Tag Archives: financial-advisors

Why FAs Should Hedge Against Declining AUM: Financial Advisors’ Daily Digest

If a market downturn shrinks your AUM and your clients flee to cash (thus, further reducing your fee basis), you’re looking at a serious reduction in revenue. SA contributor Robert Boslego puts it this way: “Although RIAs with AUM revenue models rarely think that they are in the commodity business, their income fluctuates with asset prices just as an oil producer’s revenues fluctuate with oil prices.” While not predicting the timing of the next downturn, Boslego suggests advisory firms can take actions now to protect against this revenue-jeopardizing eventuality . Indeed, your humble digest editor has in like fashion hedged against his own impending absence during the upcoming Passover holiday by recruiting the resourceful and talented Robyn Conti , who has graciously volunteered to supply advisors with relevant links over the course of the next week. If you are not already subscribed to Robyn’s feed, please do so now – if for no other reason than to receive her own highly engaging bimonthly digest addressing income issues. Below, please find links of interest to advisors, starting with a fascinating post on the transition from accumulation to distribution that we discussed yesterday (you might want to check out all the interesting reader comments):

Hedge Fund Employs Robot ‘Analysts’ To Pick Stocks: Financial Advisors’ Daily Digest

We currently have robo-advisors providing broad financial planning guidance. As the industry adopts higher-level artificial intelligence capabilities, the robots are engaging in higher level data analysis – only without the need to fly business class, quip Bobby Monks and Kathleen Campion. “For example,” they write, “when you ask Kensho’s program ‘What happens to car firms’ share price if oil drops by $5 a barrel?’ it will scour financial reports, company filings, historical market data and the like, and reply in seconds. That’s what a human analyst would do, but it would take longer and would be more subject to error and bias. Another consideration: the machine has no tortured private life nor venal career goals to color decision making.” And speaking of robos, topping our list of news and views for the day is: