Threat or Opportunity? Advisors Split on the Impact of Robo-Advisors

  |   For  |  0 Comentarios

According to The Third Annual Study of Advisory Success: Confidence and Concern in the New Digital Age, released this week at Pershing’s INSITE™ 2015 conference, advisors are fairly evenly divided between viewing digital advisors, also known as robo-advisors, as competition or irrelevant to their business. Perhaps most surprising in the research was that only 19 percent of advisors think digital advice can complement their practice.

“There is no question that digital platforms are transforming the industry,” says Ben Harrison, head of business development and relationship management at Pershing Advisor Solutions. “Though most advisors are familiar with digital advice, a relatively small percentage of advisors are currently using this technology. The biggest opportunity we see for transformation is for advisors to automate low-value tasks, expand their reach and profitability.”

The survey also found that just over a quarter of advisors surveyed (27 percent) believe digital advice is irrelevant to their practice; while nearly another quarter (23 percent) feel that digital advice represents competition. By means of comparison, one-third (33 percent) of the advisors ages 18-34 consider digital advice to be competition, and only nine percent think they can complement their business. Comparatively, 27 percent of advisors between the ages of 35-54 view digital advice as competition, while only 16 percent of  advisors over the age of 55 view them as competition

In general, price was cited by respondents as one of the most threatening factors of digital online financial providers. More than three quarters of advisors surveyed say the low cost of digital advice will pose some sort of threat to their practice. This data is underscored by the finding of a different study that found more than half of investors surveyed agreed that the investment advice most financial advisors offer is not worth the one percent fee.

“It is short-sighted to limit the ways technology can complement a business to only digital advice,” said Kim Dellarocca, managing director at Pershing. “Digital advice is important, but it is only one area where a firm needs to evolve their technology strategy to deliver a wealth management experience that mirrors the expectations of today’s consumers and workforce.” 

The study suggests action steps for advisors to transform digital innovations into drivers of positive change and business growth, including:

  • Plan your approach to technology adoption. Advisors should understand where they sit on the digital spectrum and create a plan for where they want to be. Most begin by automating repetitive or low-value- tasks in their business. Once implemented, only then should they systematically work towards adopting increasingly sophisticated tools.
  • Make high-touch practices even more efficientand more personal. Digital tools, like those that automate client communications can help preserve the “high touch” experience many advisors are known for, but in a more efficient and more personal way that is customized to clients’ specific interests.
  • Improve your profitability and technology appeal. By automating key tasks that support the delivery of wealth management services, advisors can increase their margins and productivity. Advisors can use that gained time and resources to focus on higher valued activities like service delivery and more in-depth financial planning. Infusing technology into your business with greater self-service tools and more automation, not only adds to profitability, but creates a more modern feeling for client communications and interactions that today’s tech savvy investors crave.
  • Articulate your value. As investors and advisors both respond to digital advice trends, it is more important than ever for advisors to educate their clients about the work they do on their behalf– and the distinct value and wisdom the advisor offers in relationship to the fees they charge.
  • Be realistic about focus of the practice. If advisors have an appetite for tech-enabled growth, they should invest time and money in the latest capabilities. If not, their focus should shift towards financial planning or serving wealthy or hands-off investors.

 

Ireland Out to Widen ETF Lead

  |   For  |  0 Comentarios

Ireland is seizing the opportunity offered by the soaring popularity of passive investments to widen its lead as Europe’s top domicile for exchange-traded funds (ETFs), according to the latest issue of The Cerulli Edge – Global Edition.

Cerulli Associates dismisses Luxembourg’s attempt to win ground in this arena by its scrapping the subscription tax for ETFs as too little, too late. The global analytics firm is also skeptical that the United Kingdom’s scrapping of stamp duty on ETF trading will enhance London’s hopes of becoming a serious domicile player for the index-linked funds anytime soon.

Flows into Dublin-domiciled ETFs accounted for 85% of all European ETF flows in 2014, while assets under management (AUM) in Dublin ETFs has tripled since the end of 2011, to stand at €223 billion (US$250 billion). AUM in other domiciles rose 56% over this period.

