investors, is leaving Pimco, the asset management firm he founded, for rival asset management firm Janus Capital Group, Janus said on Friday.

Dubbed the “Bond King” and long-time manager of the Pimco Total Return Fund, the world’s largest bond fund, Gross will manage the Janus Global Unconstrained Bond Fund, Janus said in a statement. He begins work at Janus on Sept. 29, Janus said.

The announcement comes just days after the Wall Street Journal reported that U.S. securities regulators were investigating Pimco and Gross in connection with an exchange traded fund he also managed at Pimco.

German insurer Allianz SE, the parent of Newport Beach, California-based Pimco, could not immediately be reached for comment.

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Friday, September 26th, 2014 EN No Comments

Take the Sunset Package or Sell the Business?

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In thinking strategically about one’s career, no matter what age or stage of life, it is important to understand the options that exist to monetize one’s business and realize the value of a life’s work. Essentially, retirement options fall into two categories:

  1. As an employee, participate in a retiring advisor “sunset program.”
  2. As an independent, sell your business on the open market or via an internal succession plan.

For employee advisors, exploring your firm’s retiring advisor or “sunset” program might be a sound way to face retirement. These plans, offered by all of the wirehouses, regionals and most traditional firms, give a retiring financial advisor the opportunity to formulate a retirement strategy whereby he or she can actively select a younger advisor or team to take over the of business and, over a period of time, be paid by the successor and eventually ride off into the sunset. And, if so inclined, an advisor can structure his or her exit so that he or she can transition out of the business gradually. Here are some of the benefits to the firm:

  1. The retiring advisor’s assets have a greater chance of remaining with the firm.
  2. It encourages advisors to form teams, which has shown to increase productivity, client experience and retention.
  3. By keeping the retiring advisor happy and captive, he or she will work hard to foster the movement of client relationships to the successor advisor.
  4. It doesn’t cost the firm anything; the non-retiring advisor who is assuming the book of business is responsible for paying the retiring advisor from revenue generated by the assets in question.
  5. A sunset agreement “trumps” the protocol, which defines what kind of client information a departing broker can take with him to a new firm. In a sunset arrangement, the agreement between the retiring advisor and the remaining advisor that spells out the terms and conditions of the transfer of business will often contain restrictions that would prevent the younger FA from taking the retiring advisor’s business with him if he were to leave the firm. This type of arrangement would fall outside of the protocol and can be enforced by the firm.

The four wirehouse firms have recently tweaked their retiring advisor programs to make them more attractive to advisors and stave off a new wave of attrition. Given the breadth of competition for advisor talent and the costs associated with rewarding and onboarding new advisors, this certainly makes sense. While each of the large firms call their plans something different (Merrill Lynch – “Client Transition Program”; Morgan Stanley – “Former Financial Adviser Program”; UBS – “Transitioning Financial Adviser Program; and Wells Fargo – “Financial Adviser Succession Program”), they all are all similar in terms of providing a revenue stream of, in some cases, up to 200 percent of trailing 12-months production to a retiring advisor over a two- to five-year period.

 

Selling the Business

But, what if the advisor contemplating retirement who doesn’t want his business to remain at the current firm, or the one who has been independent for some time? One of the greatest pulls of business ownership is the ability to sell one’s business on the open market.

Today, valuations for primarily fee-based wealth management firms are up to three times annual revenue (or more often seven to nine times earnings before interest, taxes, depreciation and amortization), and the proceeds are taxed as capital gains instead of regular income. While it is probably easier for an advisor to retire from the big firm he/she worked most of their professional life, the long range upside can be far greater in the independent space.

Take Roger, a 58-year-old advisor who was the senior partner of a team at Merrill Lynch in the southeast and who was personally producing in excess of $1.5 million annually on almost $175 million of assets. (His team’s total production was just over $2.5 million with approximately $275 million of assets under management.) Roger was in partnership with his son and nephew and was approaching the age when he was seriously considering retirement.

He had always believed that he would retire from his firm and had been keeping abreast of Merrill’s client transition program. But recent changes at the firm, such as being forced to raise client fees, convinced him otherwise. Although the money he would have received from the firm’s sunset program was adequate, he just didn’t believe that his son and nephew would thrive and prosper if they remained at Merrill. Roger felt that only he and his team knew what was best for their clients, and he didn’t want a “faceless corporate giant” dictate policies that impacted them. He reached out to me to learn about his options.

After gaining an understanding of Roger’s business, goals and expectations, we arrived at three distinct possible exit scenarios:

  1. The team stays put—the easiest and most seamless solution. This was a definite possibility, and other issues aside, would have garnered Roger several million dollars over the next few years as he retires out of the business and is paid out by his successors.
  2. Move the entire team to another traditional firm. In this scenario, Roger would be paid a large transition bonus of upwards of 300 percent of trailing 12-month production and possibly even negotiate a note for something less than the average nine-year term. He could then enter into a succession transaction with his partners, and be paid an additional amount by them for transitioning his book of business.
  3. Go the independent route. As the landscape has evolved, there are many versions of independence that would have allowed Roger to structure his exit with his son and nephew under any terms and conditions that they could agree upon, including giving Roger the ability to work few hours per week for as long as he wanted to.

