SPVs vs. Investment Funds: Which One to Choose?

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Innovation and adaptation are crucial in finance and business to tackle evolving challenges and seize opportunities. One of the most interesting and effective concepts in this area is the Special Purpose Vehicle (SPV), also known as a special purpose entity. These legal entities, operating under a specific focus, have proven to be an agile asset management tool in various contexts.

Understanding the SPV concept

Special Purpose Vehicles (SPVs) are entities with specific purposes. An SPV is a legal entity with its own assets and liabilities, separate from its parent company. Parent companies legally separate the special purpose entity mainly to isolate financial risk and ensure it can fulfill its obligations even if the parent company goes bankrupt.

An SPV is also a key channel for securitizing asset-backed financial products. In addition to attracting equity and debt investors through securitization, as a separate legal entity, an SPV is also used to raise capital, transfer specific assets that are generally hard to transfer and mitigate concentrated risk.

How do Special Purpose Vehicles work?

The SPV itself acts as an affiliate of a parent corporation. The SPV becomes an indirect source of financing for the original corporation by attracting independent equity investors to help purchase debt obligations. This is most useful for high-credit-risk elements, such as high-risk mortgages.

Not all SPVs are structured the same way. In the United States, SPVs are often limited liability companies (LLCs). Once the LLC purchases the high-risk assets from its parent company, it typically pools the assets into tranches and sells them to meet the specific credit risk preferences of different types of investors.

Companies generally use SPVs for the following purposes:

Asset Securitization: In securitization, an SPV is created to acquire financial assets, such as mortgages, loans, or receivables, from a company or originator. These assets are bundled and issued as asset-backed securities (such as mortgage-backed bonds). The SPV separates the assets from the originating company, which may reduce risk for investors.

Project Financing: SPVs are used in infrastructure or development projects involving multiple parties. The SPV can acquire and operate the project, raising funds from investors and issuing securities to finance it. This limits the risk and liability of the involved parties.

Mergers and Acquisitions: In acquisition or merger transactions, an SPV can be used to isolate the assets or liabilities of the target company, which can benefit risk management and the transaction’s financial structure.

Risk Management: Companies can use SPVs to separate certain risky assets or activities from their balance sheet, helping to mitigate the impact of potential financial issues on the entire organization.

Real Estate and Property Development: SPVs can be used in real estate projects to acquire and develop properties. This can facilitate investment from multiple partners or investors and provide a separate legal structure for the project.

Asset Financing: Companies can use SPVs to finance the purchase of specific assets, such as equipment, planes, ships, or other high-value goods.

Tax Optimization: In some cases, SPVs can be used to leverage specific tax benefits or favorable tax structures in certain jurisdictions.

Special Purpose Vehicles are used to create specific financial structures that help separate risks, facilitate investment, manage assets, and meet specific business objectives. These legal entities offer flexibility and opportunities for investors and companies in various financial and business situations.

At FlexFunds, we take care of all the necessary steps to make customized and innovative SPVs accessible to fund managers. Thanks to these investment vehicles, asset managers and financial advisors can expand the range of products they offer to their clients.

SPV vs. Investment Funds: different approaches for different needs

A Special Purpose Vehicle (SPV) and an investment fund are financial concepts used to structure and manage investments efficiently, but they are employed in different contexts and for different purposes.

Special Purpose Vehicle (SPV):

A special purpose vehicle is a standalone company created to disaggregate and isolate risks in underlying assets and allocate them to investors. These vehicles, also called special purpose entities (SPEs), have their own obligations, assets, and liabilities outside the parent company.

Investment Funds:

Investment funds are collective investment vehicles where investors contribute their money to a common fund managed by financial professionals called fund managers. These funds pool money from various investors and are used to invest in various assets, such as stocks, bonds, real estate, or other financial instruments.

So, a Special Purpose Vehicle (SPV) is used to structure specific transactions and separate risks, while an investment fund is a collective vehicle that allows investors to pool resources to invest in a broader range of assets. Both concepts play an important role in the financial field, but their focus and purpose are different.

There’s no definitive answer as to which instrument is better, as their utility depends on each individual or entity’s specific investment goals and circumstances. Each has its own advantages and disadvantages, and the choice will depend on factors such as the investment purpose, the level of risk the client is willing to take, the investment duration, and personal preferences.

