CC-BY-SA-2.0, FlickrLisa replaces Daniel K. Kingsbury. Pioneer Investments Appoints Lisa M. Jones Head of the U.S.
Pioneer Investments, a global asset management firm, has announced that Lisa M. Jones has been named Head of the U.S. In this role, she will serve as President and Chief Executive Officer of Pioneer Investment Management USA Inc., the U.S. Division of Pioneer Investments. Lisa will be a member of Pioneer’s global leadership team and will report to Sandro Pierri, Chief Executive Officer of Pioneer Investments. She will start on August 11, 2014 and be based in Boston.
Lisa has over 25 years of experience in financial services, including multiple leadership roles in which she was responsible for developing and building asset management businesses. She joins Pioneer Investments from Morgan Stanley Investment Management (MSIM), where she was Global Head of Distribution and President of MSIM Distribution Inc., a position she left in 2013. Prior to MSIM, she was Head of the Global Institutional Division at Eaton Vance Management and spent more than 16 years at MFS Investment Management where she held leadership roles in both the retail and institutional divisions. She has been an active member on a number of boards, including the Foreign Policy Association in New York, the Board of Fellows at Trinity College, Hartford, Ct., and the Advisory Board of the Institutional Investor Institute. She earned a B.A. in Economics from Trinity College.
“Pioneer Investments’ U.S. Division is a critical and integral component of our global strategy, and Lisa’s hiring is an important step forward in accelerating the growth of our already strong U.S. business,” said Pierri. “Lisa is a proven performer in distribution and overall product and business strategy, and is an energetic, results-driven leader. Her experience and leadership skills will be significant assets in helping us achieve our growth objectives in the U.S.”
Pioneer’s U.S. Division, based in Boston, has approximately $72 billion in assets under management and 560 employees, including 79 investment professionals and a sales and marketing staff of more than 150. The division manages a wide range of equity, fixed-income, multi-asset, and alternatives strategies for retail and institutional investors in the U.S. and international markets. Boston is one of Pioneer’s three major investment hubs, with others located in Dublin and London.
Lisa replaces Daniel K. Kingsbury, who will remain at Pioneer until September 5, 2014 to assist with the transition. His departure follows a successful 15-year career at Pioneer, including the last seven as Head of the U.S. “Dan’s extensive experience as a global manager played an essential role in driving the expansion of the U.S. and its integration with Pioneer’s global capabilities. We greatly appreciate his dedication and service,” Pierri said.
CC-BY-SA-2.0, FlickrFoto: Visentico, Flickr, Creative Commons. Europa se lleva la peor parte de la caída en el sentimiento de los gestores mientras los emergentes repuntan
Rising geo-political temperatures combined with the threat of rising U.S. interest rates have led global investors to scale back risk and take cash levels to two-year highs, according to the BofA Merrill Lynch Fund Manager Survey for August. An overall total of 224 panelists with US$675 billion of assets under management participated in the survey.
Investors have shifted robustly into cash with a net 27 percent of respondents to the global survey overweight cash in August, up from a net 12 percent in July. Cash now accounts for an average of 5.1 percent of global portfolios, up from 4.5 percent a month ago. Both cash readings are at their highest since June 2012. The proportion of asset allocators overweight equities has tumbled by 17 percentage points in one month, to a net 44 percent in August. The number of survey respondents hedging against a sharp fall in equity markets in the coming three months has reached its highest level since October 2008.
Global growth predictions have fallen since July but remain firm. A net 56 percent of the global panel expects the economy to strengthen in the year ahead, a fall from a net 69 percent in the previous month. However, sentiment towards Europe has fallen significantly – the earnings outlook for the region suffered its greatest monthly fall since the survey started.
Fears of a geopolitical crisis is the biggest cause of risk-reduction – with 45 percent of respondents naming it their number one “tail risk” this month, up from 28 percent a month ago. But a new question in the survey highlights how a rate hike is also playing on investors’ minds – 65 percent of the panel expects a U.S. rate rise before the end of the first half of 2015.
“The market melt-up is over, or at least on pause, as investors seek refuge while they digest world events and the prospect of higher rates,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research. “We see further de-risking to come in Europe. Negativity in this month’s survey towards Europe reflects growing softness in economic data from both the core and periphery of the region,” said Manish Kabra, European equity and quantitative strategist.
Europe’s gloss is lost
Europe’s status as the world’s market darling for much of 2014 has all but evaporated in the past month, with a big negative swing in the number of investors currently overweight European equities and an even greater negative swing in sentiment about the future.