After consideration, Roger and his team decided to break away and go independent with Focus Financial Partners. Focus valued their business by applying a multiple of five (taxed at long-term capital gains) to a portion of their earnings before owner’s compensation (EBOC). Focus then structured the deal so that the majority of the cash in the transaction was paid to Roger since he had the shortest “runway” left to work. He would remain a full-time employee of his new firm for five years, and pursuant to the buy/sell agreement he negotiated with his son and nephew, he will be paid 100 percent of his personal production at that time. He will also have the opportunity to stay on as a consultant, being paid an hourly rate and a percentage of business he brings in. For Roger, this fulfilled all of his financial and emotional requirements and allowed him to leave a legacy he felt incredibly proud of.

Making the decision to retire completely or to scale back your work schedule is a big step. The good news is that there are many legitimate options for the soon to be retiring advisor. Planning early and setting a road map for the future are the best things you can do to ensure that you are the master of your own destiny, rather than letting circumstances dictate your exit strategy.

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Friday, September 26th, 2014 EN No Comments

Market Report, "Challenges and Opportunities for the Wealth Sector in Russia …

New Financial Services research report from WealthInsight is now available from Fast Market Research

Boston, MA — (ReleaseWire) — 09/26/2014 — This report is a thorough analysis of Russia’s Wealth Management and Private Banking sector, and the opportunities and challenges that it faces.

Report Highlights

– In 2013, Russian HNWIs held 30.8% (US$345 billion) of their wealth outside of their home country; the worldwide average is 20-30%.
– WealthInsight expects foreign asset holdings to increase to US$404 billion by 2018, accounting for 29.6% of the country’s total HNWI assets.
– In 2013, Europe accounted for 60.7% of the foreign assets of Russian HNWIs. It was followed by Asia-Pacific with 17.7%, North America with 11.5%, the Middle East with 5.2%, Latin America with 3.8% and Africa with 1.2%.
– Russian HNWI allocations to Europe decreased sharply compared with other regions during the review period, from 72.4% in 2009 to 60.7% in 2013.
– Over the forecast period, WealthInsight expects HNWIs to reduce their level of investment in Europe to 54.3% of foreign HNWI assets by 2018, with investments decreasing due to growing confidence in Asian economies.

View Full Report Details and Table of Contents

Report Scope

– Independent market sizing of Russia HNWIs across five wealth bands
– HNWI volume and wealth trends from 2009 to 2013
– HNWI volume and wealth forecasts to 2018
– HNWI and UHNWI asset allocations across 13 asset classes
– Number of UHNWIs in each state and all major cities
– Fastest growing cities and states for UHNWIs (2009-2013)
– Insights into the drivers of HNWI wealth

Reasons to Get this Report

– The WealthInsight Intelligence Center Database is an unparalleled resource and the leading resource of its kind. Compiled and curated by a team of expert research specialists, the database comprises dossiers on over 60,000 HNWIs from around the world.
– The Intelligence Center also includes tracking of wealth and liquidity events as they happen and detailed profiles of major private banks, wealth managers and family offices in each market.
– With the Database as the foundation for our research and analysis, we are able obtain an unsurpassed level of granularity, insight and authority on the HNWI and wealth management universe in each of the countries and regions we cover.
– Report includes comprehensive forecasts to 2018.

Companies Mentioned in this Report: VTB 24, Nomos-Bank, Uralsib, Bank Saint Petersburg, Promsvyzbank Private Banking, Alfa Bank, Bank of Moscow, Gazprombank, Rosselkhozbank, Sberbank

About Fast Market Research
Fast Market Research is a leading distributor of market research and business information. Representing the world’s top research publishers and analysts, we provide quick and easy access to the best competitive intelligence available. Our unbiased, expert staff is always available to help you find the right research to fit your requirements and your budget. For more information about these or related research reports, please visit our website at http://www.fastmr.com or call us at 1.800.844.8156.