Some Advantages and Disadvantages of SPVs:

Advantages:

Special tax benefits: Some SPV assets are exempt from direct taxation if established in specific geographic locations.

Spread the risk among many investors: Assets held in an SPV are financed with debt and equity investments, spreading the risk of the assets among many investors, and limiting the risk for each investor.

Cost-efficient: It often requires a meager cost depending on where you created the SPV. In addition, little or no government authorization is needed to establish the entity.

Corporations can isolate risks from the parent company: Corporations benefit from isolating certain risks from the parent company. For example, if assets were to experience a substantial loss in value, it would not directly affect the parent company.

Disadvantages:

They can become complex: Some SPVs may have many layers of securitized assets. This complexity can make it challenging to monitor the level of risk involved.

Regulatory differences: Regulatory rules that apply to the parent do not necessarily apply to the assets held in the SPV, which may represent an indirect risk for the company and investors.

Does not entirely avoid reputational risk for the parent company: In cases where the performance of assets within the SPV is worse than expected.

Market-making ability: If the assets in the SPV do not perform well, it will be difficult for investors and the parent company to sell the assets back into the open market.

 Some Advantages and Disadvantages of Investment Funds:

Advantages:

Investment funds offer instant diversification by allowing investors to access a diversified asset portfolio managed by professionals.

They offer greater liquidity than some SPVs, as investors can buy or sell fund shares anytime.

Investment funds are more suitable for investors seeking a broader exposure to financial markets without actively managing their investments.

Disadvantages:

Investment funds can have management fees and associated expenses, which can reduce returns for investors.

Investment funds are designed for a wider group of investors and may not offer the same specific structure required in some complex transactions.

Ultimately, choosing between an SPV and an investment fund will depend on your needs and goals. With over a decade of experience, FlexFunds makes setting up an SPV straightforward for its clients, facilitating distribution and capital raising for their investment strategy, achieving this at half the cost and time of any other market alternative.

Fund Distribution Services Partners Has Reached an Agreement with Aegon Asset Management

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Photo courtesyLars Jensen, Managing Partner de FDS.

Fund Distribution Services (FDS), specializing in both institutional and  retail channels in US Offshore and Latin America has reached an agreement to represent Aegon Asset Management in the US Offshore market. 

“Our partnership with Aegon AM allows us to increase the breadth of solutions that we  offer our clients. Their history and experience provide additional strength and wisdom within their strategies as solid building blocks within portfolios,” said Lars Jensen, Managing  Partner FDS.

Aegon Asset Management is an active global investor with approximately 375 investment professionals managing and advising USD 321 billion as of June 30, 2023, for a global client base of pension plans, public funds, insurance companies, banks, wealth managers, family  offices and foundations. 

“We are excited to partner with FDS to increase our presence and assets in the US Offshore market. FDS offers an experienced team and strong relationships with platforms and  financial advisors in this channel,” added Mark Johnson Managing Director, Aegon Asset  Management.

Investors Trust Proudly Celebrates the Grand Opening of Its New Office in Kuala Lumpur

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Investors Trust celebrated the grand opening and ribbon cutting ceremony of its new office in Kuala Lumpur.

On Thursday, August 24, from 19:00 to 22:00, Investors Trust hosted a grand opening party that offered a delightful experience for all in attendance. This was a momentous event as it marked the grand opening of their new office in Kuala Lumpur.

This celebration gave guests the unique opportunity to explore the ins and outs of the new office while enjoying a captivating atmosphere.

The Investors Trust management team was also present, sharing interesting conversations and fostering contacts with the guests. The event was attended by more than 140 people, including distinguished guests and representatives of the local media, who came together to celebrate this remarkable milestone in Investors Trust’s trajectory.

This new office is part of the restructuring of Investors Trust’s operations in the region and  will serve as the new sales hub in Asia. The relocation reflects the company’s commitment and efforts to deliver top-rated service in the region, especially Malaysia, where it has had a  growing presence for over 10 years.

The opening of this office is a strategic decision that  represents the company’s preference to concentrate their sales and operations functions in  one location where Investors Trust is fully licensed in order to provide optimal service and expand its reach across the region. 