A net 13 percent of asset allocators are overweight Eurozone equities – a fall of 22 percentage points in one month. U.S. equities also lost ground but only a 4- percentage point drop to a net 6 percent. Furthermore, a net 30 percent of global investors believe that the 12-month profit outlook is worse is Europe than in any other region. That reading has fallen 24 percentage points since July – a record one-month swing.
It’s not surprising therefore that Europe has now become more of a region to underweight than overweight. A net 4 percent of investors want to underweight Europe more than any other region. In July, a net 10 percent wanted to overweight Europe. The survey also highlights growing pressure on the euro. A net 40 percent saying that it is the currency they most expect to depreciate (on a trade-weighted basis), a reading that represents a two-year high in negativity towards the euro, up from a net 28 percent in July.
Emerging markets shine again
Global Emerging Markets (GEM), and to a lesser extent Japan, have bucked the wider global trend of pessimism. A net 30 percent of asset allocators are now overweight Japanese equities, a rise from a net 26 percent in July and making Japanese equities the most popular of the five regions.
GEM has shown the greatest momentum, with the proportion of asset allocators overweight the region rising to a net 17 percent from a net 5 percent in July. Behind the improvement is stronger belief in China and in commodities. A net 6 percent of regional fund managers expect the Chinese economy to improve in the coming 12 months – the first positive outlook of 2014. Just two months ago, a net 42 percent forecast China’s economy to weaken.
Fewer global asset allocators are underweight commodities – a net 5 percent compared with a net 15 percent in July. Looking ahead, a net 21 percent of investors say that GEM is the region they most want to overweight in the next 12 months, up from a net 4 percent in July.
Investors pursue big caps and value
Investors have expressed unusually strong opinions in favor of large-cap stocks and value-driven investment this month. The proportion of respondents favoring value over growth investing has reached a record level of a net 48 percent. Value investing is typically in favor during “risk off” phases, but the high this month outstrips even previous highs in 2009 in the aftermath of the financial crisis. A net 59 percent believe that large caps will outperform small caps, the highest reading in two years.
Wikimedia CommonsFoto: Universidad de Miami, Otto G. Richter Library. ¿Está enviando un hijo a la universidad este año? ¡Lea esto de inmediato!
Before you go shopping for dorm room supplies and hit the book store, have your child fill in a health care proxy form and a HIPAA-compliant release form.
Whether if it’s a freshman or senior, be sure you have these important health care directives for any child over the age of 18 in place.
College has a way of luring young adults into behaviors that can land them in a doctor’s office — or worse — an emergency room. But once your child reaches the legal age of adulthood, you can be excluded from the health care process.
A college campus is ripe with opportunity for students to find trouble or, sadly, for trouble to find them. From viral outbreaks, such as meningitis, to off-campus parties and much more, many college-age children are put in first-time situations that can have life-altering consequences.
And what happens when the child is unable to speak or otherwise advocate for him or herself? With a directive in place, the uncertainty of who makes the decisions on behalf of the child is removed.
And when we are not involved, all too often our children may choose to keep us in the dark of the lingering after effects out of concern for our worry or out of fear of stigma or retribution. A recent front page story from the July 13th Sunday New York Times, “Reporting a Rape, and Wishing She Hadn’t,” brought this into sharp focus for me as a parent of two college-age children.
Make sure whoever the child has named on these forms can get information about or speak for the child in the event he or she can’t. This simple step can assure parents are front and center when children are confronting physical and emotional health issues.
Do it today! Need help? Contact your financial advisor.
By William Finnegan, Senior Managing Director, Global Retail Marketing, MFS Investments
Related resources:
Rules may vary by state. Your pediatrician may also be able to guide you regarding HIPAA. An informative Web site on this issue is www.caringinfo.org.
Check out Vicky Schroebel’s blog post about establishing a health care directive for adult children.
Royal Bank of Scotland is considering selling its Coutts International business, among options that the UK-listed firm – mostly owned by the UK taxpayer – is considering as it intensifies its focus on the domestic market, according to an internal memo seen by Tom Burroughes, Group Editor in London, News Analysis.
A spokesperson for RBS, when asked about media speculation, said there is as yet no firm deadline on when any decision over the international business’s future will be made.
“It is no surprise that RBS is thinking of selling the international arm of Coutts. It does not fit with the new UK centric strategy and management realise, that if it does not invest in the business, then the value of the franchise will decline. While some kind of management buy-out/private equity transaction cannot be ruled out given the `capital lite’ nature of wealth management, the branding issue may mean that the better option for all parties is for a trade sale,” Christopher Wheeler, analyst at Mediobanca, told the publication.