Browse all Financial Services research reports at Fast Market Research

You may also be interested in these related reports:

Challenges and Opportunities for the Wealth Sector in India 2014
Challenges and Opportunities for the Wealth Sector in Brazil 2014
Challenges and Opportunities for the Wealth Sector in Germany 2014
Challenges and Opportunities for the Wealth Sector in South Africa 2014
Challenges and Opportunities for the Wealth Sector in Dominican Republic 2014
Challenges and Opportunities for the Wealth Sector in France 2014
Challenges and Opportunities for the Wealth Sector in Japan 2014
Challenges and Opportunities for the Wealth Sector in Switzerland 2014
Challenges and Opportunities for the Wealth Sector in Chile 2014
Challenges and Opportunities for the Wealth Sector in paraguay 2014

For more information on this press release visit: http://www.releasewire.com/press-releases/market-report-challenges-and-opportunities-for-the-wealth-sector-in-russia-2014-published-547185.htm

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Friday, September 26th, 2014 EN No Comments

Deutsche AWM Celebrates 3-Year Anniversary Of Currency Hedged ETFs

Deutsche Asset and Wealth Management is celebrating the three-year anniversary of their first suite of currency-hedged ETFs this month. 

These innovative tools are designed to provide relative strength over a traditional basket of international stocks when the U.S. dollar is rising.

More recently, the return of currency volatility and strength in the U.S. dollar index has prompted investors to migrate toward ETFs such as the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSE: DBJP) and Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSE: DBEF).

DBJP provides exposure to a basket of 300 Japanese equities paired with short positions in the Japanese yen currency to mitigate the effect of currency risk. 

DBEF takes a wider view of international exposure that includes varying country and offsetting currency exposure.

The collapse in the Japanese yen this year has had a tremendous impact in relative performance for a fund such as DBJP.  This ETF has climbed more than 10 percent in 2014 versus a flat return in the unhedged iShares MSCI Japan ETF (NYSE: EWJ).

Related Link: Insurance ETFs Are On The Verge Of A Breakout

Dodd Kittsley, head of ETF strategy and national accounts at Deutsche Asset Wealth Management recently noted that “Investors need the ability to make international investment decisions without having to factor in currency fluctuation against the U.S. dollar, and our robust set of hedged equity ETFs provides large and varied global exposure.”

To commemorate this milestone, Mr. Kittsley has also released a white paper entitled: Purer return and reduced volatility: Hedging currency risk in international-equity portfolios.  This research includes an in-depth look at the impact to currency fluctuations and international equity growth trends.  

The stable of currency-hedged ETFs at Deutsche AWM now includes 11 individual funds with distinctive offerings such as the Deutsche X-trackers MSCI Brazil Hedged Equity ETF (NYSE: DBBR) and Deutsche X-trackers MSCI South Korea Hedged Equity ETF (NYSE: DBKO).  

Further strength in the U.S. dollar versus rival foreign currencies will continue to provide a tailwind for these types of ETFs.  As a result, they warrant a close look when comparing international investment themes. 

Posted-In: Deutsche Bank Dodd KittsleySpecialty ETFs Currency ETFs ETFs Best of Benzinga

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Thursday, September 25th, 2014 EN No Comments

SEI White Paper: Wealth Managers to Become More Like Financial Quarterbacks

OAKS, PA–(Marketwired – Sep 25, 2014) – As the financial industry faces changing consumer desires and expanding digital offerings, bank and trust wealth management firms are at a crossroads in how to best bring young wealth managers into the fold, while simultaneously ensuring they have the support needed to succeed with the new breed of investor. According to an SEI (NASDAQ: SEIC) white paper released today, firms can help their wealth managers optimize performance, productivity, and client satisfaction ratings by improving their infrastructures. The paper, “Creating the Next Generation of Wealth Managers: The Financial Quarterback,” explores what the wealth managers of the future will look like, and the role leadership plays in fostering employee and client growth.

“Through our research, we’ve discovered that wealth managers are most productive and add the most value to a firm when they’re working with clients to develop effective strategies to achieve life goals. With the abundance of digital strategies, pure investment and return advice is not enough — wealth managers must leverage the human factor to stand apart,” said Al Chiaradonna, Senior Vice President, SEI Wealth Platform(SM), North America Private Banking. “But, we’ve found that many firms are struggling to help wealth managers focus primarily on client-facing work because administrative and operational tasks get in the way. This points to a fundamental problem in an evolving industry like ours. If firms don’t analyze what makes a wealth manager productive, how can they expect higher productivity?”

The paper reveals that the next generation of successful wealth managers will be more like financial quarterbacks versus traditional wealth managers. No longer will they set long-term strategies and evaluate them quarterly or annually, they will evaluate situations in real-time and make changes where appropriate. Tools and on-demand data that help them better understand the entire client relationship, not simply transaction-based systems, are the keys to the future.

Similarly, investors are changing as well, especially in the way they talk about their money. As such, goals-based investing has become an industry buzzword and a favored method to determine how to invest. That, in turn, alters the way wealth managers need to interact with their clients. The paper encourages senior management to help wealth managers cut down on non-client-facing activities in order to manage a more effective and comprehensive communication process.

