Managing technological needs remains one of the biggest challenges for advisors, according to the latest Cerulli Edge-The Americas Asset and Wealth Management Edition.
According to the research, the most frequently identified challenges in using technology include compliance restrictions that limit functionality or impose other limitations on advisors’ ability to use technology (73%), followed by a lack of integration between tools/applications (71%), and a lack of time to learn and implement (70%).
Since the COVID-19 pandemic, advisors have significantly increased their use of technology. While adoption has proven to be a boon for practices that have incorporated these types of tools, the industry still has a long way to go, the report notes.
Additionally, there is an opportunity for central offices and fintech companies to strengthen the training and support they offer.
“Many of the challenges advisors identify in using technology are challenges that can be overcome through knowledge-sharing efforts to educate and inform advisors about the potential power of more effectively leveraging the technology tools they already have at their disposal,” says Michael Rose, director.
However, according to the study, only half of the advisors are satisfied with the training and support they receive. More structured advisors, who can better leverage specialized technology and offer more comprehensive services to their clients, represent one of the most important market segments for software providers, brokers, and custodians, who are the primary technology providers for these advisors.
“Given the great importance that advisors place on the technology at their disposal, it is crucial that brokers/dealers, custodians, turnkey asset management providers, and other companies that provide technology platforms to advisors obtain sufficient and ongoing feedback to ensure that the technology stack they offer remains aligned with the evolving needs of the practices they serve,” concludes Rose.
The total brand value of the world’s top 500 banks has doubled in a decade, according to the latest edition of the Brand Finance Banking 500 2024 ranking. The combined value of the 500 most valuable banking brands in the world has reached a record high of €1.35 trillion ($1.44 trillion), nearly double what it was a decade ago, according to Brand Finance’s sector report.
Notably, China dominates this ranking, with its entities occupying the top four positions: ICBC, China Construction Bank, Agricultural Bank of China, and Bank of China. The report indicates that Chinese banking brands have appreciated in value, retained the top four positions, and increased their brand value.
“The Chinese banking sector shows remarkable recovery, with the four major banks far ahead of their U.S. counterparts. ICBC (Industrial and Commercial Bank of China) remains the most valuable banking brand in the world for the eighth consecutive year, with a brand value of €67 billion. China Construction Bank, Agricultural Bank of China, and Bank of China occupy the second, third, and fourth positions, respectively,” the report states.
Another trend evident in the evolution of this ranking is that local banking brands prove to be stronger than global ones: BCA, from Indonesia, stands as the strongest banking brand in the world, and regional African operators score high in brand strength. In contrast, the brand value of Russian banks continues to plummet.
For U.S. banks, it is notable that they have experienced a slight decline of 6.6% in terms of brand value. Despite this, Bank of America retains the title of the leading U.S. banking brand for the fourth consecutive year, ranking fifth overall with a value of €34.8 billion. Meanwhile, Wells Fargo, which ranks sixth overall, has narrowed the gap with its U.S. competitor, with a 5% increase, reaching a brand value of €33.4 billion.
Commenting on these results, David Haigh, Chairman and CEO of Brand Finance, stated: “As the world’s leading banking brands reach new heights, Chinese megabanks continue to dominate at the top of the brand value ranking. Another key finding from our market study is that local banks are increasingly eclipsing their larger counterparts in brand strength. Dominant brands thrive in unique markets with limited competition, while banks that expand into multiple markets can successfully increase their brand value but risk diluting their strength.”
Regarding these trends, Brand Finance’s market study indicates that local and regional banks are performing as well as, and in many cases better than, banks with a global presence in terms of positioning their brand in the hearts and minds of customers.
For example, BCA of Indonesia is the strongest banking brand in the world, with a score of 93.8/100 in the Brand Strength Index (BSI) and an elite AAA+ rating. Three African brands, Equity Bank, First National Bank, and Kenya Commercial Bank, along with Romania’s Banca Transylvania, are among the five strongest brands in the world, all with AAA+ ratings.
