The Pursuit of Scale Continues to Drive Consolidation Among Wealth Managers

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Consolidation remains a highly active trend across the financial industry. According to the latest report from Cerulli Associates on this sector, titled “Wealth Management Consolidation: Analyzing the Drivers Behind a M&A Deal Environment”, the pursuit of scale and the goal of capturing a larger share of the advisory value chain are fueling merger and acquisition (M&A) activity throughout the industry. The consulting firm believes this trend will create a more competitive environment for wealth managers.

The imperative to grow larger and more profitable has driven much of the intensified M&A activity that has been underway in the asset and wealth management industry for over a decade, resulting in an environment dominated by key players. According to Cerulli, the top five wealth management firms control 57% of the assets under management (AUM) of broker-dealers (B/D) and 32% of B/D advisors, while the top 25 B/D firms and their various affiliates control 92% of the AUM and 79% of the advisors.

Wealth managers are increasingly focused on providing truly comprehensive wealth management services, pursuing M&A to strengthen capabilities and capture more of the value chain. Although increasing share of the client’s portfolio has been an elusive goal in the industry for decades, Cerulli sees significant consolidation opportunities among wealthy investors. According to the research, 57% of advised households would prefer to consolidate their financial assets with a single institution; however, only 32% currently use the same provider for both cash management and investment services.

“Following a merger or acquisition, companies rarely emerge as well-oiled machines offering top-tier capabilities and services. The vertical integration of technology systems, client account migration, and changes in workplace culture are all potential pain points when an organization restructures. As wealth management firms enter new segments through acquisition, they must have a plan to transition clients to service models that meet their needs,” says Bing Waldert, Managing Director of Cerulli.

According to the firm, now more than ever, due diligence is a step that must be fully developed. “Deals that make sense on paper can turn into cautionary tales when acquirers miscalculate the impact of merging operations,” says Waldert. “In a wealth management environment where advisors and assets are more mobile than ever, there is an increased potential for a deal to have negative ramifications for advisor retention,” Waldert concludes.

Venerable Investment Advisers Launches Its First Line of Funds

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Venerable Investment Advisers, an investment advisor and subsidiary of Venerable Holdings, announced the launch of its initial line of investment funds, comprising approximately $9.9 billion in assets under management.

The investment funds from this launch, and future ones, serve as investment options for the separate accounts of insurance companies and incorporate the internal management of the underlying investment funds into the variable annuity business of Venerable Insurance and Annuity Company.

Venerable Advisers enlisted the investment advisory affiliates of Russell Investments and Franklin Templeton to provide sub-advisory services for the Venerable Variable Insurance Trust.

“This is an important milestone in the rollout of our investment advisory business, and we appreciate the collaboration of Russell Investments and Franklin Templeton along the way. We look forward to continuing to focus on optimizing our business and growing our AUM with future fund launches,” said Tim Brown, president of Venerable Advisers.

Zach Buchwald, president and CEO of Russell Investments, added that the multi-manager options are designed to address current investment challenges. “Russell is honored to partner with Venerable Advisers to offer a more efficient model that will help drive better outcomes for policyholders,” he added.

“The partnership with Venerable Advisers in launching their inaugural line of investment funds has required exceptional collaboration, focused on delivering results to clients,” said Jeff Masom, head of U.S. Distribution at Franklin Templeton.

The Asset Regularization Regime in Argentina: What We Know So Far

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As September progresses, the month in which the first tax information exchanges between Argentina and the United States are expected, initial data from the Asset Regularization Regime points to the domestic market, a phenomenon the local press has dubbed the “mattress whitening.”

“Up to now, the greatest impact on new accounts is primarily being seen in banks, which have already opened 23,000 accounts. Since this regularization is focused on small investors and strengthening reserves, it would be natural for a good portion of the nearly $14 billion in private sector dollar deposits that left after the 2019 PASO elections (internal primaries) to return to the financial system,” say sources from Adcap Grupo Financiero.

“There are many people and little money,” say accounting experts consulted by the newspaper La Nación. However, there is anticipation for the possible influx of up to $40 billion.

According to Infobae, “as adherence to capital regularization advanced, private sector dollar cash deposits increased to $19.643 billion as of September 3rd, a record high since October 25, 2019, when they totaled $19.867 billion.”

Adcap Grupo Financiero notes that, based on conservative estimates, Argentines have at least $100 billion within the country in 850,000 safety deposit boxes.