“The relocation of our Asia hub continues our longstanding commitment to the region and  further expands our presence in Malaysia where ITA Asia Ltd is registered as a licensed  Insurer by the Labuan Financial Services Authority,” David Knights, Head of Distribution Asia at Investors Trust. 

The office is in the new state-of-the-art Exchange 106 building which is  located in the new business district of Tun Razak Exchange. The relocation will provide an  attractive and modern working environment for their Asia sales team along with an impressive  location for Investors Trust’s business partners from around the world. 

Robeco releases the second «Big Book of SI»

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Robeco has published the second edition of its comprehensive manual, the Big Book of Sustainable Investing (SI). This publication provides insights into how investors can approach SI, and details Robeco’s sustainable practices. It offers solutions to navigate complex sustainability topics, including the net-zero transition and the UN Sustainable Development Goals (SDGs).

The first Big Book of SI was published five years ago and became one of Robeco’s most downloaded publications, establishing its significance. Over the last few years, the world has experienced major health, geopolitical, and climate-related events. These events have illustrated how quickly risks can materialize and spread with serious impacts on supply chains and economies. “We have witnessed the interconnectedness of environmental and social issues and this has created greater interest, and a more intense focus on sustainability in investments”, the. firm said. 

Recent studies reveal that humanity is consuming natural resources 1.75 times faster than the planet’s ecosystems can regenerate. “We cannot change the past, however, there is an opportunity to chart a different course to avoid catastrophic outcomes in the future. The Big Book of SI explores three global challenges – climate change, biodiversity loss, and human rights – to illustrate the need for integrating sustainability into investment decisions. Sustainable Investing contributes to mitigating risks, generating investment returns, and driving positive change through the alignment of portfolios with real-world impact”, Robeco added.

Worldwide, approximately USD 35 trillion is invested sustainably across five major markets. SI growth is expected to continue because it is seen as being financially relevant and with a growing client base and increasing societal expectations, SI investing continues to gather regulatory support. 

Mark van der Kroft, Chief Investment Officer Robeco: “Sustainability has been integral to Robeco’s investment philosophy for decades. We firmly believe in safeguarding economic, environmental, and social assets to ensure a healthy planet where people can thrive for generations to come. As SI pioneers and investment engineers, we strive to lead the way in uncovering new opportunities for investors, and promoting a sustainable future for both business and society. This commitment as well as the support to our clients wherever they are on their sustainability journey, is reflected in our second Big Book of SI.”  

The 135-page book, filled with research-driven insights, is now available on Robeco’s website.

Investors Are Right to be Wary of the Returning of Certain Assets to Previous Highs

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In July, the U.S. stock market demonstrated remarkable strength, as the S&P 500 continued its upward trajectory, securing its fifth consecutive positive month and achieving its longest streak of monthly gains since August 2021. Additionally, the Dow Jones Industrial Average witnessed its largest two-month gain since November 2022, and within the same month, it tied a record with an impressive 13 straight daily gains. Not to be outdone, the Nasdaq Composite also excelled, marking its fifth consecutive month of growth and best 5-month stretch since September 2020.

Overall, July’s gains served as the cherry on top of what has already been a strong year for equities. The outstanding performance was backed by encouraging economic data and robust earnings reports, further solidifying investors’ confidence.

On July 26, the Federal Reserve announced a 25bps rate hike at the end of its two-day policy meeting, bringing the targeted federal funds rate to 5.25-5.50%. This rate hike brings the benchmark borrowing costs to their highest level in more than 22 years. Fed Chair Jerome Powell stressed that the central bank is seeking proof that inflation is “durably down” and will make their decisions “meeting by meeting based on the totality of incoming data”. Powell emphasized that current economic conditions will likely require monetary policy to be more restrictive for longer until the committee is confident that inflation is coming down sustainably to their 2% target. The next FOMC meeting is September 19-20.

Small cap stocks helped led the rally during the month with the Russell 2000 Value recording its best 2-month stretch since November 2022. We continue to see abundant opportunities in small to mid-cap stocks, given the compelling valuation of the Russell 2000 Value, which currently trades at only 10-12x earnings. This stands in stark contrast to the broader market, which hovers closer to 20x earnings, representing one of the biggest deltas we have ever witnessed.

