Foto: Elliot Harmon
. Uno de cada cuatro de los mejores RIAs prevé realizar adquisiciones antes de año y medio
While the majority of advisory firms have seen their revenue levels stall, a group of “Elite” registered investment advisors have experienced significant growth as the result of superior and strategic management, according to the 2016 Elite RIA Study from InvestmentNews Research and BlackRock.
The 2016 study finds that the industry’s largest and most productive RIAs increased their revenues by 23% over the last year, while the typical independent firm’s business remained flat.
This year’s study specifically highlights the primary drivers of this exceptional growth for industry’s Elite RIAs, and also looks ahead at strategies that will likely drive future success in the business.
“While the regulatory environment and markets have created headwinds for most firms, the truly Elite RIAs are starting to pull away from the pack,” said Mark Bruno, associate publisher of InvestmentNews. “They see an opportunity to differentiate their business right now – whether it’s through the services they deliver, or their internal operations – and they are making aggressive moves to increase their market share.”
In particular, the study notes that Elite RIAs are highly focused on going upstream with their client base, placing a clear emphasis on pursuing ultra-high-net-worth and institutional clients. At the same time, they are also strategically leveraging technology, and employing unique and scalable organizational structures that allow for superior client service and support – as well as the potential to absorb new advisers and clients through mergers and acquisitions.
Over the last year, the percentage of Elite RIAs that rely on teaming increased from 44% to 56%. Also the study states that Elite RIAs are investing in dedicated operations and compliance specialists: Nearly twice as many Elite RIAs support a dedicated compliance role compared with all other firms (58% vs. 34%). Another key point is that 73% of Elite RIAs build and manage custom investment portfolios for each client, compared with 54% of all other firms – a core part of their value proposition and competitive differentiators. “Effective use of technology” (57% reporting) and “Growth and retention of existing clients” (51%) are the two factors most cited by Elite RIAs as the drivers of future success over the next 12-24 months.
One in four Elite RIAs are considering an acquisition in the next 12-18 months and 48% of advisers view robo technology as an opportunity, up from 39% just a year ago.
“The 2016 data is particularly noteworthy with regard to the deployment of technology and compliance,” said Hollie Fagan, head of BlackRock’s dedicated Registered Investment Advisor and Retail Investor Platforms. “Elite advisers have paid attention to an important lesson implicit in the continued emergence of robo-advisory: that technology, thoughtfully configured and deployed, can enhance the client experience and provide a critical tool with which to segment and scale a book of business.”
“At the same time, Elite RIAs view the renewed focus on compliance resulting from the DOL’s fiduciary rule-making as a significant opportunity, understanding that working with greater transparency and alignment is good for both their clients and the growth and vitality of their business,” Fagan said.
According to Detlef Glow, Head of EMEA research review at Thomson Reuters Lipper, and considering the rough market conditions during the first half 2016 and the concerns about a possible “Brexit” vote in the United Kingdom, it was not surprising that the assets under management in the European mutual fund industry decreased from the record level of €8.88tr (December 31, 2015) to €8.76tr at the end of June 2016.
This decrease of €126.7bn was mainly driven by the performance of the underlying markets (-€156.2bn), while net sales contributed net inflows of €29.5bn to the overall change in assets under management in the European fund industry.
Other findings include:
Bond funds enjoyed the highest net inflows (+€38.8 bn) during first half 2016.
Bond Global (+€7.1 bn) was the best selling long-term mutual fund category over the first half 2016.
BlackRock (€593.8 bn) at the end of June accounted for more assets under management than the following two fund promoters together.
BlackRock led the sales table for first half 2016 with net sales of €18.1 bn.
CC-BY-SA-2.0, FlickrPhoto: Dennis Wong. What Will the Asset Management Industry Look Like in 2030?
A change in wealth allocation and investor attitudes is set to redefine the asset management industry according to the latest paper published by the Association of the Luxembourg Fund Industry (ALFI) and Deloitte Luxembourg, “How can FinTech facilitate fund distribution?”
The paper found that Millennials and Generation X will account for half of assets under management by 2030 and that their attitudes towards saving and investment will result in asset managers adjusting their future offerings to adapt to and facilitate a new way of investing.