This figure rises if foreign accounts are included. According to the latest report from Indec on the “Balance of Payments, International Investment Position, and External Debt,” with data from the first quarter of 2024, it is estimated that Argentines held $238.233 billion in cash outside the Argentine financial system—excluding deposits in local banks. These savings may be deposited in sight accounts abroad—even declared and subject to local tax payments—or they could consist of cash in safety deposit boxes in Argentine banks, private safes, or, as is colloquially said, stashed “under the mattress,” beyond official oversight and fueling the free market.

According to official data, the regularization carried out during Mauricio Macri’s administration (2015-2019) brought a record $116.7 billion into the system.

The Madison Group Joins UBS International in New York

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UBS has added The Madison Group to its international office in New York, coming from Morgan Stanley.

“We are pleased to announce that The Madison Group has joined UBS at our flagship international office in New York, located at 1285 Avenue of the Americas,” reads the statement posted on LinkedIn by Michael Sarlanis, Managing Director of UBS’s New York International office.

As a top-tier global wealth manager, The Madison Group is particularly well-prepared to serve UHNW (Ultra High Net Worth) families, both in the U.S. and abroad, adds the information from the Swiss bank.

The group, consisting of nine members, is led by Marcos Douer, Managing Director and Senior Portfolio Manager; Seema Khanna, Executive Director; David Heffez, Senior Portfolio Manager, and Cristina Alvarado as Financial Advisor.

Additionally, the team includes Jessica Santiago, Senior Wealth Strategist; Gabriel Lasry, Director; Sophia Newman, Senior Registered Client Associate; Angelina Torres, Senior Client Associate, and Amanda Silva, Client Service Associate.

“The Madison Group offers insightful strategies and innovative solutions tailored to all aspects of your financial life. With a rich legacy of experience, the team is dedicated to providing comprehensive financial advice, from the simplest to the most complex, exploring possibilities and finding the solutions you need to achieve your goals,” concludes the statement.

New York Life Investments Restructures Two Actively Managed ETFs

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New York Life Investments announced the restructuring of its two semi-transparent active ETFs, NYLI Winslow Large Cap Growth ETF (IWLG) and NYLI Winslow Focused Large Cap Growth ETF (IWFG), converting them into fully transparent active ETFs.

Both ETFs are sub-advised and managed by Winslow Capital Management, an equity growth investment firm focused on long-term fundamental investing. The investment team is led by Justin Kelly, Patrick Burton, Peter Dlugosch, and Steven Hamill.

“IWLG and IWFG aim for long-term capital growth by utilizing a bottom-up investment process and investing in companies with above-average earnings and cash flow growth potential,” says the firm’s statement.

The ETFs are non-diversified, meaning they can invest a larger percentage of assets in fewer companies, allowing the portfolio management team to express their conviction in their best ideas. There are no changes to the investment team, process, or objectives as a result of the restructuring, concludes New York Life Investments.

Optimism About Mortgage Rates Isn’t Enough to Boost Homebuyers

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Consumers showed increased optimism about the future direction of mortgage rates, but this has not translated into significant changes in overall sentiment about homebuying, according to the latest Fannie Mae Home Purchase Sentiment Index, accessed by Funds Society.

In August, the index rose by 0.6 points, reaching 72.1. Additionally, 39% of consumers—the highest figure ever recorded in the survey—indicated that they expect mortgage rates to decrease in the next 12 months, compared to 29% the previous month. This compares to 35% expecting rates to remain the same and 26% expecting them to increase, the report adds.

On another note, a larger percentage of consumers also indicated that they expect home prices to decrease over the next 12 months, though the majority still expects prices to rise.

Despite improved affordability prospects, consumers’ perception of conditions for buying a home remained unchanged, with only 17% saying it’s a good time to buy. In contrast, 65% believe it’s a good time to sell a home.

Moreover, the study revealed that expectations for declining home prices have risen. While 37% believe prices will increase—a drop from 41% last month—the percentage expecting prices to decrease grew from 21% to 25%. The proportion of those who believe home prices will remain the same held steady at 37%.

Mortgage Rate Expectations: The percentage of respondents who believe mortgage rates will decrease in the next 12 months rose from 29% to 39%, while the percentage expecting rates to increase fell from 31% to 26%. The proportion expecting rates to remain the same dropped from 38% to 35%. As a result, the net share of those anticipating mortgage rates to drop increased by 16 percentage points month-over-month, reaching 13%, the highest figure in the survey’s history.

Job Loss Concerns: The percentage of respondents who are not worried about losing their job in the next 12 months rose from 77% to 78%, while those expressing concern remained the same as last month at 21%. The net share of those not worried about losing their job increased by 1 percentage point month-over-month, standing at 57%.