Cerulli notes that tax advantages, infrastructure and a history of delivery for asset management companies all work to the Emerald Isle’s advantage when it comes to a choice of domicile. It contends that factors such as the absence of tax on investment funds, and Ireland’s strong taxation treaties with other countries, notably the United States, are crucial considerations for investors choosing ETFs.

“The phrase ‘ETF price war’ may have become a cliché, but for sound reasons. Companies such as Vanguard, one of the biggest ETF players, are looking to undercut rivals. Last year it slashed the charge for one of its Dublin-domiciled S&P 500 UCITS [Undertaking for Collective Investments in Transferable Securities] ETFs to 7 basis points. With costs in this sort of bracket, tax differences will be keenly felt,” says Barbara Wall, Europe research director at Cerulli.

She notes that for some companies, the difference is enough to justify moving ETFs from their existing Luxembourg domicile. Deutsche Asset & Wealth Management is in the process of changing much of its ETF range from synthetic to physical. The latter are often seen as easier to understand. But by moving the domicile to Ireland at the same time, it can realize tax advantages not available in Luxembourg. It has announced the closures of several Luxembourg funds–including products tracking the S&P 500–which will be merged into Ireland funds.

Brian Gorman, an analyst with Cerulli, notes that after gaining Irish domicile, the next stop for many ETFs is the Irish Stock Exchange (ISE). “Although the ISE offers limited scope for trading, an ETF can then quickly gain admission to trading on the London Stock Exchange, the biggest and most liquid market in Europe. The cost of access via this route is much lower than taking the direct option. Many providers are choosing to trade their ETFs across a range of stock markets.”

 

Emerging Market Risks Hotting Up

  |   For  |  0 Comentarios

Investing in Emerging Markets continues to prove challenging and volatile, but Standard Life Investments has produced a heat map to assess the vulnerability of emerging market economies to future shocks. The risk profiles of emerging economies have changed considerably in the past six months. That is the period that will take the map and research to be updated with the aim of helping investors and fund managers improve their understanding of the large amounts of economic and financial data and potential threats currently facing emerging markets.

Countries such as Mexico and India generally look safer now, while conditions in already risky countries like Brazil and Malaysia have deteriorated further. The largest reduction in vulnerability was in Ukraine and Russia, thanks partly to better management of monetary policy, although this could change if there is a re-escalation of conflict between the two countries.

Jeremy Lawson, Chief Economist, and Nicolas Jaquier, Emerging Markets Economist for the Emerging Market Debt team created the heat map in October 2014 and produced an update in May 2015 which incorporates data following the two main shocks in recent months – the collapse in oil prices and sharp rise of the dollar.

Jeremy Lawson, Chief Economist, Standard Life Investments said: “Risk improvement was particularly prevalent in Eastern European countries such as Poland, Hungary and the Czech Republic, thanks to improving fiscal policy and falling inflation. Mexico and the Philippines which scored amongst the most resilient back in October also continued to strengthen – as a large oil importer the Philippines benefitted from falling oil prices. India and Indonesia were also out-performers, cutting fuel subsidies and spending more on infrastructure.

“At the other end of the spectrum, vulnerabilities are heightened in economies with large macroeconomic imbalances or reliance on exporting commodities, such as Brazil, Chile, Malaysia and Turkey.

“The dispersion of risk highlights that emerging markets should not be analysed as a homogenous group, it’s essential that investors adopt an active unconstrained approach. Whilst emerging market risk remains well below pre-Asian crisis levels, the next challenge ahead will be the beginning of the Federal Reserve’s rate hiking expected in the second half of 2015 – it’s the pace of this that will prove critical.”

 

El Salvador Joins International Efforts to Fight Offshore Tax Evasion

  |   For  |  0 Comentarios

El Salvador Joins International Efforts to Fight Offshore Tax Evasion
CC-BY-SA-2.0, Flickr1 de junio de 2015 - (de izquierda a derecha) Francisco Galindo Vélez, Embajador de El Salvador en Francia firmado el . El Salvador se une a los esfuerzos internacionales para luchar contra la evasión fiscal internacional

El Salvador signed this week the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, becoming the 86th signatory to the most comprehensive instrument for boosting international co-operation against offshore tax evasion.