ALFI and Deloitte have identified in their latest report new approaches towards investment and the implications these will have on the asset management industry. New thought patterns, standards and expectations which are substantially different from previous generations will lead to a boom in robo-advice, a change in tailoring portfolios, and a shift in marketing strategies.
Denise Voss, Chairman of ALFI, says: “These behaviours will be a driver for change and the investment management industry has a unique chance to respond to these positive opportunities. Asset managers not only have to consider their offerings in the future, but we are also currently seeing an increasing number of Baby Boomers being influenced by the younger generation’s fresh perspectives. This will result in today’s asset managers having to clearly understand and address the needs of each generation individually.”
In addition, the paper found that the new set of investors is seeking to further align their investment portfolios with their social and economic values. Issues such as global warming sit at the forefront of what is important to younger investors, and the report forecasts a sharp movement away from traditional investment in oil and gas to clean-energy industries such as solar and wind. The research also found that Millennials are often willing to accept lower returns in exchange for greater social and environmental impact compared to previous generations.
The DIY attitude of the Millennial investor will also see an important leap in assets under management in the robo-advice space. Over 50 per cent of investors interviewed as part of the research paper cited a lack of trust in advisers and belief in better performance from self-directed investment as the reasons for why they are turning away from traditional advisers and towards robo-advisers. Total assets under management that are managed by robots currently represent less than 0.1 per cent of the €29 trillion investable assets in the US. However, the report predicts this to grow to 10 – 14% by 2025.
Simon Ramos, Partner of Deloitte Luxembourg, says: “The emergence of algorithmic-driven, so-called “robo-advice” and enhanced distribution platforms offer great opportunities for traditional asset managers to re-think their business models. The robo-advisor phenomenon will be a game changer that could result in an overall reduction of fees and create a new digital experience for the end investor. We will continue to see robo-advisers entering the fund distribution ecosystem and Luxembourg’s strongly connected industry players are well-positioned to ensure that Luxembourg remains at the forefront for innovation. Luxembourg’s fund industry must play a leading role in this shift in order to address the future of investment management.”
Foto: 401(K) 2012
. ¿En qué ciudades se gestiona mejor, y peor, el dinero?
Los Angeles metro area residents are the best at managing money and Baltimore residents are the worst, according to a new CreditCards.com report.
The study compared the average credit score in each of the 25 largest U.S. metropolitan areas with an expected credit score which CreditCards.com generated by analyzing local income, age, unemployment and education data. The hypothesis was that locations with higher median household incomes, median ages and educational attainment – along with a lower unemployment rate – would have higher credit scores.
It didn’t always work out that way. The average Los Angeles-area resident’s credit score is 16 points better than expected. That’s despite significant headwinds: for example, among the 25 metros, the L.A. area has the lowest percentage of high school graduates (79%) and its median household income ranks 12th. Given that context, L.A.’s average credit score (664, which ranks 16th according to Experian) looks much more impressive.
Minneapolis/St. Paul placed second for a very different reason. That metro area has the highest average credit score in the nation. The Twin Cities benefit from several economic advantages, including above-average income and education and a low unemployment rate. Area residents are making the most of those advantages; their average credit score is 15 points better than anticipated.
New York City, Chicago and Bostoncame in third, fourth and fifth, respectively.
Baltimore and its neighbor Washington, D.C. occupy the worst positions on the list.Both metro areas have very high median incomes and above-average educational attainment. However, Baltimore and D.C.-area residents aren’t maximizing these perks. Baltimore’s average credit score is 17 points poorer than expected and D.C.’s is 14 points lower.
The Tampa, Miami and Atlanta metro areas comprise the rest of the bottom five.
“Good credit has a lot more to do with discipline than income,” said Matt Schulz, CreditCards.com’s senior industry analyst. “Use technology to your advantage: review your account information at least once a week and your credit report at least once a month to catch errors and avoid late payments. It’s an easy habit to establish, especially considering how much time we spend on our phones checking Facebook and playing Pokémon Go.”