“However, whichever route is followed, a big issue is how to deal with the US cross-border tax issue, which proved a sticky problem in the recent sale of BSI, by Generali, to BTG Pactual,” he added, referring to Coutts’ Swiss business.
For weeks, there has been speculation that RBS might sell off the international arm of Coutts, which operates under that brand in jurisdictions in Asia and Switzerland, among others. Other wealth management brands of RBS include Adam & Co, a Scottish-based bank that also has offices in London. Coutts is one of the most renowned banking names in the UK, dating back to late 17th century and famed as the bank used by the UK monarch.
A possible sale comes as some banks, which expanded into foreign fields in the years before the financial crisis, have found the business of managing overseas operations more burdensome recently as compliance and related costs have mounted. In other cases, banks haven’t felt they reached the critical mass of business to justify outlays, which is why, for example, Morgan Stanley has sold parts of its non-US wealth arm. Societe Generale sold its Asia private banking arm to Singapore-headquartered DBS earlier this year. Bank of America has spun off its international wealth business outside the US to Julius Baer. A broader issue is that RBS, which was bailed out by the-then Labour-led government in the depths of the financial crisis, is under pressure to return to full financial health as soon as possible, enabling the government to sell its majority stake. A similar process is under way at Lloyds Banking Group, in which the government holds a large minority stake.
The move will inevitably fuel speculation about whether private banking operations are best handled under the umbrella of a larger organisation, or as pure, standalone vehicles. At rival UK bank Barclays, that firm has recently folded its wealth management arm into a broader segment of the bank, and it no longer reports discrete results on the wealth business. By contrast, HSBC has reportedly stated it intends to keep its private banking arm as a separate unit.
International targets
RBS feels it will be tough a return on equity of more than 15 per cent on its international wealth management business; that operation accounts for around 41 per cent of client assets and liabilities and 35 per cent of revenues. At the UK arm, meanwhile, RBS said in its memo that it is confident of further strong growth and potential to boost return on equity. At present, the UK represents 59 per cent of customer assets and liabilities and 65 per cent of revenues in the banking group’s business.
RBS has been reviewing its wealth management units since February this year, stirring inevitable industry speculation. RBS wants a more strategic focus on the UK and will continue to serve UK resident non-domiciled clients. Options might include merging the rest of the current Coutts International business, joint ventures or a sale, “thereby reducing RBS’s footprint internationally”, the RBS memo said.
As far as the management structure is concerned, the wealth executive committee will operate as before; Rory Tapner, CEO of the wealth business, will continue to chair that committee and report to Alison Rose, who is CEO, Commercial and Private Banking at RBS.
“There are no immediate changes for individuals in these businesses and it is important that we continue to work together to deliver for our customers, and to focus on making RBS the most trusted bank,” the memo, signed by Rose, and Les Matheson, CEO, personal and business banking, said.
CC-BY-SA-2.0, FlickrTim Dowling, director de High Yield Global, ING IM. Los tipos forward son una herramienta prácticamente inútil para predecir el futuro de las tasas de interés
ING Investment Management is warning investors against relying on forward interest rates when trying to estimate future bond yields, describing them as nearly ‘worthless’.
A forward rate is a theoretical expected yield on a bond several months or years from now, generated by subtracting the yield of a shorter maturity bond from the yield of a longer dated bond.
The investment manager is concerned that forward interest rates are currently being relied upon to advance the argument that future economic growth, inflation and bond yields will be lower than in the past. The relatively low forward rates implied by today’s bond prices are a seemingly objective measure that can be used to support “secular stagnation”, which is the idea that the world has shifted permanently into a lower growth mode. Applying this concept to today’s markets, the US Treasury five year note will yield approximately 3.34% on August 4th 2019 and the Bundesobligation five year will trade at approximately 1.97%.
However, analysis by ING IM reveals that using August 4th 2009 bond yields, the US Treasury five year note should be trading at 4.68% today and the Bundesobligation five year should be 4.18% – instead they are trading at 1.63% and 0.29%, respectively.
Tim Dowling, Head of Global High Yield, ING IM said: “Forward interest rates may be an objective measure, but they are close to worthless as a predictor.’’
“The main benefit from looking at the relationship between shorter and longer dated bonds is that it can provide some insight into trading levels a couple of months out, rather than five years from now. Making predictions that are more than a year away is little more than guesswork. The relationship of shorter and longer dated bonds really only helps with understanding how investors are anticipating short term price reactions.”