Finally, regarding movements within the ranking, only 11 of the top 50 countries experienced declines in aggregate value, led by Russia (69%), Nigeria (28%), and Malaysia (20%). “As expected due to the international sanctions imposed on Russia, the country’s two largest brands—Sber and VTB—are at the forefront of those that have seen the largest percentage drops in brand value, with declines of 64% and 91%, respectively,” the report notes.
GoldenTree Asset Management has announced the hiring of Avineet Punhani as Principal. He will be based in the firm’s New York office and will report to Grady Frank, Partner and Head of Private Credit Origination.
Punhani brings to GoldenTree nearly 15 years of credit expertise alongside his robust private equity relationships. He joins GoldenTree from PNC Financial Services, where he served as a Managing Director with responsibilities that included leading their global origination efforts in the technology industry.
“Throughout our 25-year history, GoldenTree has been a leader in developing innovative private credit solutions, consistently delivering value to issuers and private equity sponsors. This success has created compelling investments for our funds. We are excited to welcome Avi to our team, and are confident that his expertise will enhance our relationships with private credit issuers,” said Grady Frank.
Lee Kruter, Partner and Head of Performing Credit added, “GoldenTree’s deliberate, investment-centric approach sets us apart from our peers. In today’s uncertain economic and market environment, we believe GoldenTree is uniquely positioned, given our broad reach across credit asset classes, our experienced investment team, and our expertise in analyzing complex transactions. We look forward to growing our team and expanding our capabilities to continue delivering differentiated value to our investors.”
Punhani said, “GoldenTree’s diverse industry expertise, expansive capital base and ability to structure unique transactions swiftly and at scale create a truly differentiated value proposition. I am thrilled to join GoldenTree’s leading private credit platform and collaborate with Grady, Lee and this talented team to further enhance our market presence, deepen our relationships with key stakeholders and create attractive investment opportunities that can continue to drive differentiated returns for our investors.”
GoldenTree Asset Management is a global asset management firm with approximately $55 billion in assets under management, according the firm information.
In the coming years, nearly a trillion dollars is expected to be invested in generative artificial intelligence, but is it worth it?
To understand where the industry is headed, Brook Dane and Sung Cho, portfolio managers from Goldman Sachs Asset Management’s Fundamental Equity team, met with executives from 20 leading technology companies driving innovation in artificial intelligence.
There are risks. Only a handful of companies can compete in the development of large-scale, general-purpose language models. It could become a market where the winner takes all, with significant losses for companies that fall behind, even after massive investment. The applications that justify the enormous amount of spending have yet to fully emerge. For now, AI competition is largely concentrated among a few large companies with substantial resources.
However, the team sees signs that industry-specific and vertical models may emerge, leading to a broader range of winners in the AI arms race. Conversations with leading tech companies indicate that some executives are already seeing a return on their AI hardware investments. And a new generation of products from chip manufacturers is beginning to enter the market, which could mean a wider range of beneficiaries in the semiconductor industry from the AI wave.
The Options Clearing Corporation (OCC) announced that MIAX Sapphire, has become an OCC participant exchange.
MIAX Sapphire, owned by parent holding company Miami International Holdings, launched operation of the MIAX Sapphire electronic exchange on August 12, 2024.
MIAX Sapphire is MIAX’s fourth U.S. listed options exchange. With the addition of MIAX Sapphire, OCC now provides clearing and settlement services to 21 exchanges and trading platforms for options, futures and securities lending transactions.
“OCC congratulates MIH on the launch of its fourth listed options exchange,” said Andrej Bolkovic, OCC Chief Executive Officer. “As the central counterparty clearinghouse for all U.S. listed options, we are pleased to offer our clearing and settlement capabilities to MIAX Sapphire and to support the exchange-traded options industry’s continued growth.”
“The launch of MIAX Sapphire provides our members, liquidity providers and market makers with a new exchange designed to meet their evolving demands for improved access to options liquidity,” said Thomas P. Gallagher, Chairman and Chief Executive Officer of MIH. “The launch of our fourth U.S. options exchange provides our market participants with access to 100% of the multi-listed options market, all supported by our proprietary technology designed to enhance liquidity and promote improved price discovery.”