Foto: Paulo Valdivieso
. El 62% de los clientes "promotores" seguiría a su advisor a otra firma
Nearly two-thirds of millionaire investors (62 percent) rely on financial advisors to help them manage and protect their wealth. Similarly, advisors rely on their current clients to drive referrals, which generate nearly half (48 percent) of new business for advisors and help drive organic growth.
In its 8th release, Fidelity Investments’Millionaire Outlook Study looked at the state of the investor-advisor relationship. For the first time, the study calculated a Net Promoter Score (NPS), a commonly used tool that measures the likelihood that millionaire clients will recommend their advisors to colleagues and friends. The study found that 55 percent of millionaires are “Promoters”—meaning they are loyal to their advisors and likely to recommend them to others; in fact, of those Promoters, nearly two out of three (65 percent) would call their advisors their friends. That’s good news for advisors and those they serve.
However, despite seeing the value in hiring professional financial advisors, 45 percent of millionaires would not recommend their financial advisors to friends or colleagues. In fact, one in five (20 percent) millionaires are “Detractors”—unhappy enough that they may leave their advisor or discourage others from working with them.
“We have entered a ‘referral economy’ – where we, as consumers, thrive on sharing the people and things we value with those in our social and professional networks,” said Bob Oros, head of the registered investment advisor (RIA) segment, Fidelity Clearing & Custody Solutions.
“While this presents a tremendous opportunity for advisors, the challenge is uncovering the formula that drives millionaire clients to recommend them rather than remain silent — or worse — leave,” continued Oros.
Other findings include that 69 percent of loyal millionaires gave a referral in the last year.Promoters have 71 percent of their assets with their primary financial advisor, while detractors have about half (48 percent) of their assets with one; And promoters are ahead of their financial goals: 25 percent of promoters feel they are ahead of their financial goals, while only 7 percent of Detractors feel that way.
Three out of four millionaires who would recommend their advisor would also consult with them on what to do with a sudden and significant financial gain, while only 36 percent of detractors would do the same. In fact, 45 percent of detractors would invest it on their own, without consulting their advisor.
Promoters follow their advisors: 62 percent of promoters would switch firms with their financial advisor, while that cannot be said for detractors (only 17 percent would switch).
The global, sustainable corporate bond fund ERSTE RESPONSIBLE BOND EMERGING CORPORATE has clearly passed the threshold of EUR 100mn of assets under management. A perfect occasion to take stock. Christian Schön, member of the board of directors of Erste Asset Management, explains what role sustainable investments play in emerging markets, especially in the corporate bond segment.
Question: How do sustainability and emerging markets go together? Schön: Very well, actually. Responsibility and growth are not mutually exclusive. Let me take China as example: between 2006 and 2012 energy consumption per unit of GDP was reduced by almost a quarter. By 2020, CO2 emissions are to be cut by 40 to 45% per GDP unit. On top of that, the government plans to increase the share of non-fossil fuels in energy consumption to 15%. The entire industry benefits from this green policy. In China alone, more than EUR 500bn have been invested in renewable energy and measures to cut greenhouse gas emissions over the past five years. In South America, too, we can see enormous progress as far as sustainable business practices are concerned. At the same time corporate bonds from emerging economies continue to pay significantly higher yields than their peers from developed countries. This scenario holds opportunities for sustainable investors, especially in the emerging markets corporate bonds segment.
Q: From your point of view, what is the added value of an emerging markets bond fund that is managed on the basis of sustainable criteria? S: The application of sustainable criteria in company research facilitates an improved risk assessment, particularly for emerging economies. Imagine that in addition to traditional company valuation, you are using another magnifying glass that provides you with new insights into the respective company and its governance. This is particularly essential for the assessment of corporate governance criteria including the risk of corruption. This expanded analysis is done against the backdrop of the stringent ethical criteria, which we as sustainable investors apply with regard to the upholding of human rights or in connection with the problem of child labour.