El Salvador’s Ambassador to France, Mr. Francisco Galindo Vélez, signed the Convention in the presence of Mr. Carlos Cáceres, El Salvador’s Minister for Finance.

El Salvador is the 8th Latin American country and the 3rd member of the Central American Common Market – after Costa Rica and Guatemala – to join the Convention.

OECD Secretary-General Angel Gurría offered congratulations during the signing ceremony, saying that it “sends yet another strong message to the international community about El Salvador’s commitment to fighting international tax avoidance and evasion by increasing transparency”. He added that the OECD “looks forward to its rapid entry into force so that El Salvador can seize this opportunity to build trust in its institutions and reinforce the rule of law.”

Developed by the OECD and the Council of Europe, the Convention provides a comprehensive multilateral framework for the exchange of information and assistance in tax collection. Its coverage includes administrative assistance between tax authorities for information exchange on request, automatic exchange of information, simultaneous tax examinations and assistance in the collection of tax debts.

Since the G20 put financial sector transparency and tax evasion on the international agenda in 2009, the Convention has become a central element of international cooperation efforts. It is seen as the ideal instrument for swift implementation of the new international Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries as well as automatic exchange of country by country reporting under the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project

El Salvador became a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes in 2011. El Salvador’s Phase 1 peer review report, which demonstrates their high level of commitment to the international standard for tax transparency and exchange of information, was published in March 2015.

The 86 jurisdictions participating in the Convention can be found at www.oecd.org/ctp/exchange-of-tax-information/Status_of_convention.pdf

Fitch Rates Petrobras’ Proposed Notes Due 2115 ‘BBB-‘

  |   For  |  0 Comentarios

Fitch Ratings has assigned a ‘BBB-‘ rating to Petroleo Brasileiro S.A.’s (Petrobras) proposed senior unsecured century notes issuance. The notes, which mature in 2115, will be issued through its wholly owned subsidiary, Petrobras Global Finance B.V. (PGF), and will be unconditionally and irrevocably guaranteed by Petrobras. Proceeds will be used for general corporate purposes. Fitch currently rates Petrobras ‘BBB-‘. The Rating Outlook is Negative.

Key rating drivers

Petrobras’ ratings continue to reflect its close linkage with the sovereign rating of Brazil due to the government’s control of the company and its strategic importance to Brazil as its near monopoly supplier of liquid fuels. Absent implicit and explicit government support and its defacto monopoly position, Petrobras’ credit quality is not commensurate with an investment grade rating.

Government support is evidenced by the recent lending commitments offered by stated-owned Banco do Brasil and Caixa Economica Federal as well as the decision to maintain gasoline and diesel prices at the pump significantly above international levels in order to bolster Petrobras’ cash flow generation. By law, the federal government must hold at least a majority of Petrobras’ voting stock. The government currently owns 60.5% of Petrobras’ voting rights, directly and indirectly, and has an overall economic stake in the company of 48.9%. Petrobras’ cash position is sufficient to meet its short-term funding needs.

Petrobras’ Negative Outlook reflects the uncertainties surrounding the company’s ability to deleverage its balance sheet over the medium term. Petrobras may face challenges to deleverage its capital structure organically as the corruption scandal may result in delivery delays of production units.

Fitch will continue to monitor Petrobras’ strategy to strengthen its capital structure and expects the company to release coherent deleveraging program once the company releases its revised business plan for the next five years. Should Petrobras succeed in placing this proposed debt issuance, it will be viewed as a positive step in regaining access to the debt capital markets, which the company relies on in order to support its investment plans and funding needs.