M&A was bolstered by deals that made significant progress in gaining regulatory approvals. Microsoft defeated the U.S. Federal Trade Commission’s attempt to block it’s $73 billion acquisition of videogame maker Activision, and the U.K. CMA reversed course and is working with Microsoft to find a deal structure that would satisfy its competitive concerns. The spread to the $95 deal price narrowed considerably and the companies extended their merger agreement and effective increased the deal price by allowing Activision to pay a $0.99 per share pre-closing dividend. VMware and Broadcom secured approval from the European Commission and provisional clearance from the U.K. CMA for their $85 billion deal, the parties still need U.S. and Chinese approvals. L3Harris Technologies secured FTC clearance to acquire rocket engine maker Aerojet Rocketdyne for $58 cash per share ($5 billion) and the deal closed on July 28th. We are heartened to see companies successfully defending the merits of their transactions despite regulatory objections.

July saw a continuation of the risk-on environment and the convertible market moved higher, bringing YTD returns into double digits. The rally was driven by some positive earnings reports along with expectations of a soft landing in the U.S. as inflation moderated. Balanced convertibles led the way in what was another broadly positive month. Fund performance was in line with the global market for the month with some of our equity sensitive holdings leading the way in our portfolio. We still see opportunity in a balanced convertible portfolio. While the market continued a risk-on stance in July, investors are right to be wary of certain returning to previous highs. Convertibles offer a risk adjusted way to participate in this market.

New convertible issuance stalled this month as many companies focused on reporting earnings. We are still on track for a better year of issuance than we saw in 2022. Issuance this year has generally been attractive with higher coupons, lower premiums and more asymmetrical returns than are available in the secondary market. We have continued to see companies buying back convertibles in a transaction that is accretive to earnings and positive for the credit.

 

Opinion article by Michael Gabelli, Managing Director and President of Gabelli & Partners. 

 

Artificial Intelligence Financial Advisor PortfolioPilot Was Registered and Regulated in the US

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Global Predictions, powering the next generation of economic decision-making, today announced that PortfolioPilot is officially a Registered Investment Advisor regulated by the U.S. Security & Exchange Commission (SEC).

“Securing SEC registration for our AI financial advisor marks a huge milestone for the company and instills a new level of user confidence in our platform,” said Alexander Harmsen, CEO of Global Predictions. “We are committed to empowering self-directed investors to make smarter investment decisions by building hedge fund caliber investment solutions and making them accessible to everyone.”

The company has gone through reviews and implemented a rigorous compliance program with ongoing audits in accordance with the SEC’s stringent compliance guidelines. This compliance, the heightened level of oversight, and fiduciary responsibility strengthen PortfolioPilot’s ability to be a trusted companion for self-directed investors looking for personalized, automated recommendations.

PortfolioPilot distinguishes itself from human financial advisors with its ability to provide genuinely personalized investment advice for self-directed investors. Leveraging AI and the company’s Economic Insight Engine, a proprietary modeling and forecasting system, the platform analyzes the user’s entire net worth to provide automated recommendations, portfolio insights, and an AI assessment to identify critical areas of improvement and highlight economic factors most impacting their portfolio.

PortfolioPilot introduces three new features: Portfolio Overhaul is a one-click, automated, and comprehensive process that reviews and adjusts the user’s existing portfolio based on various factors like risk tolerance level, investment goals, and macroeconomic conditions.

In addition, Fee Optimization provides a clear picture of the annual fees, including expense ratios, transaction costs, and management fees, to help understand the cost of impact on investment returns. In addition, offers cost-saving recommendations, including lower-fee alternatives with similar risk/return and strategies to reduce transaction costs.

Third and finally, AI Equity Search – Assists users in discovering investment opportunities in the market to generate alpha. Based on the user’s search query, the tool will analyze vast amounts of data and generate a shortlist of stocks or ETFs that meet the criteria.

SEC Enhances the Regulation of Private Fund Advisers

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The Securities and Exchange Commission adopted new rules and rule amendments to enhance the regulation of private fund advisers and update the existing compliance rule that applies to all investment advisers. The new rules and amendments are designed to protect private fund investors by increasing transparency, competition, and efficiency in the private funds market, the statement said.