The Fed is preparing its new Jackson Hole symposium with the market expecting, and almost demanding, a rate cut. It’s been 14 months since rates have been stationary, despite the drop in inflation.
The monetary authority will begin its annual monetary policy meeting next Thursday, August 22, titled Reassessing the Effectiveness and Transmission of Monetary Policy.
With inflation data trending downward, employment figures strong, and retail sales showing no alarming signs, experts are pressuring the central bank to lower interest rates and to begin a series of rate cuts by the end of the year.
For example, a report from AIS Financial Group summarized that last week the S&P 500 rose by 3.9%, recovering the levels of late July prior to the drop in the first days of August. It has also accumulated a 16.45% increase year-to-date (YTD). In this regard, AIS states that “the market consensus sets an average target price of 5,460” for the S&P 500 by the end of 2024.
Additionally, the market’s rise was driven by the Technology (7.5%), Consumer Discretionary (5.2%), and Financial (3.2%) sectors. In this context, “the Fed is expected to start rate cuts in September, with four cuts expected by the end of the year. The data released last week and the market’s reaction confirm that recession, rather than inflation, has now become the main driver for the market,” AIS asserts.
Therefore, they recommend “being prudent, looking for defensive sectors, quality sectors with solid balance sheets to face this context,” and highlight sectors like banks, energy, healthcare, defensive consumption, and industrial.
On the other hand, the KKR report, signed by Henry H. McVey, Head of Global Macro, Dave McNellis, Co-Head of Global Macro & Asset Allocation, and Ezra Max, Associate, U.S. Macro, asserts that the Federal Reserve “will cut rates, but not recklessly.”
The experts agree with the market’s forecast of four or five cuts in the next three months, “implying at least a 50 basis points cut, which is too pessimistic for a world where GDP is approaching 3% and inflation remains above target.”
Moreover, they confirm that there have been no changes to consumer price forecasts or the Fed’s outlook of three cuts this year and six cuts in 2025.
“Regarding rate policy, we expect the Fed to cut once at each meeting from now until mid-2025, before reaching a neutral low rate of three percent,” says the KKR report.
McVey, McNellis, and Max warned that the return of the Fed’s dual mandate and the growth data – including Thursday’s retail sales data and refund requests – are becoming the most important factors for the pace of Fed easing, and this could change opinions.
“Our baseline hypothesis is a turbulent and soft landing, but a strong GDP rebound would lead us to expect a more aggressive Fed rate cut path. Therefore, the risks remain to the downside for rates and yields, and our message is that now is not the time to bet heavily on floating rates staying at the current high levels,” they explained.
David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, for his part, expressed that Fed Chair Jerome Powell could be satisfied with the progress of his administration when comparing the macroeconomic figures from when he took office during the COVID-19 pandemic to now.
However, that “certain satisfaction” will lead investors to focus on how stocks will be determined, to some extent, by how the Fed evaluates the impact of monetary policy on the economy.
Chair Powell’s view, expressed at many press conferences, is that monetary policy is powerful but acts on the economy with long and variable lags. However, while this seems to coincide with empirical observation, it is unclear, in a world of instant information, why this is or should be so, Kelly added.
Regarding the most likely Fed path, the expert distinguishes between pre and post-August 4 forecasts.
In June, the Fed forecasted only a 25 basis points cut by the end of 2024 and a further 1% reduction by the end of 2025. However, on August 4, following a slight increase in unemployment benefit claims and a weak July employment report, the market widely anticipated a 1% cut by the end of 2024 and cuts exceeding 2% by the end of 2025.
“One of the reasons for this sharp shift in expectations is probably the recognition that if the Fed started cutting aggressively, it would likely continue to do so. If, for example, the Fed cut 50 basis points at its September meeting, the economy would likely be weaker, not stronger, by the time of the November meeting, which would pressure the Fed to institute new 50 basis points cuts. This is a path the Fed would clearly want to avoid, preferring to normalize rates slowly in an economy maintaining stable growth, even as inflation moves away from its 2% target,” he commented.
The Federal Reserve will take into account the data and events of this week. However, it seems likely that, in his Friday speech, Powell will try to reinforce the idea that monetary easing should be, and will be, gradual, laying the groundwork for a 25 basis points rate cut in September, with the potential for only 25 to 50 basis points in additional cuts before the end of the year, Kelly estimates.
