Insights into the world of high- and ultra-high net worth investing
September 22, 2009- Vol 3, Issue 38
One of the most provocative sessions
at last week's Schwab Impact conference was given by Dan Ariely, who deftly summarized his
current research in the important field of behavioral finance. Ariely's message was that, no matter
how good their intentions or how deep their experience, people - investors specifically - consistently
make the wrong decisions. They behave irrationally, and predictably
Achieving operational scale is
one of the biggest challenges Registered Investment Advisors (RIA) face
today. In a new report produced by Aite Group, LLC and published by
Envestnet, advisors responded to a survey that they believe they could save time on many of their most important tasks
(e.g., financial planning, proposal generation, customer acquisition, etc.)
if they had a greater degree of technology integration available in their
practice. (Source: Aite Group's survey of more than 200
financial advisors in 2008) We thank Envestnet for their sponsorship.
Advisors today operate in a very different world from twenty
years ago. Dan Richards discusses one of the most significant changes - the shortening of attention spans - and
the resulting shift in what it takes to
Instead of mixing value and growth stocks, investors would be
far better served by combining value and
momentum stocks, according to Cliff
Asness, co-founder and Managing Principal of AQR
Management. In fact, momentum has
"kicked butt" when compared to growth over the last 80 years,
More articles below...
While health care remains the hot topic on Capitol Hill, another
piece of legislation is poised to gain similar attention. Regulating carbon emissions to address
the threat of global warning is a top priority of the Obama administration,
and its favored approach is to create a "cap-and-trade"
market. John Parsons, an expert in the field, explains how this financial market solution might work.
Few of us respond as easily or effectively as
we might like in the face of disaster. In this guest contribution, Mariko Gordon takes a look at
why, and offers three things to keep
in mind the next time you're in the midst of a crisis,
financial or otherwise.
Kristen Luke explains three ways advisors
can promote their practice through Facebook: utilizing a basic
personal profile, creating a business page and creating a group page.
In a letter to the Editor,
a reader responds to our article last week, Mohammed El-Erian: We Have Not
Reached Escape Velocity.
reported two weeks ago on the results of the Business Building for Wealth Managers and
Investment Advisors Survey, co-sponsored by Advisors Trusted
Advisor and Advisor Perspectives. Readers responding by completing the
whole survey were entered into a drawing for Advisors Trusted Advisor's 7 Steps to Effective Business
Building for Financial Advisors program. We're happy to announce the
winner:John Heeckt of Financial Sources, Inc..
Lastly, we highlight submissions to Advisor
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Advisors who understand the natural biases in individual behavior can frame
questions that will steer their decision-making process in a more rational
- and economically better - direction.
Predictably Irrational - How
Investors Frame Decisions
Report Identifies the Value of Technology Integration for Advisors
A new study
highlights a significant increase in advisor efficiency and a reduction in
administrative burdens with full technology integration at advisory
services firms. Integrated RIA practices are able to
spend the majority of their time (52%) with clients.* Learn more
about the power of technology integration and how Envestnet can help you
make your advisory business more productive. (*Source: Aite Group, July
New Report Identifies the Value of
Technology Integration for Advisors
Communicating in a Sound Bite World
Researchers offer lots of explanations for reduced attention spans. Some
attribute it to the impact of television and the "CNN effect",or
to the role that computers and video games have played. Still others
talk about it as a response to how overloaded we are with the volume of
communication we receive. But no matter how you cut it, it's
indisputable that attention spans are shorter than they were twenty or even
ten years ago. And this is not only true our younger generation - it
applies to us all.
Communicating in a Sound Bite World
Momentum Move Your Portfolio?
worked in the past, and investors would have been better off with a
combination of value and momentum than with a combination of value and
growth (even after trading costs and taxes). That much is certain,
but can one expect similar outperformance in the future?
Will Momentum Move Your Portfolio?
Financial Market Solution to Carbon Emissions
John Parsons believes cap-and-trade is the best approach to addressing
carbon emissions. He describes two other successful attempts at
regulating emissions through a cap-and-trade approach: the US
has had a sulfur dioxide (SO2) market since 1995 and the European Union has
had a CO2 market since 2005. Success is far from guaranteed, however,
and Parsons also speaks about a number of problems posed by the
Waxman-Markey bill currently under consideration.
The Financial Market Solution to
Disaster Management, The Green Beret and Lamaze Way
Our first reaction to disaster is often denial and a lack of urgency (not
panic as most of us assume). There's a delay ... a milling around ...
a gathering of belongings. "The public totally discounts low
probability high consequence events. The individual says, it's not going to
be this plane, this bus, this time," according to disaster expert
Disaster Management, The Green Beret
and Lamaze Way
Ways to Market Your Business Using Facebook
Using Facebook as
a marketing tool is the right strategy for some advisors - those with large
social networks or those involved in certain community activities.
Three Ways to Market Your Business
A reader responds to last week's article, Mohammed El-Erian: We Have Not
Achieved Escape Velocity.
Letter to the Editor
Highlights from Advisor Market Commentaries
In the Wall Street Journal of September 17, 2009 (John Cogan, John Taylor,
and Volker Wieland: The Stimulus Didn't
Work - WSJ.com) the title is in past tense, implying the $787
billion package has been fully utilized and now we can determine the
success or failure of this big bill. The merits and flaws of this opinion
piece have been published and more will be written. I would like to add to one important fact which
underscores that the authors need to hold their horses until more evidence
is available to conduct an objective analysis.
"The Stimulus Didn't Work"
- An Overlooked Fact that Needs Mention by Asha Bangalore of Northern Trust
Option-ARMs are beginning to recast (contrary
to popular lexicon, recast represents a change in payment; reset refers to
a change in interest rate), with Iowa Attorney General Tom Miller going
insofar as to say that payments on
option-ARMs will 'explode' in the next year to two years. An
acceleration in the recast schedule is expected in 2010 and 2011, although
no one is entirely confident of how big of a problem we will face.
Fitch points out that 88% of the $189 billion securitized option ARM market
has yet to recast while Barclays argues that with nearly 40% of option ARM
borrowers already delinquent or in foreclosure, the natural attrition rate
will shrink the market rapidly. The numbers released from Fitch only
address securitized loans, not those tucked away on bank balance sheets -
part of what makes Barclays move all the more suspicious.
The Recession Is Likely Over! by the Investment
Research Team at Fortigent
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