“Private funds and their advisers play an important role in nearly every sector of the capital markets,” said SEC Chair Gary Gensler. “By enhancing advisers’ transparency and integrity, we will help promote greater competition and thereby efficiency. Consistent with our mission and Congressional mandate, we advance today’s rules on behalf of all investors — big or small, institutional or retail, sophisticated or not.”

To enhance transparency, the final rules will require private fund advisers registered with the Commission to provide investors with quarterly statements detailing certain information regarding fund fees, expenses, and performance, the SEC stated.

In addition, the final rules will require a private fund adviser registered with the Commission to obtain and distribute to investors an annual financial statement audit of each private fund it advises and, in connection with an adviser-led secondary transaction, a fairness opinion or valuation opinion.

To better protect investors, the final rules will prohibit all private fund advisers from providing investors with preferential treatment regarding redemptions and information if such treatment would have a material, negative effect on other investors. In all other cases of preferential treatment, the Commission adopted a disclosure-based exception to the proposed prohibition, including a requirement to provide certain specified disclosure regarding preferential terms to all current and prospective investors.

In addition, the final rules will restrict certain other private fund adviser activity that is contrary to the public interest and the protection of investors. Advisers generally will not be prohibited from engaging in certain restricted activities, so long as they provide appropriate specified disclosure and, in some cases, obtain investor consent. The final rules, however, will not permit an adviser to charge or allocate to the private fund certain investigation costs where there is a sanction for a violation of the Investment Advisers Act of 1940 or its rules.

To avoid requiring advisers and investors to renegotiate governing agreements for existing funds, the Commission adopted legacy status provisions applicable to certain of the restricted activities and preferential treatment provisions. Such legacy status will apply to those governing agreements entered into in writing prior to the compliance date and with respect to funds that have commenced operations as of the compliance date.

Insigneo to Acquire PNC’s Latin American Brokerage and Investment Operations

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Insigneo announces that Insigneo Securities, LLC and Insigneo Advisory Services, LLC have entered into a definitive agreement to acquire the Latin American consumer brokerage and investment accounts of PNC Investments, PNC Managed Account Solutions, and PNC Bank.

PNC will retain the deposit and loan accounts of customers with brokerage assets and assets under management moving to Insigneo and will continue to support the U.S. banking needs of their international clients. This strategic move represents a significant milestone for Insigneo as it further solidifies its position as a leader in the independent wealth management industry, the firm said.

With this acquisition, Insigneo will be opening new offices in Texas and expand its capabilities to serve a broader Mexican client base, while adhering to its mission of delivering exceptional client service, enabled by state-of-the-art technology, and driven by continuous innovation, the company added.

“The acquisition of PNC’s Latin American brokerage and investment operations further cements Insigneo’s position in the Americas as a leader in international wealth management,” said Raul Henriquez, Chairman and CEO of Insigneo Financial Group. “We are committed to the region with our strategy of empowering investment professionals to deliver excellent service and compelling investment strategies and solutions to clients globally”.

The acquisition is expected to close in the coming months.

Vontobel SFA expands Business Development team to drive business with UBS

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Photo courtesyClaudia Ruemmelein

In line with Vontobel’s ambition to drive the next stage of growth in the US, Vontobel SFA is expanding its Business Development team. Claudia Ruemmelein and Hansjuerg Raez are joining SFA as Senior Business Developers in the Miami and New York offices on September 1, 2023.

“Together with our ongoing efforts in the US, we believe that this integral next step will enable us to deliver on our strategic ambition, further build out our client base and service our partners and clients more effectively”, the firm said.

The Business Developers are the first point of contact for UBS financial advisors in the US, who continue to recommend SFA to their clients looking to diversify their assets internationally and thus offer tailored investments in Switzerland.

The important responsibility of the Business Developers is to maintain and expand our collaboration with UBS financial advisors, keep them informed about the Vontobel SFA offering, and reliably provide advice and support. The team, which includes employees in Zurich, New York and Miami, is to be expanded to around 10 experts over the next years under the leadership of Patrick Schurtenberger.