According to the expert, this should be considered good news for investors. While active monetary policy can be quite effective in times of financial stress, such as stabilizing financial markets during the Great Financial Crisis, it has proven to be very ineffective in stimulating a slow economy or cooling a hot economy. Fortunately, outside of crisis times, the economy seems to retain the ability to heal itself – as it largely has in recent years – and this should support a further rise in stock prices and a slow drift downward in long-term interest rates, Kelly concludes.
Gold is now trading above $2,500 per ounce, showing signs of potentially breaking its historical highs again. Its value as a safe-haven asset shone brightly in the first weeks of August following the volatility shock experienced by the major equity markets, causing gold to rise after several downward sessions. Now that this “scare” has passed, what could continue to drive its valuation?
In the opinion of Charlotte Peuron, equity fund manager at Crédit Mutuel Asset Management, the increase in gold’s price to $2,400 per ounce has been driven by Western investors through gold ETF purchases and a more favorable financial environment for gold.
According to her outlook, given the downward trend of the dollar against other currencies and the real U.S. interest rates, the upward trend in gold is expected to continue.
“The upward trend in gold prices dates back to 2022. Three factors explain this movement: sustained demand for jewelry; investment in physical gold (coins and bars) by Asian investors; and massive purchases by central banks in emerging countries, particularly China, who wish to diversify their foreign exchange reserves and thus reduce their exposure to the U.S. dollar,” explains Peuron.
For James Luke, a commodities fund manager at Schroders, additional factors include changes in geopolitical and fiscal trends that are paving the way for sustained demand for gold, and gold miners might be poised for a significant recovery.
“Geopolitical and fiscal fragility—trends directly linked to demographic shifts and deglobalization, which, along with deglobalization, characterize the new investment paradigm that we at Schroders have dubbed the 3D Reset—combine today to forge a path toward a sustained and multifaceted global drive for gold supplies. In our view, this could trigger one of the strongest bull markets since President Nixon closed the gold window in November 1971, ending the U.S. dollar’s convertibility to gold,” he argues.
Towards a Polarized World
One of the most interesting reflections made by Luke is that the strength of gold reflects the shift towards a more polarized world. “The escalating tension between the United States and China, and the sanctions imposed on Russia following the invasion of Ukraine in 2022, have driven record gold purchases by central banks as a monetary reserve asset,” says the Schroders manager.
Currently, the $300 billion in frozen Russian reserve assets clearly demonstrate what the “weaponization” of the U.S. dollar—or in other words, the dollar’s hegemony—can truly mean. In his opinion, the massive issuance of U.S. Treasury bonds to finance endless deficits also raises questions about the sustainability of long-term debt. Furthermore, he notes that central banks—China, Singapore, and Poland, the largest in 2023—have been paying attention, although record purchases have only increased the share of gold in total reserves from 12.9% at the end of 2021 to 15.3% at the end of 2023.
“From a long-term perspective, central bank purchases clearly reflect the evolution of global geopolitical and monetary/fiscal dynamics. Between 1989 and 2007, Western central banks sold as much gold as they practically could, as after 1999 they were limited by gold agreements that central banks reached to maintain order in sales.
In that post-Berlin Wall and Soviet Union world, where U.S.-led liberal democracy was on the rise, globalization was accelerating, and U.S. debt indicators were quite quaint compared to today’s, the demonetization of gold as a reserve asset seemed entirely logical,” he explains.
However, he clarifies that the 2008 financial crisis, the introduction of quantitative easing, and emerging geopolitical tensions were enough to halt Western sales and quietly attract emerging market central banks to the gold market, averaging 400 tons annually between 2009 and 2021. According to Luke, “these are significant figures, less than 10% of annual demand, but not seismic.”
On the other hand, he warns that the more than 1,000 tons of gold—accounting for 20% of global demand—purchased by central banks in 2022 and 2023, a pace that continued in the first quarter of 2024, is potentially seismic. “It seems entirely plausible that the current tense dynamic between established and emerging powers, combined with the fiscal fragility looming not only over the reserve currency issued by the U.S. but over the entire developed economic bloc, could trigger a sustained move towards gold,” he argues.
