FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
What The Bond Market Is Telling Us (Morningstar)
At the start of the year everyone expected long-term interest rates to rise, but rates have actually been declining. "Keep in mind that long-term interest rates really reflect investors' expectations about future short-term rates," according to Matt Coffina editor of Morningstar StockInvestor newsletter. "I hate to say it, but I think it's not good," Coffina said. This he thinks is the bond market's way of saying that "interest rates are not going to be higher in the future, which presumably means that the economy is not going to be all that strong."
"You'd expect if the economy really started to pick up strength, inflation pressures would start to build and sooner rather than later the Federal Reserve would be in a position where it would have to start raising short-term interest rates. …I think the bond market is telling us that inflation still isn't a concern, and economic growth is going to be fairly weak for the foreseeable future."
Household Net Worth Hits Record High (Calculated Risk)
U.S. household net worth was $81.8 trillion in Q1 2014, up $26.2 trillion from the trough in Q1 2009, according to the Federal Reserve's Q1 2014 Flow of Funds report. This is a new record high. "Although household net worth is at a record high, as a percent of GDP it is still slightly below the peak in 2006 (housing bubble), but above the stock bubble peak," writes Bill McBride at Calculated Risk.
Small Foundations Need To Diversify Just As Much As Big Funds (The Wall Street Journal)
Diversification is important even for small foundations, writes Bret Sinak, managing director of Endeavor Wealth Management in a WSJ column. "In the past, if a foundation wanted to diversify in an asset class like real estate, it had to buy an office building," he writes. "If it wanted exposure to gold, it had to buy gold bullion. If it wanted timber, it had to buy a forest."
"Over the last 10 years, however, the mutual fund and exchange-traded fund marketplace has incorporated a variety of alternative-asset classes like real estate, commodities, and hedge-fund strategies. By utilizing such funds, advisers can help smaller foundations emulate the diversification strategies of their larger counterparts."
Nearly Half Of Advisors Think They're At The Top Of Their Industry (WealthManagement.com)
Nearly 50% of advisors think they're at the top of their industry, according to a report from Pershing published at its INSITE 2014 conference. Interestingly, only 21% said their peers were as successful, reports Diana Britton at WealthManagement.com. "The gap between perception and reality might be explained by over-confidence, or simply each advisor’s sense that his or her hard work must be achieving a measurable advantage over other advisors,” according to the report cited by Britton.