Household Income: The percentage of respondents reporting their household income is significantly higher than it was 12 months ago dropped from 18% to 17%, while those saying their income is significantly lower rose from 11% to 14%. The proportion indicating their income is roughly the same decreased from 69% to 68%. As a result, the net share of those stating their household income is significantly higher than a year ago fell by 4 percentage points month-over-month, standing at 3%.

Robert Forsyth Joins Lazard AM as Global Head of ETFs

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Lazard Asset Management has announced Robert Forsyth as the new global head of ETFs to drive the development and expansion of the firm’s active ETF platform.

Based in New York, Forsyth joins Lazard Asset Management from State Street Global Advisors, where he was most recently the global head of ETF Strategy. During his time at State Street Global Advisors, he held various leadership roles in product strategy, investment, and sales for the company’s trillion-dollar ETF business.

“We are continuously evolving our platform so that more clients can access our leading investment strategies. Building and expanding an active ETF platform is a key step in our plans, and Rob will play an important role in accelerating our ambitions. Throughout his career, Rob has distinguished himself as a leader capable of building, scaling, and distributing exchange-traded products that resonate with a broad range of investors. We look forward to leveraging the breadth of his skills and experience to advance our vision and objectives,” said Evan Russo, CEO of Lazard Asset Management.

Forsyth has developed a deep understanding of the ETF ecosystem over more than 20 years of working with exchange-traded products. At Lazard, he will report to Jennifer Ryan, head of distribution in North America, and work closely with the firm’s leadership team to build its ETF offering, the statement adds.

“The opportunity to join Lazard and help this historic firm build its active ETF platform is unique,” said Forsyth.

In June 2024, Lazard Asset Management launched its first ETF product, the Lazard Global Listed Infrastructure Active ETF, for Australian investors. The firm plans to continue building on this launch, along with a new sub-advised ETF mandate in the U.S.

Lazard offers clients a range of active equity and fixed-income products through mutual funds, UCITS, and SMAs. In addition to offering prominent active strategies in the U.S., the firm has long been a leader in providing global, international, and emerging markets strategies for its global client base, according to the statement obtained by *Funds Society*.

This appointment is the latest in a series of high-level hires for Lazard Asset Management. The firm’s plan to build its ETF platform is part of its ongoing strategy to develop products and solutions that continue to evolve Lazard’s investment platform and distribution capabilities.

The Employment Data Provides Certainty of a Rate Cut; the Question Is No Longer When but by How Much

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Elecciones en EE.UU. y mercados

U.S. employment figures showed a slowdown in the economy, paving the way for the much-anticipated interest rate cuts in September.

However, with an economy losing momentum in job creation but maintaining strong budgets for wages, the question is now how much the Fed will cut rates next week.

According to an analysis by alternative asset manager KKR, while the August nonfarm payroll data reflected a clear weakening of the U.S. economy, “the report did not unequivocally confirm that the Fed must ease its monetary policy by 50 basis points.”

The Global Macro team’s report, led by Henry H. McVey, acknowledges that although attention is focused on the 142,000 jobs added in August—slightly below the consensus of 165,000 but above July’s revised 89,000—the key point is that, despite downward revisions, the year-over-year growth rate was higher than in July.

Experts note that with previous months’ revisions, job growth has fallen below 125,000 every month except one since April. They add that a stagnant labor market (i.e., where hiring, layoffs, and turnover are low) means that the slowdown in labor demand will increasingly show up in weaker overall data.

The KKR report estimates that August’s employment data will not be “perceived as negatively as some had expected.”

“Although the negative revisions are notable, our overall message remains that the Fed must act aggressively, but we are not convinced that this will include 50 basis points initially, especially since financial conditions remain quite favorable. In the past, 50-basis-point cuts to start a cycle often included higher credit spreads and higher unemployment rates,” the report adds.

Employment growth in August came in slightly below expectations (142,000 versus 165,000), but the most notable elements of the report were the substantial downward revisions from previous months (-85,000 net).

From the independent advisory platform Sanctuary, an analysis by Mary Ann Bartels, shared with the firm’s clients, anticipates a 25-basis-point rate cut by the Fed.

“With employment data pointing to a slowdown in the labor market, the likelihood of a rate cut is almost assured. Mary Ann continues to expect a 25-basis-point cut by the end of this month, and this week’s inflation data—the Consumer Price Index and Producer Price Index—should confirm the direction of interest rates,” reads a summary posted by Sanctuary on LinkedIn.

Payrolls Decline, but Wages Increase

Wage budgets are growing at near-record rates, according to a new corporate survey in the U.S. conducted by The Conference Board.