Lexington Partners together with AlpInvest Partners have announced that they have entered into a definitive agreement to acquire JPMorgan Chase’s interests in approximately 50% of the portfolio companies currently held by One Equity Partners, JPMorgan Chase’s principal private equity unit. Terms of the transaction, which is expected to close by year-end, were not disclosed.
The OEP professionals will form a new private equity investment advisory firm, OEP Capital Advisors, and become independent from JPMorgan Chase once the sale is completed. OEPCA will manage the portfolio being sold by JPMorgan Chase, as well as the investments being retained by JPMorgan Chase.
“Lexington is pleased to partner with One Equity Partners to acquire a significant portion of JPMorgan Chase’s interests, and to support the future investment activities of the OEP team,” said Brent Nicklas, Managing Partner of Lexington Partners.
“We view this as a great opportunity to partner with one of the industry’s leading private equity firms,” said Tjarko Hektor, Managing Director of AlpInvest Partners.
“We look forward to delivering great long-term value to these two leading alternative investment management firms,” said Richard M. Cashin, Chairman and Chief Executive Officer of One Equity Partners. “We also thank JPMorgan Chase for their partnership and support of many years, enabling us to build the business we have today.”
The transaction is not expected to have a material impact on JPMorgan Chase’s earnings. J.P. Morgan advised on the sale.
Foto: roberthiggins, Flickr, Creative Commons. Los inversores, ¿incapaces de beneficiarse de la habilidad de los mejores gestores?
In 1973, Princeton economist Burton Gordon Malkiel famously pointed out that a blind folded money manager throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts. He was translating into layman’s terms research that suggested that most investors would do better investing in index funds than in actively managed funds. His conclusion was accurate, but research from Stanford Graduate School of Business, “Measuring Skill in the Mutual Fund Industry”, explains why no one — especially financial policymakers — should jump to the conclusion that active-fund managers have no superior investment skills. Over time, people have used the truism about index funds to mistakenly conclude that mutual fund managers have no skill, and that it is impossible to ever beat the market.
In fact, research by Jonathan Berk of Stanford Graduate School of Business and Jules H. van Binsbergen, formerly of Stanford and now at Wharton, suggests that the typical mutual fund manager is persistently skilled, and that top performers are especially good. It’s just that the market is so hypercompetitive that most investors can’t benefit from the skill — it is competed away too quickly as money pours into emerging managers’ funds. The managers and their companies, rather than investors, capture the value of the total market earnings and fees charged to investors.
For policy makers, the research suggests that mutual fund managers have been unfairly castigated. If we confuse the questions of how skilled mutual fund managers are with how much individual investors can benefit from their skill, we risk making poor decisions about how to regulate and set policy in finance.
Measuring Investment Skill
Though conventional wisdom holds that mutual fund managers are unskilled, they are some of the most highly compensated members of our society. The researchers began looking into how that could be.
The basic economic principle of rents holds that someone cannot earn a “rent” — a wage above costs, in this case — unless they possess a desired skill in short supply. Though there can be distortions in the market, such as government incentives or penalties that might explain the high incomes, it seemed impossible that mutual fund managers would earn such high wages without possessing any skills at all. “We then asked ourselves a basic but crucial question: Could we be measuring skill incorrectly?” Berk says.
Many people have used gross alpha — the industry term for returns above a benchmark of diversified stocks, such as the S&P 500, and before fees charged to investors are deducted — as a proxy for investment skill. The researchers offer the example of Peter Lynch to show why looking at skill this way could be a mistake. In his first five years managing Fidelity’s Magellan Fund, Peter Lynch had a 2 percent monthly gross alpha on average assets of about $40 million. In his last five years, his gross alpha was only 20 basis points per month, but on assets that ultimately grew to more than $10 billion.
“Based on the lack of persistence in gross alpha, one could mistakenly conclude that most of Peter Lynch’s early performance was due to luck, rather than skill,” Berk and van Binsbergen write. But the skill is still there, which you can see when you take into account how much money Lynch actually made from the funds he invested. The value he extracted from financial markets went from less than $1 million per month in his first five years to over $20 million per month in the last year.
If not gross alpha, then how ought skill to be measured? Berk says it is important to first recognize how a manager makes money. First, she buys low and sells high, to make money for investors. She then charges fees to investors for the returns. The money made by the manager — and the better representation of her skill — is the return she earns over her benchmark plus the fees that investors are willing to pay her, says Berk. As with the Lynch example, the measure needs to take into consideration the percentage fee charged and the size of the fund upon which the percentage is charged.
