So far this year, more “mom-and-pop” broker/dealers are dropping out of the business compared to this time last year, according to new data from the Compliance Department Inc. I got on the phone today with Director of Business Development David Alsup, who said the little guys are dropping out because their trade volumes are taking a dive, and they can’t meet the minimum requirements to stay in business.
According to Alsup’s research, 11 firms that have clearing arrangements went out of business in April of this year, much higher than normal. Alsup said he typically sees about three to four firms going out per month.
But Alsup believes it’s more significant to look at several months of data. If we look at the trend over the first four months of 2012, we find that 53 firms closed up shop, compared to only 25 firms that went out during the first four months of 2011. The firms that have dropped out in the last couple months have indeed been smaller firms, ranging anywhere from two to 75 advisors, Alsup said. Read the rest of this entry »
Cerulli: Alternatives are not an "if you build it, they will come" scenario.
Over the last couple years, we’ve written time and again about the mainstreaming of alternative investments with the rise of alternative mutual funds and ETFs. But data released by Cerulli Associates gives even more credence to the argument that alternative mutual funds will one day likely stand side-by-side with traditional investments such as stocks and bonds.
According to a Cerulli report, 70 percent of retail asset managers said they believe alternative products to be as important as or more important than other initiatives. As it is now, alternative mutual funds account for 2.8 percent of overall mutual fund assets. But Cerulli projects this to grow to 9.7 percent of all mutual fund assets in five years, and 15.8 percent of assets in 10 years. Read the rest of this entry »
Active ETFs have been making a big splash lately, especially with the recent launch of PIMCO’s Total Return ETF (ticker: BOND). But a new report by Lipper finds that active ETFs are more expensive than index funds, but so far haven’t outperformed pure index ETFs over the long term.
That’s typically the argument for actively managed mutual funds—you’re paying more for them, but they make up for it in higher performance. Of course, that point is also arguable. Studies show that actively managed funds typically underperform their passively-managed brethren.
A recent Edward Jones survey of 1,006 Americans found that advisors with military experience can be more appealing to potential clients. (We wrote about it in the May 2012 issue.) But a former advisor, who has military experience, says nothing could be further from the truth.
On his blog—the Alfidi Capital Blog—Anthony Alfidi voices his frustration over the Ed Jones survey, saying that nearly every prospect he encountered ignored his military background as a selling point. Alfidi now runs his own investment research firm. Read the rest of this entry »
After being quiet throughout the winter, the Occupy Wall Street movement once again hit the streets Tuesday in their own version of “May Day” in many cities around the world—New York, Chicago, San Francisco, London—to name a few. Many commentators are questioning whether the event saved the movement, and whether it has longevity this time around.
In December, financial advisors Eric Zoldan of JHS Capital and Tom Dowling of Aegis Capital went down to Wall Street to observe the protests firsthand and try to find out more about what the protesters wanted. At the time, they found that the protesters’ primary gripe was with Washington policymakers, not Wall Street, and these FAs’ believed the movement could move to Washington, D.C.
Given that, I decided to ask my cousin Jason McDaniel, who happens to be a professor of political science at San Francisco State University, for a political perspective on the movement. He’s highly quoted in the mainstream media, and he makes some very good points. Just to note, he’s not anti-Occupy Wall Street, but he is disappointed by the lack of political engagement from the movement. He hopes that will change this time around. Read the rest of this entry »
Non-traded REITs have been getting a lot of bad press lately, as valuations for some have dropped dramatically. And now the industry is being looked at closely by regulators—including FINRA and the states—as to how broker/dealers and advisors are using non-traded REITs, and how fees and performance should be disclosed.
I recently spoke with Kevin Hogan, president and CEO of the Investment Program Association, who had seven regulators at his organization’s spring conference last month. He gave me a brief update on the regulatory environment for non-traded REITs. Comment letters on FINRA’s regulatory notice 12-14 were due April 11, and the agency is currently reviewing comments. The next step, Hogan said, is for FINRA to make a recommendation to the SEC, which he expects to occur in late summer, early fall. Read the rest of this entry »
For the last year, retail investors have been retreating from U.S. equity mutual funds like no other, redeeming $121 billion from these funds in the last year. But there is one bright spot in talking to clients about mutual fund investing: Fees are coming down.