The report reveals that projected salary budget increases for 2025 are expected at the fastest pace in two decades. Salary increase budgets are a good indicator of the average raise a worker receives in a given year.

On average, employers report planned wage increase budgets of 3.9%, a slight uptick from the actual 3.8% growth in 2024, according to The Conference Board’s US Salary Increase Budgets 2024-2025 report.

“Despite slower hiring and a slight rise in unemployment, elevated wages are expected to persist in 2025. A decline in labor supply is leading companies to focus on retaining their current workforce, resulting in sustained wage increases and higher real wage growth as inflation moderates,” said Dana M. Peterson, Chief Economist at The Conference Board.

The report presents comprehensive survey data from 300 compensation leaders on what companies across the economy are budgeting for annual wage increases.

Important Things I Learned in 18 Months at a Climate Finance NGO

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This is what I learned about our sustainable financial ecosystem, after working for 18 months at In / Flow, a climate finance NGO.

  • Climate finance doesn’t work without relentless collaboration and innovation. Science, academia, industry, markets, and governments must continue to work together. All knowledge and skills are needed to tackle the challenges we face. The more diverse the set of minds, the greater the chances of leveraging all necessary perspectives and minimizing blind spots. It is at the intersection of these spheres that the abundance of edge effects emerges.
  • Projects, assets, and emission reduction activities abound, and the demand for green, social, and sustainable bonds and loans shows no signs of slowing down, with new investment vehicles being launched at an accelerated pace. The challenge lies in moving capital from the project to the investment. The bottleneck is at the top of the investment value chain, where project identification, due diligence, activation, and obtaining permits represent the biggest obstacle to capital deployment.
  • Financial players overwhelmingly demand the harmonization of standards and frameworks. From a global perspective, the interoperability of taxonomies at the country level—i.e., the classification of activities by industrial sector for establishing criteria—is a condition to enable ambitious and credible sustainable trade on an international scale.
  • The redistributive powers of fiscal policy and subsidies must continue to support the global transition. Policy and regulations are the cornerstone of sustainable finance. We can’t live with them, and we can’t live without them. The more adept we are at adapting our financial ecosystem to new rules of the game, the better the chances of thriving in a new world order. Policies have fallen behind lately and remain vulnerable to shifting political cycles. We must create policy frameworks that can stand the test of time.
  • Market participants who are willing to embrace the challenge must also be rewarded and see that their commitment to sustainable investment leads to growth and superior returns. A good example of this is performance-linked instruments with a step-up coupon mechanism through which issuers can access lower capital costs by meeting a target. More advantageous financing for sovereign Debt Management Offices, stronger balance sheets for corporate issuers. Everyone may need to give something up in the short term. Investors may need to grit their teeth and adopt a long-term view (as they traditionally should) and will see lower long-term embedded risk. There are trade-offs, but everyone can win from this.
  • Investment banks can play a key role in advising companies on how to balance their growth and sustainability agendas and guide the financing of ambitious and credible transition plans when needed. Debt capital markets (DCM) and corporate advisory expertise in structuring and pricing all labeled debt are essential to ensuring that credit spreads fully reflect both the financial and non-financial risks and opportunities of the projects, assets, and activities to which revenues are allocated. Banks and lenders that align will attract more business, see higher issuance volumes flowing through their DCM desks, and enable the liquidity depth sought by investors.
  • There are data challenges for standardized metrics, integrated reporting, and risk assessments. Independently verified market data are critical to the credibility of sustainable capital markets. Science-based evaluation aligned with the goal of avoiding 1.5°C exposure from the use of funds and, indeed, transition plans is the only assurance investors can rely on to ensure that the sustainability fundamentals of a bond are anchored in authentically well-informed and reliable expertise. ISO certification and accreditation provide even greater assurance for the grayest types of investments. Retroactive and programmatic certification of bonds, assets, and entities is available to support and minimize issuer efforts.
  • Index providers have stepped up by offering powerful benchmarks that define investment opportunity sets (pre-selected) for the investor community. Whether labeled as use-of-proceeds debt or thematic transition financing, index providers have designed ready-to-use indices for reference mutual fund products and active management and segregated mandates, as well as for passive replication of exposures in ETPs (exchange-traded products). Sustainable investments are now widely accessible to both retail and institutional investors.
  • Stock exchanges provide ideal venues for the launch and marketing of new sustainable issuances. The fierce competition to attract sustainable debt listings has led them to up their game by expanding the scope of their capabilities and playing a significant role in advancing the issuer-investor interaction agenda on a case-by-case basis.