 

Global ETP Flows in May Reflect Durable Demand For Non-U.S. Equities

  |   For  |  0 Comentarios

Amy Belew, global head of ETP research at BlackRock comments on the May ETP Landscape Report the firm just presented, that Global ETP flows of $18.3bn were concentrated in developed market EAFE equities and Japan funds. Europe and U.S. flows were modest as mixed economic data for both regions has led to uncertainty over growth prospects. Still, 2015 asset gathering remains ahead of the record year-to-date pace set in 2013 and nearly matched last year on the way to a new full-year high.

Broad developed markets equities gathered $6.4bn as demand remains robust for non-U.S. exposures. EAFE ETPs accounted for $4.2bn, with an additional $2.1bn going to global funds. These categories have quickly accumulated $35.8bn year-to-date and are set exceed the average of $45bn over the past two years.

Japan equities maintained momentum with $5.8bn as the Nikkei 225 Index reached its highest level since 20002. Flows were driven by strength in corporate earnings. Locally-domiciled funds led, though asset gathering has also picked up for U.S.- and Europe-listed funds.

Currency-hedged equities brought in $3.4bn, slowed early in the month by a stretch of U.S. dollar weakening that began in April. Flows have proven responsive to currency movements, and resumed toward the end of May across EAFE, Europe and Japan funds as the dollar exhibited renewed strength.

Broad EM equities gathered $1.6bn, and flows have now trended higher during consecutive months for the first time since August. Improving returns, accommodative Chinese government policies and the pause in dollar appreciation have helped turn flows around.

Fixed income flows overall were flat and have been volatile with investors uncertain as to when rates may begin to move higher. Pockets of strength persist, including U.S. investment-grade corporate funds, which gathered $0.9bn, and EM debt, which added $0.5bn to bring year-to-date flows to $3.2bn. But U.S. Treasury funds shed ($2.8bn). Year-to-date fixed income flows remain ahead of the record pace established last year, driven by investment grade and high yield corporate bonds.

Recon Capital Partners Enters Strategic Engagement with Brazilian RIA

  |   For  |  0 Comentarios

Recon Capital Partners, the issuer behind the Recon Capital FTSE 100 ETF and the Recon Capital DAX Germany ETF, has increased its global distribution efforts and strengthened its commitment to continue delivering global investment solutions by partnering with Bullmark Financial Group, one of Brazil’s fastest-growing RIA firms. The scope of the relationship will entail both firms collaborating on product development, enhancement and distribution with an emphasis on Latin American-themed exchange-traded products (ETPs) that mitigate risk via intelligent index construction.

“As Brazil is one of the top emerging markets, we see great potential in working in tandem with Bullmark Financial to develop much-needed, risk-conscious ETPs focused on the quickly growing Latin American market. Our affiliation with Bullmark is a significant decision to align two investment firms from different continents that share similar goals and parallel investment philosophies,” said Recon Capital Partners Chief Executive Officer Garrett Paolella. “This relationship marks the beginning of substantial development plans, strategic initiatives and future partnerships with similarly minded international investment professionals for Recon Capital.”

Bullmark Financial Group, headquartered in Brazil’s Federal District and staffed by more than 75 employees, offers financial planning solutions, wealth management and asset allocation services for high net worth clients, including individuals, families and institutions. “Bullmark Financial saw in Recon Capital Partners an accomplished firm that parallels our investment outlook and business model,” said Renato Nobile, CEO of Bullmark Financial. “By collaborating with Recon Capital Partners on products and global distribution, we are providing solutions to investors looking to tap into the Latin American economy and markets.”

Recon Capital Partners’ suite of international investment solutions includes the only US-listed ETFs to track the German DAX and British FTSE 100, trading under the tickers DAX and UK, respectively. Additionally, the firm offers the Recon Capital Nasdaq 100 Covered Call ETF (QYLD).

Smarter Data Management is Essential for Effective Fund Management

  |   For  |  0 Comentarios

BNY Mellon has published a new white paper examining Big Data’s credentials and its potential as a transformative tool in the current era of shrinking margins and ever-more sophisticated and powerful analytical tools.

The new paper —Big Data and Investment Management — highlights how custodians, depositary banks and administrators are positioned at the forefront of product development around Big Data solutions that address the complex and commercially critical issues of how to enhance both sales performance and client satisfaction.