According to Morningstar, the average mutual fund expense ratio was 0.75 percent in 2011, down from 0.77 percent in 2010. Domestic equity fund fees were even lower, averaging 74 basis points in 2011, from 78 basis points a year earlier. Read the rest of this entry »
LPL's Esther Stearns will lead the new subsidiary.
LPL Financial announced today that it will launch a new subsidiary—LPL New Venture—which will provide services to novice advisors and those who are primarily focused on mass-market clients. Esther Stearns has given up her duties as president and chief operating officer to head up the new subsidiary, the firm said.
In effect, LPL has reorganized its senior leadership, naming Robert Moore president and COO starting May 1. Moore currently serves as the firm’s chief financial officer, and will continue to carry out those duties until a replacement is found.
Meanwhile, Bill Dwyer, president of national sales, will now oversee the firm’s sponsor relations function.
“The launch of LPL New Venture will better prepare the company to take advantage of significant opportunities arising from changing dynamics within the financial services marketplace,” Stearns said, in a press release.
Beyond that, the firm didn’t say much about the new venture, except to say that more details will be shared in the coming months. We don’t even know what ‘mass market’ means. Will the new venture serve as a training ground for new advisors? As a way to attract young people into the industry? Could it be a move to target “core millionaires” at a time when everyone is obsessed with high-net-worth? We don’t know, but more is to come…
Chip Roame, managing principal of Tiburon Strategic Advisors
Whether you agree with him or not, Chip Roame, managing principal of Tiburon Strategic Advisors, is not afraid to tell you exactly how he sees it when it comes to the financial services industry. It was no different at this week’s Tiburon CEO Summit in New York. During his opening presentation Monday morning, Roame said of the 12 percent of wirehouse advisors that are changing firms in any given year, about 80 percent of them are fired.
“You can call that guy a breakaway broker if you want to,” Roame said. “I would call that guy a ‘broken-away broker.’”
Two-thirds of the breakaway brokers who leave on their own land at another wirehouse or regional because they get a big check, Roame said. Recruiting packages at the wirehouses can be as high as 350 percent of an advisor’s trailing 12-month production, he added.
The other one-third of advisors are going independent. But the wires are not naïve about the fact that they’re losing advisors. According to Tiburon data, the four wirehouses (UBS, Wells Fargo Advisors, Morgan Stanley Smith Barney, and Merrill Lynch) have shed almost 8,000 advisors over the past three years. That’s 13 percent of their sales forces.
In another one of Roame’s bold predictions, he said one wirehouse will launch a half-way house sometime this year, creating a model where the firm is partly independent and partly captive. Read the rest of this entry »
Chip Roame, managing principal of Tiburon Strategic Advisors, made a bold prediction today at Tiburon’s 22nd annual CEO Summit in New York: The self-serve channel is booming. Roame predicts that in 10 years, the number of discount brokerage branches and the number of bank branches will reverse themselves.
He expects bank branches to virtually disappear, and they’ll be replaced by small kiosk-type discount branches. Why? “Because where you need help and advice in person more is investment advice. It’s not in banking anymore,” Roame said.
Roame gave his keynote industry address this morning at the Ritz-Carlton in Battery Park. During the presentation, he said the financial services industry is stumbling all over itself at a time when consumers are losing money. Read the rest of this entry »
So far this year, more “mom-and-pop” broker/dealers are dropping out of the business compared to this time last year, according to new data from the Compliance Department Inc. I got on the phone today with Director of Business Development David Alsup, who said the little guys are dropping out because their trade volumes are taking a dive, and they can’t meet the minimum requirements to stay in business.
A recent Edward Jones survey of 1,006 Americans found that advisors with military experience can be more appealing to potential clients. (We 
After being quiet throughout the winter, the Occupy Wall Street movement once again hit the streets Tuesday in their own version of “May Day” in many cities around the world—New York, Chicago, San Francisco, London—to name a few. Many commentators are questioning whether the event 
Non-traded REITs