  • Asset owners have the power to drive significant improvements in sustainable finance market techniques. Greening large institutional mandates held by public and corporate pension funds, insurance companies, endowments, and foundations is likely the greatest incentive we can give to other market players—including, but not limited to, asset managers—to execute their sustainable strategy. Greening institutional investment portfolios could be the fastest lever for meaningful greening. Most importantly, plan members have a duty to invest in the transition of their economy and society.
  • Environmental and social issues are deeply intertwined, and we must adopt community-based, place-based, and resilience-inducing approaches for climate solutions to be fully effective. Indigenous community participation in the issuance of social and sustainable debt (a hybrid between green and social) is key to the resilience agenda, ensuring that in the event of disaster, economies and societies can recover quickly. Investors, demand a just transition.
  • Similarly, capital must be attracted to and within emerging and frontier markets through sustainable investments in private assets, while ensuring the experience is local and community-based. Sustainable debt from emerging markets carries the same country-level risk as its conventional emerging market debt counterpart. Do not expect a price premium or risk discount to avoid disappointment. However, the Global South is home to countless green and sustainable investment opportunities that will ultimately lead to a reduction in the debt burden of emerging market sovereign and corporate issuers, driving an improvement in fundamentals and the stabilization—perhaps even the reduction—of emerging market credit spreads in the long term.
  • Concessional financing from multilateral development banks (MDBs) and development finance institutions (DFIs) plays a key role in aggregating project financing, especially in highly fragmented and opaque loan markets. Their expertise in implementing climate and social development programs is critical to a successful transition of our global economy. Inspiring institutional investors to invest in these programs will also make a difference. Supranationals are experts in infrastructure investments, and while in the past they lagged in investments, since 2008 they have multiplied sixfold, and pension funds consider them a source of returns and protection against market volatility.
  • The use of artificial intelligence (AI) is already contributing enormously to the fight against climate change and the incorporation of climate resilience into our ecosystem. Existing AI systems offer tools that predict weather, track icebergs, identify oil spills, methane leaks, and other types of pollution. In the insurance sector, AI already helps the risk assessment framework refine the calibration of the impact of natural hazards on the real economy. Private capital is especially suited to seed these early-stage climate technology solutions, as many sectors in transition require patient, determined capital.
  • Trust that markets will create a new financial instrument for every problem we face. Despite initial scrutiny over sustainability-linked bonds, it is now clear that forward-looking performance-linked structured products not only constitute a powerful tool for enabling the transition of high-emission and hard-to-abate sectors of our global economy, but they also help monitor issuers’ progress on their path to net-zero. KPI selection, scientifically proven threshold setting, and target and coupon calibration depend entirely on the sector and thus require sector-specific scientific expertise.
  • Governments and companies demonstrating leadership by phasing out fossil fuels and phasing in emission-reducing activities and projects will eventually see a favorable impact on their borrowing costs. Issuers’ ability to skillfully communicate strategically aligned transition plans to investors, as well as execute and report on their progress on the path to net-zero by 2050, could be key to weathering the transformation of our economies and societies. Securing financing through sustainability-linked and impact financial instruments can and will embed their strategies with greater credibility and help them build trust among financial market participants and other stakeholders.
  • Whether you support this trend or not, the truth is that carbon markets are developing, and banks and exchanges are arming themselves with some of the brightest minds in the field. On the Voluntary Carbon Market (VCM) front, safely structured and vetted, biodiversity impact credit (in the form of Verified Carbon Units or VCUs) could play a significant role, provided that any offsets genuinely support biodiversity conservation or nature-based solutions.

Kushal Kshirsagar Joins Chicago Atlantic From BlackRock

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Chicago Atlantic has announced the appointment of Kushal Kshirsagar as Managing Partner of Private Wealth Solutions.

Kshirsagar joins from BlackRock and will be responsible for bringing Chicago Atlantic’s private market strategies to individual investors and their advisors, according to company information.

Previously, Kshirsagar held various roles within BlackRock’s Multi-Asset Strategies, U.S. Wealth Advisory, and iShares divisions, including portfolio manager for BlackRock’s U.S. Income Models, lead portfolio strategist for UHNW Wealth Advisory, and Head of Strategy and Business Development for iShares in Asia. Prior to BlackRock, Kshirsagar worked at UBS, Credit Suisse, and Vanguard, and earned a PhD in Finance from UNC – Chapel Hill.

“I was drawn to Chicago Atlantic’s unique combination of underwriting expertise, analytical rigor, proven track record, and entrepreneurial spirit. In a crowded market of undifferentiated private credit strategies competing in the same sponsor-backed club deals, Chicago Atlantic stands out for its sector expertise and focus on markets where there are structural reasons for capital supply shortages,” said Kshirsagar.