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FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Trust Levels In The Wealth Management Industry Spiked In 2014 (Capegemini/RBC Wealth Management)
The trust of high net worth individuals (HNWI) in wealth managers climbed 13.5 percentage points to 74.7% in Q1 2014, according to the latest World Wealth Report from Capegemini and RBC Wealth Management. Trust levels in firms climbed 15 points to 76.4%. "European HNWIs were a big driver behind the overall increase in trust, registering a 17.8 point increase in trust in financial markets and a 19.2 point increase for regulators," according to the report.
With One Word, Janet Yellen Torpedoed A Key Catalyst For Market Volatility (Business Insider)
Following the Federal Open Market Committee (FOMC) announcement yesterday, Fed chair Janet Yellen said recent inflation data has been noisy. Morgan Stanley's Matthew Hornbach called that the "biggest surprise of the FOMC press conference." That characterization of inflation served to negate the market-moving ability of the data point. And Wall Street has clearly been bored by low volatility.
"The Fed’s characterization of recent inflation readings as “noisy” and the preponderance of evidence to the contrary leave us feeling as if the Fed is likely to dismiss most economic data deviations from slower-moving trend processes," said Hornbach. "Under the “dismissive” framework, implied market volatility should increase less for a given economic surprise than under our previous framework – a “reactive” framework based on the idea that the Fed would be more data dependent. As a result, we turn neutral on implied volatility."
Merrill Vet Heads To Cantor Fitzgerald To Help Grow Wealth Management (Business Insider)
Cantor Fitzgerald Wealth Partners has hired Scott Hotham from Merrill Lynch to help grow its wealth management business. Hotham had was managing director and head of institutional client solutions and strategy at Merrill Lynch. Prior to that, Hotham was regional managing director of the South Atlantic Region at Merrill overseeing 1,400 employees across six states. "As we continue to expand, Scott and other seasoned professionals who are joining our platform add tremendous value to our clients, strengthen our ability to attract other talented advisors, and expand our breadth of services," Stan Gregor, CEO of Cantor Fitzgerald Wealth Partners said in a press release.
What The Fed's Latest Outlook Means For Investors (BlackRock Blog)
On Wednesday, it was revealed that mean expectations for the benchmark Fed funds rate see it at 1.2% by the end of 2015, and 2.5% by the end of 2016. The longer-term the Fed reduced its terminal target Fed funds rate projection to 3.75%. But what does all this mean for investors? "An investor can think of the federal funds rate and QE as a gas pedal," writes Matthew Tucker in a piece for BlackRock Blog. "…We still don’t expect the Fed to hit the brakes and push the fed funds rate above the “longer run policy rate”; instead we expect continued declining acceleration."
Citing his colleague Rick Rieder, Tucker points out that this outlook offers two key opportunities for investors.
1. "Long-end municipals in the U.S. Munis took a considerable hit a year ago when interest rates rose sharply, but have gained momentum in the past two quarters as interest rates have declined and sentiment has improved; we believe there is value to be found here as a source of income in a continued yield challenge environment."
2. "The housing sector continues to improve, and while its recovery has slowed recently, we believe the upward trend will continue. The continued low level of market volatility is also good for MBS performance."
The Only Short-Term Strategy That Makes Sense In The Current Market (The Wall Street Journal)
This is a difficult time for advisors helping their investor search for yield. "The longer the duration of the bond, the greater the risk that its value will decline," writes Hugh Lamle, president of M.D. Sass Investors Services, in a WSJ column. "Short-term bonds are less susceptible to that risk, but consequently, their yields tend to be very low." But he does argue that mortgage-backed securities are an exception.
"Currently, these securities yield around 1.85% to their weighted average duration, almost twice that of comparable securities that are not U. S. government mortgage-backed issues," he writes. "What's more, mortgage-backed securities pay monthly interest which means they're generating cash that you can frequently reinvest monthly at potentially higher rates when and as they eventually rise. The ability to redeploy that cash into higher-yielding bonds helps protect against the potential damage done by rising interest rates. Given those advantages, it is just about the only short-term strategy in today's market that really makes sense."