FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
The Rising Rate Environment Won't Actually Be That Newsworthy (The Journal of Financial Planning via Nerd's Eye View)
Some investors may be antsy about the potential for rising interest rates. But Brent Burns, president and co-founder of Asset Dedication, says "the thing about a rising-rate environment is that it’s not actually going to be all that newsworthy."
Talking to a roundtable for the Journal of Financial Planning, Burns says "...unlike the stock market, when interest rates rise—and we saw that in May and June of 2013—maybe you’d see a bond fund lose 5 percent, depending on its duration. You never see that big, dramatic, downward move like you would in the stock market." The other panelists also argued that the main role of bonds (especially short-term bonds) is not to generate high returns, but to act as a "shock absorber" for stocks.
There's A New ETF That Will Let You Bet Against People Who Are Betting Against Stocks (ETF Trends)
Investors will soon be able to get their hands on a short-squeeze exchange traded fund (ETF) that will let them bet that heavily shorted stocks can do an about face. A short squeeze sees a heavily shorted stock — which investors have bet will see prices tumble — start to turnaround.
"The ETF’s managers will select U.S. stocks and American Depository Receipts that they believe may be subject to a “short squeeze” and lend portfolio securities that they believe may be subject to a short squeeze," writes Max Chen at ETFTrends. "Basically, the fund managers will pick out securities that have a higher potential for capital appreciation, which could result in a short squeeze." The ETF provided by ETFi is slated to trade under the ticker SQZZ.
Advisors Should Build A Firm That They Can Sell (Reuters)
A firm is an advisor's biggest asset, Waldemar Kohl, vice president of practice management for Fidelity Institutional Wealth Services told Robyn Post at Reuters. But research from Fidelity Investments has found that most independent advisors let their firms peter out once they retire, because they don't have plans in place to sell the firm, thereby cutting off a major source of income. To do this however advisors need to work ahead of time to ensure that the firm is ready to be purchased. "Cash flow can look great, but if you're a one-man band, it's not attractive to a buyer because when you go, the revenue goes," Nancy Nelson, a Washington-based planner told Post.
Individual Investors Need To Realize That Most Of Them Will Be Shut Out Of The Best Alternatives (The Wall Street Journal)
When alternative investments first came to the fore in the 1990s investors were pulled in on promises of high returns. At the time investors failed to understand that they were only being told about the returns of the best alternative managers, writes Gus Sauter, a senior consultant to Vanguard Group, in the WSJ.
"The new sales pitch is that alts may not produce as high a return as broadly available traditional funds, but they provide returns with lower risk," he writes. "The reality is, just like mutual funds, the best performing alts perform quite well, but the majority leave you wanting more. The problem that most individual investors face is that they won’t have access to the best performers."
Advisor Pair Leaves Barclays For Merrill Lynch (Investment News)
James Clarke and Philip Weyhe that together managed $285 million in assets, with over $2.5 million in production at Barclays Capital have left for Merrill Lynch, reports Minda Smiley at Investment News. "The team came to Merrill Lynch because they viewed our tools, technology and platform as stronger than those of our competitors,” a spokeswoman for Merrill Lynch told Smiley. "They were looking for a platform to support them as they continue to build their practice and serve clients over the next decade."