Q:What criteria play a role in the investment process for emerging markets bonds? S: Especially in a dynamic environment such as emerging markets, an ongoing research process is a crucial element of success. We have been developing our approach for 15 years. It combines all methods of analysis and selection that are available to sustainable investors into one integrated management approach. In addition, we complement our in-house expertise with the know-how of renowned research partners. On the basis of this method, we develop an initial ESG investment universe, which is then used for the individual investment process of the individual funds. The ERSTE RESPONSIBLE BOND EMERGING CORPORATE fund for example invests in the bonds of emerging markets companies that have successfully gone through our ESG screening. It also taps the high-yield segment while requiring a rating of at least B-. However, BBB bonds account for the biggest share of the portfolio. Foreign exchange risks are largely hedged against the euro. This multi-step process ensures the compliance with criteria of sustainability and the opportunity of surplus return.
Q: How has ERSTE RESPONSIBLE BOND EMERGING CORPORATE fared since its launch, and what is its outlook? S: Since the launch of the fund in December 2013 we have recorded a compound annual growth rate of 4.25% in spite of a relatively difficult market environment. We have seen investors return to the emerging markets segment especially as a result of the current low interest rates. The capital inflow into our funds testifies to the fact that sus-tainable criteria play an ever-greater role in this area as well.
Institutional investors across Europe are steadily increasing proportional investment exposure via mutual funds, even where mandates could be demanded, according to the latest issue of The Cerulli Edge – Global Edition.
Cerulli Associates, a global analytics firm, says statistics suggest that, while insurers are leading the way, the trend in Europe is pan-institutional. For example, German pensions’ proportional exposure via funds rose from 41.3% in 2011 to 50.1% in 2015.
“In the search for better investments, insurers are turning to less familiar asset classes–prompting the use of funds rather than segregated accounts to make their investments. There is clearly a greater willingness to have commingled investments,” says David Walker, director European institutional research at Cerulli.
He notes that early allocations to less well-trodden asset classes will be smaller, and therefore the volumes involved may not justify, in either the insurer’s or asset manager’s eyes, a separate account. That said, even in some of the more familiar yield classes–for instance high yield and emerging market debt–certain insurers prefer funds as these are easier to enter and exit compared with being in a segregated account.
“One manager Cerulli interviewed uses geography to split his insurer clientele’s preference for commingled/pooled structures, or investing via mandates. He has mutual funds more generally in France, Germany, Italy, and Spain, but mandates typically in the UK and Europe’s north,” says Walker.
He notes that some institutions are not willing to forfeit the influence over the strategy/risk exposures and the briefings that are part and parcel of a mandate-based relationship. For some institutions, not knowing the identity of the other coinvestors in a broader pooling vehicle is a step too far.
“Some insurers seeking prize investment assets such as buildings or infrastructure projects in this yield-starved environment argue that they lose competitive edge by ‘sharing’ them with rivals in a pooled structure,” says Walker.
CC-BY-SA-2.0, FlickrPhoto: Dennis Jarvis
. Are Emerging Markets Becoming Safer than Developed Markets?
When looking at global growth expectations for the near future, we continue to see a confirmation of the increasing weight of emerging markets (EMs) in the global economy and further divergences in the growth path between them and developed markets (DMs).
According to Matteo Germano, Global Head of Multi-Asset Investments at Pioneer Investments, all in all, EMs appear to be in a more resilient position, but they are still exposed to major risks, with a slowdown in China being the most significant. While China continues to play the most relevant role in the emerging space, other countries, such as India, continue to increase their relevance.
India’s economy experienced outstanding economic performance in Q1 2016, when GDP grew by 7.9% YoY, the most in two years. Going forward, Pioneer expects continued positive momentum in economic activity but much more moderate than in Q1 2016. For calendar year 2016, we expect GDP will grow a bit more than in 2015, at around 7.5% YoY on average.
“India is a relatively protected economy with respect to the damage that could come from a further slowing in global trade induced by the Brexit vote. Gross Exports as size of GDP at around 20% are on the lower side of the range for Asia Pacific countries.” Says Germano
The recently announced departure of Central Bank Governor Raguram Rajan is raising some uncertainty with respect to the way the new Governor will conduct monetary policy, starting from a revision of the inflation target, viewed by many as too low for a country such as India.
At the political level, preparation for next year’s elections is gaining momentum; recently, Prime Minister Modi decided to reshuffle his Cabinet after a careful screening process based on merits. The aim is to push ahead his program, changing ministers in favor of a more reform-oriented group of people, with an eye on the next electoral contest at the state level.