Funds Analyzed
Berk and van Binsbergen looked at a universe of 5,974 mutual funds from 1969 to 2011 and compared their results to comparable Vanguard index funds, which are alternative products that investors can actually buy. When they divided the mutual funds into 10 groups based on the amount of money managers have made in the past, as described above, the researchers found that the funds that made the most in the past also made the most in the future. That is, the ability to make money is persistent. The researchers also calculate that the average fund manager added $2 million in value each year.
Who Benefits?
If the higher earnings are persistent, why can’t individual investors benefit more from them? The market responds very quickly when a new manager with skill emerges, rewarding her with more assets to invest. As the fund grows, it is harder for the manager to make money for a variety of reasons: For instance, placing trades in large enough quantities for all the investors becomes more difficult. Over time, returns are lower on the larger funds. But the amount of money the skilled managers earn remains high, based on this analysis.
Does it matter that mutual fund managers are skilled if investors don’t benefit from the skill? Consider other professions. The Army, for instance, would not rate a doctor only on her rate of cures without regard to the difficulty of her cases, the number of people she is required to see every hour, and whether she is operating in a war zone. Conflating skill with results might lead to poor policy decisions. If mutual fund managers have no skill, then it follows that their high pay could be the result only of marketing — or worse, chicanery.
This research found the opposite story: Mutual fund managers walk an ever-narrower ledge in a highly competitive industry.
The research revealed another intriguing result: The mutual fund manager’s current compensation from aggregate fees and the value he or she added to the fund predicted the fund’s future returns even better than past value added. That suggests that investors pick up on tiny signals in the market to evaluate the potential for managers to outperform in the future. It’s possible that neither investors nor mutual fund managers have been as foolish as they have been portrayed.
Foto: Deintana3, Flickr, Creative Commons. Luz verde a los fondos de inversión a largo plazo europeos
Ireland, one of the biggest hubs for funds in Europe, will allow hedge funds based in the country to lend to companies under new rules drawn up by the central bank, the bank said.
According to Reuters, with banks in Europe still reducing their lending to households and corporations in the wake of the financial crisis, firms who are too small to issue bonds are increasingly seeking to borrow from other sources such as insurers, private equity firms and hedge funds.
Ireland has traditionally prevented hedge funds domiciled in the country from lending because regulators viewed it as too risky. But with access to credit a growing problem in Europe, the central bank has drawn up regulations that will allow specialized loan funds that it authorizes to extend loans internationally.
The central bank issued a consultation paper on the rules last Monday and expects them to be in place by the end of the year.
“In our view this is a sector that should be subject to some additional regulation,” said Martin Moloney, head of markets policy at the Irish central bank.
“If you have loan origination funds operating out of Ireland and lending into other countries there are potential cross border issues. We wanted to deal with that upfront and we have been very focused on the financial stability issues.”
The central bank is drawing heavily on new regulations devised to prevent a repeat of the banking crisis to regulate funds which lend money.
Under the rules, a loan fund will not be able to lend more than a quarter of its assets to one borrower and the amount of debt the fund can take on will be capped at a ratio of 1 to 1, meaning that if a fund has assets of 100 million euros it can borrow another 100 million euros.
The move by the Irish central bank comes as the European Central Bank and the Bank of England are trying to resurrect the European Union’s market for asset-backed securities as a way of getting credit flowing to smaller businesses and plug some of the gap left by banks.
CC-BY-SA-2.0, FlickrFoto: Thomas Depenbusch. Reforma del hukou: Un paso importante para reducir la inestabilidad social en China
Last week’s announcement that the Communist Party will reform the hukou, or household registration system, is an important first step toward reducing the contradictions and conflicts in Chinese society. According to Andy Rothman, Investment Strategist at Matthews Asia, hukou reform should also boost consumption and raise manufacturing productivity. In the most recent post of “Sinology”, an investment blog authored by Rothman, he explains what is a hukou, its purpose and the implications of this relevant reform.
Historically, the hukou system served several purposes for Mao. First, it restricted movement within the country. People born in rural areas received an agricultural hukou, which we will refer to as a rural hukou, while those born in cities received a non-agricultural hukou, which we will refer to as an urban hukou. It was very difficult for most Chinese to change their hukou designation, and for those holding a rural hukou, it was almost impossible to move to a city.