In this context, and to put it bluntly, his main conclusion is that “the gold market is not large enough to absorb such a sustained move without prices rising significantly, especially if other global players also try to enter more or less at the same time.
The Securities and Exchange Commission announced charges against 26 broker-dealers, investment advisers, and dually-registered broker-dealers and investment advisers for widespread and longstanding failures by the firms and their personnel to maintain and preserve electronic communications.
The firms admitted the facts set forth in their respective SEC orders, acknowledged that their conduct violated recordkeeping provisions of the federal securities laws, agreed to pay combined civil penalties of $392.75 million, as outlined below, and have begun implementing improvements to their compliance policies and procedures to address these violations, the press release said.
Three of the firms, as noted below, self-reported their violations and, as a result, will pay significantly lower civil penalties than they would have otherwise.
See below the list of fined companies:
Ameriprise Financial Services, LLC agreed to pay a $50 million penalty
Edward D. Jones & Co., L.P. agreed to pay a $50 million penalty
LPL Financial LLC agreed to pay a $50 million penalty
Raymond James & Associates, Inc. agreed to pay a $50 million penalty
RBC Capital Markets, LLC agreed to pay a $45 million penalty
BNY Mellon Securities Corporation, together with Pershing LLC, agreed to pay a $40 million penalty
TD Securities (USA) LLC, together with TD Private Client Wealth LLC and Epoch Investment Partners, Inc., agreed to pay a $30 million penalty
Osaic Services, Inc., together with Osaic Wealth, Inc., agreed to pay an $18 million penalty
Cowen and Company, LLC, together with Cowen Investment Management LLC, agreed to pay a $16.5 million penalty
Piper Sandler & Co. agreed to pay a $14 million penalty
First Trust Portfolios L.P. agreed to pay an $8 million penalty
Apex Clearing Corporation agreed to pay a $6 million penalty
Truist Securities, Inc., together with Truist Investment Services, Inc. and Truist Advisory Services, Inc., which self-reported, agreed to pay a $5.5 million penalty
Cetera Advisor Networks LLC, together with Cetera Investment Services LLC, which self-reported, agreed to pay a $4.5 million penalty
Great Point Capital, LLC agreed to pay a $2 million penalty
Hilltop Securities Inc., which self-reported, agreed to pay a $1.6 million penalty
P. Schoenfeld Asset Management LP agreed to pay a $1.25 million penalty
Haitong International Securities (USA) Inc. agreed to pay a $400,000 penalty
“As today’s enforcement actions against more than two dozen firms reflect, we remain committed to ensuring compliance with the books and records requirements of the federal securities laws, which are essential to investor protection and well-functioning markets,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Among this group of firms, there are several that differentiated themselves by self-reporting prior to the staff’s investigation, demonstrating once again the real benefits of proactive cooperation.”
Each of the SEC’s investigations uncovered pervasive and longstanding use of unapproved communication methods, known as off-channel communications, at these firms.
As described in the SEC’s orders, the firms admitted that, during the relevant periods, their personnel sent and received off-channel communications that were records required to be maintained under the securities laws. The failure to maintain and preserve required records deprives the SEC of these communications in its investigations. The failures involved personnel at multiple levels of authority, including supervisors and senior managers.
The firms were each charged with violating certain recordkeeping provisions of the Securities Exchange Act, the Investment Advisers Act, or both. The firms were also each charged with failing to reasonably supervise their personnel with a view to preventing and detecting those violations.
In addition to the financial penalties, each of the firms was ordered to cease and desist from future violations of the relevant recordkeeping provisions and was censured.
Separately, the Commodity Futures Trading Commission announced settlements with The Toronto Dominion Bank, Cowen and Company, and Truist Bank for related conduct.
DWS announced that Jay DeWaltoff has joined the firm as Head of U.S. Real Estate Debt to accelerate the growth of its existing U.S. real estate credit business and expand its global private credit platform.