The paper also examines how investment managers can utilize Big Data to bring together separate elements — dark pools of data, predictive analysis, behavioral finance — to allow the investment industry to enhance product design, drive sales and improve investor outcomes.

Daron Pearce, global investment manager segment head for Investment Services at BNY Mellon, said: “As the lines between the front, middle and back office continue to blur, smarter data management is essential for effective fund management. Big Data facilitates that – but also poses challenges. Through an understanding of these opportunities and potential obstacles, the investment management industry can use their own data to design, manufacture and market solutions more effectively with a view to generating outcomes that are more aligned to investor expectations.”

Mark Gibbons, chief information officer, EMEA at BNY Mellon, added: “B2C businesses have already embraced Big Data, developing sophisticated, data-driven profiling tools that enable tailored services for different client segments. While client, transactional and portfolio data is collected across the investment management industry for historical, regulatory and analytical purposes, most managers are yet to fully leverage these diverse data pools with a view to identifying key correlations and generating fresh insights. That is a particular area of focus for BNY Mellon, as demonstrated by our own Digital Pulse offering which tracks activities, processes and transactions within our company, resulting in predictive analytics that enable businesses to work smarter and drive improvement.”

Avoid European Equities Leaving a Bitter Taste

  |   For  |  0 Comentarios

Asset managers need to take steps to avoid losing investors along with the exodus from European equity funds once the sugar-rush effect of quantitative easing (QE) has waned, warns the latest issue of The Cerulli Edge – European Monthly Product Trends Edition.

European equity funds are enjoying their strongest flows in several quarters, thanks in part to the European Central Bank’s monthly liquidity injections of €60 billion (US$66 billion) to bolster the eurozone, but asset managers should be gearing up for the inevitable end of the cycle, says Cerulli Associates.

“Once investors start sensing Europe has had its run, they will want to take out their money. To realize longer-lasting benefits, asset managers must convince clients to stick with the brand by offering strong products in another sector, such as emerging markets, which are now presenting buying opportunities,” says Barbara Wall, Europe research director at the analytics firm.

The firm notes that investors in countries such as Spain and Italy are once again keen on European equities, going through private banking channels. Asia is showing more interest, while funds are also flowing out of the United States after a strong run. U.S. investors who bought when the euro and dollar were nearing parity are enjoying a currency bonus.

Flows into long-term active European equity funds hit €14 billion for the first three months of 2015, the highest quarterly level since the first quarter of last year. The firm believes that further positive flows are likely to continue, but for months, rather than years.

“Asset managers should enjoy the QE bonus flows while they last. But the pattern is unlikely to be different from previous cycles, and the end may already be in sight. Positive developments such as the definitive U.K. election result are being offset by Greece remaining in crisis mode,” says Brian Gorman, an analyst at Cerulli.

Other Findings include that Italy, Germany, and Spain were the most successful European countries for the first quarter of 2015, gathering €12 billion, €14 billion, and €3 billion respectively, driven in the main by investors’ demand for mixed assets and euro bonds, which attracted €12.2 billion and €8.5 billion.

European exchange-traded funds tracking Japanese equities saw net inflows rising to €1 billion in March from €370 million during February, as investors abandoned U.S. and U.K. equities in favor of opportunities in Japan.

Italian funds remain out in front for inflows among European markets, even if March did not quite match February’s stellar achievement. Mixed assets accounted for half the flows, and were slightly down on the previous month. Bond flow rates picked up. Money market funds, which have suffered outflows every month so far in 2015, were the only negative category.

Cass Business School Study Reveals M&A Strategies That Lead to Highest Shareholder Value Creation

  |   For  |  0 Comentarios

New research, authored by Intralinks Holdings Inc., and City University London’s Cass Business School, has identified the best-performing global businesses in creating shareholder value from mergers and acquisitions (M&A).

The study, ‘Masters of the Deal: Part 2, looks at 20 years of data’, the largest ever analysis of shareholder value creation from M&A, and analyzed 265,000 deals and the performance of over 25,000 global public companies. The research identified 1,469 elite global firms that consistently outperformed their peers in delivering above-average total shareholder returns. A complete list of these best performing companies in M&A can be found on the Intralinks website.