Hansjuerg Raez

Claudia will be based in Miami and brings more than 15 years of experience in the financial services industry, with a successful track record of building and developing new business in the Asset Management and Private Equity sectors. She joins us from Mesa Capital Advisors, where she covered Latin American institutional and UHNWI/Family Office clients investing in alternative investments.

Prior to that, she held various roles at First Avenue Partners, Apollo Management and PriceWaterhouse Coopers in New York, London and Frankfurt.

Hansjuerg will be based in New York and also brings more than 15 years of experience in the financial services industry. He joins us from UBS AG New York, where he was responsible for multinational corporate clients and the expansion of that business for the last nine years.

Prior to that, he was at Trafigura in Stamford, Shanghai and Lucerne in various roles. Hansjuerg holds a bachelor’s degree in Business Administration from the University of Bern, Switzerland.

The future of Wealth Management is changing: How to grow as Wealth Managers

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Foto de Cai Fang en Unsplash

Achieving a portfolio under management of USD 500 million of high-net-worth families in a short period of time is not easy, considering the aggressive competition among firms and colleagues visiting the same clients and offering the same products. The elements that can differentiate us are what determine success or failure.

Over the years, we have overcome international and regional crises that have made us experts in how to protect and increase wealth in the face of changes that occur.

But now, the challenge is greater, because we not only have to face the post-pandemic economic changes, including changes in consumer behavior, but also the management of the inflationary phenomena and global interest rate hikes.

Additionally, we are facing a change in our industry, not only due to the arrival of AI (Artificial Intelligence), but also because major firms are migrating their strategies, and advisors are caught amid this chaos.

Therefore, we must make decisions thinking about our plan for the next 10 years, both for ourselves and for our clients.

Analyzing the situation:

a) Many large firms have shifted their focus from “putting their clients first” to ceasing service to those who are not their primary market… without prior notice, or clear future expectations.

b) There are many parameters to analyze, and everything is based on who your clients are: individual or institutional, country, size, sophistication in investments, with or without banking services (credit cards, transfers, loans); and whether your approach is comprehensive, supporting your clients with their assets and efficient planning and organization of their wealth, or if you prefer to only focus on their investments.

c) Clients demand personalized, flexible, and prompt attention; many “large” firms become bureaucratic and when their focus is not on the client, they lose their responsiveness, either relying on machines or on newly advisors focused on promoting “combo” portfolios that often do not meet the complex profile and needs of the client.

d) Advisors understand the clients’ “preservation profile“: strong jurisdictions in which to diversify with properties and financial assets held in well capitalized firms, with diversified portfolios seeking high income and capital growth, taking advantage of market opportunities within their profile (which is generally more conservative than established… when corrections occur) and therefore managing their assets accordingly, as trusted individuals with whom we have weathered various storms together. Our clients seek captains who know how to navigate and reach the destination.

e) We know where their money comes from, and it truly gives us a unique opportunity to respect their work, admire their achievements, and understand the dynamics of our clients, their families, and businesses in order to plan for intangibles – what is more important: the potential 20% market correction which generally recovers over time, or a family going through a divorce and “losing” 50% of their assets? Or an international client in the US with a personal investment account potentially losing up to 40% of their portfolio above USD 60,000 in US securities due to inheritance taxes? (*IRS info). It is part of our work, along with other professionals, to plan with companies, trusts, and other tax-efficient structures.

f) To preserve wealth, we involve future heirs so that they are aware that investment accounts are the funds generated and not spent over many years by their predecessors, along with the compounding effect (* Rule of 72 info), e.g., a portfolio doubles at 7.2% annual rate every 10 years). This way, when they receive them, they don’t “gamble” with them or spend them with their “new” friends.

g) Providing tools is always more educational than giving away, and for this purpose, there are strategies such as borrowing against the family portfolio (so they develop their projects with the discipline of having the obligation to repay); a strategy that is also used to acquire properties in a tax-efficient manner or support local businesses while maintaining the medium to long-term investment portfolio. It is also good for them to learn how it works because diversification and “time in the markets” are the only secrets to financial success.