To set wealth managers up for success, the industry should heed sports science, reveals the paper. Game film, data, good coaching, and a quality supporting cast all combine to put superior athletes in positions to win every day. This model translates well for wealth management firms. Firms looking to move from good to great need to better utilize the technology and information at their disposal to determine how the business model and company environment impacts wealth manager effectiveness. Only then can they work to correct any irregularities and improve performance.

“Just like a coach spends extra time molding a player, senior management needs to take the lead in turning wealth managers into the firm’s all-star financial quarterbacks,” said Chiaradonna. “That takes more than just a pep talk here and there; it involves digging into the psyche of a wealth manager and creating best practices and strategies that help differentiate the firm from others.”

The paper, published by SEI Executive Connections, is the fourth in a four-part series, titled “SEI Insights: The Future of Wealth Management,” which explores four key areas outside of the financial industry that offer opportunities for transformation in the wealth management industry. The first three parts of the series examined the benefits of employing a unified platform to overcome legacy system issues, embracing business model reinvention to improve enterprise risk management, and challenging traditional thinking around asset-based segmentation. SEI Executive Connections is a community for bank executives and industry experts which provides business intelligence and opportunities to interact on banking topics and trends. To request a copy of the full paper, please visit http://www.seic.com/enUS/banks/14683.htm?cmpid=pr-925-advproductivity-wp.

About the SEI Wealth Platform(SM)
The SEI Wealth Platform (the Platform) is an outsourcing solution for wealth managers encompassing wealth processing services and wealth management programs, combined with business process expertise. With the Platform, SEI provides wealth management organizations with the infrastructure, operations, and administrative support necessary to capitalize on their strategic objectives in a constantly shifting market. The SEI Wealth Platform supports trading and transactions on 115 stock exchanges in 48 countries and 33 currencies, through the use of straight-through processing and a single operating infrastructure environment. For more information, visit: www.seic.com/wealthplatform.

About SEI
SEI (NASDAQ: SEIC) is a leading global provider of investment processing, investment management, and investment operations solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of June 30, 2014, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $602 billion in mutual fund and pooled or separately managed assets, including $249 billion in assets under management and $353 billion in client assets under administration. For more information, visit www.seic.com.

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Thursday, September 25th, 2014 EN No Comments

Bruton’s Lucia Capital Acquires $170 Million RIA

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San Diego, Calif.-based Lucia Capital Group has acquired the client relationships of a $170 million RIA firm, West Coast Asset Management, with the help of Derek Bruton, the former head of LPL Financial’s independent advisor services and Lucia’s new CEO. Bruton resurfaced at Lucia in July, and was tasked with growing its businesses, which include RIA Lucia Wealth Services, broker/dealer Lucia Securities, and affiliate RIA firm Lucia Capital Management. 

Bruton stepped down from his role at LPL Financial in April due to concerns over his interactions with other employees, LPL said in a regulatory filing. The nature of his “interactions” with other LPL employees is still unclear.

Montecito, Calif.-based West Coast Asset Management was co-founded in 2000 by President Lance Helfert and Paul Orfalea, the founder of Kinkos, which he built into 1,200 branches and 25,000 workers worldwide. Helfert will join Lucia as senior vice president, along with Chief Investment Officer Atticus Lowe, who will join Lucia’s research and investment management group. Orfalea will not be joining.

West Coast Asset Management provides equity, fixed income and alternative investments to high-net-worth investors, institutions, retirement plans and charitable foundations.  

The acquisition is part of an larger effort by Bruton to grow the firm by attracting new advisors and rolling up advisor teams. Lucia now has 17 offices, over 70 employees and $2.3 billion in client assets.   

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Thursday, September 25th, 2014 EN No Comments

80 Clients Join Satuit Success 2014 Conference in Boston

With 80 attendees representing more than 45 institutional, private equity and wealth management firms, the 13th Satuit Success Summit returned to Boston this month. Held at the Seaport Hotel, the conference once again offered its users the opportunity to learn about the latest SatuitCRM® features and to participate in group discussions on workflow and business intelligence specific to asset management. The industry specific conference is unique among technology conferences because all users have similar business requirements allowing participants to share ideas with their peers from other asset management firms.

“The Top 10 Forgotten Features was my favorite panel. It was a great refresher…to bring back to the team,” said Ariana Cook, of HGK Asset Management. The Technical Discussion Group got high marks from Ryan Bateman of Sands Capital Management who said there were “great questions that really sparked the conversation.” The tech session gave attendees a chance to interact directly with Satuit’s Chief Technology Officer Josh Weiss.

Client panelists included Gina McBriar of Banyan Partners and Lisa Moyer of Investment Research and Management and Ron Bartosh of Guyasuta Investment Advisors, Inc.

A complete set of presentation materials is available to clients under the Support tab on the website.

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Wednesday, September 24th, 2014 EN No Comments

Bedell Group | Wealth management: Jersey for Indian family offices

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Wednesday, September 24th, 2014 EN No Comments