He will be based in the firm’s New York City office and report directly to Todd Henderson, Co-Global Head of Real Estate and Head of Real Estate for the Americas.
DeWaltoff brings over two decades of origination and structuring experience to the role. Prior to joining DWS, he was the Head of the Commercial Mortgage Loan Group at J.P. Morgan Asset Management within its Alternatives platform, where he was directly responsible for capital raising, constructing tailored portfolios to meet investor objectives, and approving all new investments.
During his 11-year tenure, DeWaltoff successfully led the team in building a dynamic commercial mortgage lending platform, growing commitments from less than $2 billion to over $13 billion. He has also held previous roles at Citigroup Global Markets and Cushman & Wakefield.
“With $116 billion in assets across our Alternatives platform and a 50-year track record, DWS has cultivated longstanding strategic relationships with investors seeking access to private real estate, infrastructure, and liquid real assets. We are seeing increased opportunities in the debt market due to the macroeconomic and regulatory environments which should deliver attractive risk-adjusted return potential to investors,” said Henderson. “We are delighted to welcome Jay to the team as we deepen our commitment to our clients in the Alternatives sector and look to take advantage of improving fundamentals in the real estate sector to generate above-average returns across the risk spectrum in the asset class.”
In addition to the appointment of DeWaltoff, Daniel Sang, Catherine Millane, and Khrystyna Bazlyak, join DWS. All three join from J.P. Morgan Asset Management. The new joiners will bolster the strength of DWS’s existing team which has a longstanding track record of success in real estate credit.
DeWaltoff added: “I’m pleased to be joining DWS during such a pivotal time for the real estate market. DWS’ brand in the real estate ecosystem, combined with its equity track record, and deep institutional relationships, provides a strong jumping-off point for me and the team to help drive the business forward.”
DWS has managed corporate credit portfolios for over 25 years, with over EUR 100 billion in dedicated investment grade, hybrid, high yield, and direct lending portfolios. DWS aims to build diversified portfolios that deliver attractive risk-adjusted returns with a focus on capital preservation to investors, which include governments, corporations, insurance companies, endowments, retirement plans, and private clients worldwide, according the firm information.
The independent and hybrid registered investment advisor (RIA) channels are growing at a faster pace than other brokerage channels. To capitalize on this opportunity, asset managers are expanding their coverage models and the depth of their resources for larger RIAs, according to the latest Cerulli Edge-U.S. Advisor Edition report.
The total number of independent and hybrid RIAs has surged in the past decade, rising from 18% to over 27%, and is expected to exceed 30% within the next five years.
Advisors with varying levels of experience and assets have made the switch, but RIAs with more than $1 billion in assets under management have experienced the greatest expansion.
With this growth, asset managers are enhancing their coverage models, expanding their service menus to better cater to these massive RIAs.
Currently, more than two-thirds of asset managers offer or plan to offer dedicated key account coverage, institutional pricing, and client-facing marketing materials to the largest RIAs.
At least 75% of asset managers are using or planning to use dedicated key account coverage to aid in distribution efforts with the largest RIA firms. However, these resources are no longer sufficient compared to the more complex resources advisors now expect from the industry.
“It is no longer a competitive advantage to simply provide key account coverage or make client-facing marketing materials more user-friendly,” says Kevin Lyons, senior analyst.
Advisors are seeking more intricate resources that can truly benefit their practice by making it more efficient, he added.
As a result, distribution executives at asset managers have also begun to focus on other services: nearly 70% currently offer or plan to offer portfolio construction/model construction services or investment analysis tools.
More than half (52%) offer or plan to offer business consulting resources (e.g., succession planning, growth strategies, team structuring).
“Wave after wave of advisors is joining the independent channel, coming from firms and channels that often provided portfolio analysis tools, consulting expertise, and investment analysis as part of their advisor affiliation. Asset managers understand the need to prioritize coverage in the RIA space and help fill any gaps in research or even administrative services that their former firms provided,” says Lyons.
As more experienced advisors migrate to independent and hybrid RIA channels, asset managers can seize the opportunity by deepening their competitive positioning through the quality of the resources they offer, making themselves more attractive potential partners for advisors, concludes the expert.