Considering this description of the context, we must ask ourselves:

At what point in your life are you…

Do you have the resilience to be a “soldier of your firm”, following orders to “close your clients’ accounts” in exchange for receiving the clients of the colleague who dares to take the step, or to retire? Or do you have the energy to be loyal to your clients to do all the work of establishing their accounts again and understand that there will be surprises along the way with the clients themselves, your colleagues, or the new firm or structure you choose?

Think about the future and try to understand who you want to work for in the next 10 to 15 years: a firm, your own firm, or clients? Your current clients or those who take the step with you (and truly value you)? New clients, markets, team, or strategic alliances?

The feeling that is generated when a partner or client accompanies you is tremendous and generous; they are there for you, just as you have been there for them… and naturally, you will take care of them, their children, and referrals.

It would be expected that the relationships built on years of effort and hard work surpass temporary separations of months (due to compliance with protocols and sector-specific rules).

According to a Wealth-X report, high net worth clients often follow their investment advisors when they decide to switch firms. This is due to the trust and experience that they have developed with their advisor over the years. The report also highlights that client loyalty to the investment advisor outweighs loyalty to the firm itself. Additionally, a survey conducted by PwC reveals that 64% of high-net-worth clients consider the personal relationship with their financial advisor as an important factor when choosing a wealth management firm. 

Speaking of motivation, if one is recognized in the industry, besides choosing wisely and going where one feels better, you can “capitalize” on the change, and the work is very well rewarded…

A very personal article, as a Portfolio Manager, a market researcher, and with my own convictions… the same beliefs that led me to enter 2022 with over 30% of my clients’ USD 500 million in cash because I anticipated interest rate hikes and cash along with a small proportion in alternative investments (properties) was the only thing that could protect them.

And, as someone dedicated to my clients, recognized by Forbes, Working Mother, Women We Admire-Miami, and even being congratulated in Times Square… now, anticipating the events and adapting to the new reality, I have stepped out of my comfort zone to search, compare, and find the best place for my clients, a “boutique-style within one of the best capitalized financial institutions in USA with extensive resources,” or as my clients say, “we went from Rolex to Patek Philippe.”

Therefore, considering the question “should I stay, or should I go?”, and in order to grow, check the following points:

  1. The significant growth in wealth management by boutique firms, as indicated in the Wealth-X report, also highlights that boutique firms have been successful in attracting high-profile clients such as successful business owners, institutional investors, and affluent families. This is due to their ability to quickly adapt to the changing needs of these clients, offering tailored solutions and high-quality personalized service, particularly in markets emerging and growing economies.
  1. The increasing demand for online financial services and mobile applications by clients.
  1. The increase in investment in North American firms. Additionally, the importance of understanding tax and legal regulations in both countries and properly preserving money in an efficient tax structure.
  1. The search for estate planning services and investment in real estate in the United States.
  1. Clients’ preference for responsible investment and strong personal relationships based on trust and tailored to cultural needs.
  1. And, I will share my thoughts on strategy at this moment: position your cash… remember that in the last two decades there have only been high interest rates a couple of times, and therefore, considering the decrease in inflation, among many other variables, I believe that interest rates will decrease in the coming years; based on that, I suggest increasing the fixed income investments in your portfolio’s asset allocation, targeting yields of at least 5% with a conservative mix of securities such as fixed-term deposits – CDs (FDIC-insured certificates of deposit), as well as investment-grade bonds. It’s also time to extend the duration and increase maturities to maintain high cash flows and potential appreciation (you can stagger maturities for liquidity if needed). For additional income, growth, and currency diversification, consider including funds & ETFs (Exchange Traded Funds), which for emerging markets (bonds and stocks) are a good way to better protect principal, thanks to diversification and tax efficiency – at least, ‘offshore’ offer to international clients.

In conclusion, taking into account these considerations supported by reliable reports and sources, remember the words of Warren Buffett: ‘It takes 20 years to build a reputation and only 5 minutes to ruin it,’ as it will help you make the right decision.

Whether it’s staying with your current firm, moving to another firm, becoming independent, changing sectors, or even taking a break or retiring… It’s time to make that decision with courage, conviction, and triumph. Keep soaring high and enjoy the journey while continuing to be the best version of yourself.

Wishing you great success on your path!

 

Eva Marina Ovejero, Managing Director at Alex. Brown, a Division of Raymond James