The report also found the common M&A strategies employed by these high performing companies, which had a significant influence on their outperformance. The strategies of these companies, referred to in the report as Excellent Corporate Portfolio Managers (ECPMs), included:

  • Bolder M&A strategies, with greater execution risk – cross-border acquisitions accounted for 38% of the value of all acquisitions by ECPMs versus 28% of the value of all acquisitions by other firms; ECPMs made four times as many hostile acquisitions as other firms.
  • Faster deal completion – 33% of all acquisitions and 33% of all divestments by ECPMs were slow to complete, versus 34% and 39% respectively for other firms.
  • Greater engagement with financial sponsors and public companies – ECPMs engaged in a higher proportion of deals than other firms where the counterparty was a private equity firm or a public company.
  • Greater use of all-cash consideration – 38% of the value of all acquisitions by ECPMs were all-cash, compared to 30% of the value of all acquisitions by other firms.
  • Avoiding large, transformational acquisitions by undertaking smaller acquisitions, relative to their own size, than other firms – the average value of acquisitions by ECPMs was 0.18 times their own sales, versus 0.26 times the buyer’s own sales for non-ECPM firms.
  • Making significantly more acquisitions than divestments – ECPMs made 3.4 times as many acquisitions, by value, than divestments, compared to other firms which, on average, engaged in the same value of acquisition and divestment transactions.
  • Making significant timing adjustments to acquisitions and divestments to align with market conditions and take advantage of valuation opportunities – ECPMs reduced the value of acquisitions relative to divestments during periods when M&A markets and valuation levels are increasing strongly, and significantly increased the value of acquisitions relative to divestments immediately following sharp market downturns.

The Best Performing Companies in M&A

Number of ECPMs per region:

  • US: 588
  • UK: 276
  • Europe, Middle East & Africa excluding UK: 275
  • Asia Pacific: 206
  • Americas excluding the US: 124

The Oil & Gas sector was found to have the highest percentage of firms identified as ECPMs (10.5%), followed by Industrials, Healthcare, and Technology.

Globally, 6% of all companies examined for the report were identified as ECPMS. Regionally, it was European companies that were more likely to qualify as ECPMs. In fact, 12% of listed firms in the UK and France identified as ECPMs, along with 9% of the listed German companies. Even though the US had the highest number of ECPMs (40% of total sample), the US as a region fell below the global average with only 5% of US firms identified as ECPMs.

Firms identified as ECPMs include:

US: Colfax, Concho Resources, Dana Holding, EMC, EV Energy Partners, FleetCor Technologies, Google, IHS, Monsanto, RigNet, Salesforce.com, Targa Resources Partners, TriMas, Vanguard Natural Resources

Europe, Middle East & Africa: Aberdeen Asset Management (UK), Intertek (UK), Mondi (UK), SABMiller (UK), Aros Quality Group (Sweden), HEXPOL (Sweden), AURELIUS (Germany), MBB SE (Germany), SMT Scharf (Germany), Burkhalter (Switzerland), Eurocash (Poland), Eurofins Scientific (Luxembourg), Nizhnekamskneftekhim (Russia), Jeronimo Martins (Portugal), Econocom (Belgium)

Asia Pacific: Hinokiya Holdings (Japan), Maeda Kosen (Japan), Ancom Logistics (Malaysia), C.I. Holdings (Malaysia), Tiong Nam Logistics Holdings (Malaysia), Austin Engineering (Australia), Corporate Travel Management (Australia), M2 Group (Australia), Mineral Resources (Australia), Silver Lake Resources (Australia)

Americas excluding the US: Alimentation Couche-Tard (Canada), Amaya Gaming Group (Canada), Black Diamond Group (Canada), Canadian Energy Services & Technology (Canada), Constellation Software (Canada), GoGold Resources (Canada), SECURE Energy Services (Canada), Trinidad Drilling (Canada), Mexichem (Mexico), TOTVS (Brazil)