China’s Communist Party used the hukou system in support of the planned economy. In the late 1950s, about 85% of the population was rural, and the Party wanted peasants to remain in the countryside, to grow the grain and raise the animals necessary to feed the smaller urban population that was going to establish China’s new industrial economy. The rural population was also expected to be largely self-reliant and was given access to land for farming, but few other benefits.
Holders of urban hukous, in contrast, were assigned a job (there were no private firms) and provided housing, education, health care and pension benefits. Grain was rationed until 1992 and only urban hukou holders received ration coupons, which limited both the cost to the government and the ability of rural hukou holders to survive in the city.
Why hukou reform now?
Over the past decade, the Party often acknowledged the need to reduce formal discrimination against migrant workers and proposed some reforms, but there was very little progress.
Over the past year, however, the Party leadership appears to have recognized the risks of continuing to discriminate against a segment of the population, which is both large and vital to economic growth. Pressure to act has been growing: as migrant workers shift from being a “floating” to a more permanent urban population, they increasingly expect better non-wage benefits, including social-security coverage and other urban social entitlements such as free education and social housing that historically have been available only to workers with urban hukous.
After more than a year of debate and planning, last week the Party leadership launched its program for hukou reform. Little details were released, but Rothman expects the program to focus initially on migrant workers who are living with their family members in smaller cities, and the government announced a target of providing urban status to 100 million people by 2020.
Three key benefits
Matthews Asia anticipates the following benefits from implementation of the hukou reform program:
Reducing social instability risks. Launching a complex and expensive reform program is a sign that the new Party leadership is willing to take on big challenges. Hukou reform will also reduce the risk of social instability from the 234 million people living in cities who face de jure discrimination on a daily basis, particularly due to their ineligibility for social services and subsidized housing.
Boosts to labor supply and consumption. Reform of the hukou system may increase the supply of migrant workers in cities at a time when the overall labor force is shrinking, and should improve consumptionby strengthening the social safety net for migrants, which will increase transfer payments and reduce precautionary savings.
Productivity gains. Ending the current hukou restrictions should result in higher productivityin manufacturing and construction by reducing worker turnover, and by creating a better-educated workforce. One example of gains from converting temporary labor to permanent staff may illustrate the potential improvements that could result from lower turnover. A multinational company with large China operations told us last year that when they switched from temporary to permanent contract workers, their costs per unit rose by 4.5%, but output per worker rose 27%, accidents were down by half, and consumer complaints attributable to operations fell 30%.
You may access the full article, authored by Andy Rothman, through this link.
Andy Rothman is Investment Strategist at Matthews Asia.
As Millennials become more established in their careers, they are generally not on the radar of most financial advisors, reveals new research from the Principal Financial Group. According to The Principal Financial Well-Being Index: Advisors, a nationwide study of 614 financial advisors conducted online by Harris Poll for the Principal Financial Group in the second quarter of 2014, only 18 percent of financial advisors surveyed are targeting clients in Generation Y, and 57 percent of advisors prefer new clients with assets of more than $250,000.
The Principal Financial Well-Being Index: Advisors surveyed financial advisors nationwide including independent broker/dealers, wire house and regional brokerage firms, insurance agencies, independent wealth management firms, banks and independent asset management firms. The Index is part of a series of quarterly studies commissioned by The Principal Knowledge Center examining the financial well-being of American workers, business owners and advisor opinions and practice management.
According to the Index, at least three out of five financial advisors surveyed are targeting Baby Boomers (64 percent), affluent/high net worth individuals (64 percent), or business owners (62 percent). In fact, only 30 percent of American workers overall work with a financial advisor.
“This research illustrates the enormous opportunity for up-and-coming advisors to build relationships with underserved Millennials, who are in a growing phase of their careers and income potential,” said Tim Minard, Senior Vice President of Distribution at The Principal.
So what prevents Millennials and other workers from seeking the help of a financial advisor? The study found that 29 percent of advisors surveyed report that fees and costs are the biggest barrier, followed by fear (16 percent) and people thinking they can do it on their own (10 percent).
Many of these financial advisors reported that clients tend to live beyond their means (22 percent), don’t save enough (15 percent) and do not start to save early enough in their careers (11 percent). The majority of advisors (52 percent) indicate that no more than one in four of their clients begin saving early enough in their career to actually achieve the recommended level of retirement savings.
“One of the biggest challenges advisors face is helping clients try to catch up when they didn’t start saving for retirement in the early years of their careers,” Minard said. Financial professionals are able to easily demonstrate to clients the power of early savings and the impact it has on their retirement nest egg.”