For the Pioneer expert, Post-Brexit vote, the focus has shifted towards the potential spillover of a slowdown in Eurozone and UK growth to other EMs. Obviously, the close economic, social and political linkages of Emerging Europe to the Eurozone and UK, the CEE4 countries (Czech Republic, Hungary, Poland and Romania) are expected to be the most impacted within EMs.
“From an investment perspective, we believe that the attractiveness of EM assets is increasing. EM bonds, having proven to be quite resilient during the recent stress phase, offer additional yield versus the compressed returns in developed markets.” He says.
Germano believes the dovish monetary policy stance prevailing in advanced economies could be supportive for EM currencies. “In EM bonds, selection will be key, as different economies are at different stages of their development process and face different challenges. EM equities also proved to be resilient in this market phase, outperforming the global equity market year-to-date. Within EM equities, we maintain our positive view regarding India’s and China’s “new economy” sectors, which could benefit from the move towards a more service-driven economy.” He concludes.
BNY Mellon said its U.S. Investor Solutions Group has launched a real-time service to deliver net asset values (NAV) and daily dividend accrual rates for mutual funds.
The firm provides the data on behalf of its asset manager clients to intermediaries such as broker-dealers via The Depository Trust & Clearing Corporation’s (DTCC)Mutual Fund Profile Services (MFPS)by utilizing IBM MQ real time transmission methodology. The technology conveys information more quickly than the batch transmission technology it replaced. BNY Mellon is the first transfer agent to leverage the technology utilized by DTCC to deliver NAV data.
“Our first-to-market MQ technology delivery service enables asset managers to accelerate the delivery of key data—such as NAVs and daily dividend accrual rates—to intermediaries, thereby increasing their ability to meet critical nightly processing windows,” said Christine Gill, head of Investor Solutions Group. “The value of this improved turnaround time flows end-to-end to all stakeholders, not only to intermediaries, but in turn to the clients they serve, and ultimately to shareholders.”
The importance of providing timely data to broker-dealers has been increasing as these intermediaries have gathered a growing percentage of mutual fund assets on their platforms, according to the company. BNY Mellon’s U.S. Investor Solutions Group comprises its transfer agency and subaccounting businesses. As of March 31, 2016, BNY Mellon supported over $2.6 trillion in assets globally on its transfer agency platform and over 165 million accounts with assets of more than $2.6 trillion on its subaccounting platform and is ranked as the largest third party provider of subaccounting services and the second largest provider of transfer agency services (based on accounts) in the U.S., per the 2016 Mutual Fund Service Guide.
Concluded Gill, “We remain committed to investing in technological innovations that improve our clients’ experience and underscore our leadership position as the investments company for the world.”
The European Fund and Asset Management Association (EFAMA) in its latest Investment Funds Industry Fact Sheet, which provides net sales of UCITS and non-UCITS from 28 associations representing more than 99% of total UCITS and AIF assets, highlights that for May 2016, net inflows into UCITS and AIF totaled EUR 52 billion, compared to EUR 65 billion in April.
According to EFAMA, the decrease in UCITS net sales was caused by lower net sales of bond funds. Long-term UCITS (UCITS excluding money market funds) recorded net inflows of EUR 24 billion, compared to EUR 33 billion in April.
Equity funds experienced a turnaround in flows, increasing from net outflows of EUR 1 billion in April to net inflows of EUR 3 billion in May.
Net inflows into bond funds decreased to EUR 14 billion from EUR 23 billion in April.
Multi-asset funds recorded net sales of EUR 5 billion, compared to EUR 6 billion in April.
Meanwhile, net sales of UCITS money market funds increased to EUR 17 billion, from EUR 11 billion in April and AIF recorded net inflows of EUR 11 billion, compared to EUR 21 billion in April.
Overall, total net assets of European investment funds increased by 1.8% in May to stand at EUR 13,519 billion at the end of the month. Net assets of UCITS increased by 1.9% in May to EUR 8,290 billion, and AIF net assets increased by 1.6% to EUR 5,229 billion.
Bernard Delbecque, Senior director for Economics and Research at EFAMA commented: “After three months of negative outflows, equity funds achieved again positive net sales in May”.
