Tag Archives: sa-gil-weinreich

The Fate Of Financial Advisors Part II: Financial Advisors’ Daily Digest

ETFGuide laments that DOL and the SEC are not protecting the public, just burdening advisors. Max says advisors can make a good living and gain professional satisfaction if they take the trouble to understand the nitty gritty around the financial concerns of niche professionals. For the average advisor, though, Six forecasts a homogenized, (lower) salaried future. Yesterday’s advisors’ daily digest generated a few, but quite pointed and intelligent remarks about “the fate of financial advisors” (our topic of discussion). ETFGuide ‘s main point is that the policies of public agencies, while meant to protect the public, generally have the effect of making business life intolerable. This is a widely shared view among advisors today. The next two comments — and this is the great thing about SA’s community of advisors — offered hope, perspective and practical ideas in the face of this reality. Max @mcorder.net sort of rolls up his sleeves and explains that while investors’ lives grow more complicated, there remains a paucity of competent advisors who have versed themselves in the day-to-day concerns of various niche clienteles. If you’re willing to in turn roll up your sleeves and learn about the personal financial issues of say, dentists, read dental trade magazines and perhaps contribute to them, you’ve got yourself a niche business which, as he says, doesn’t “need a whole lot of…clients to earn a decent living.” Underscoring the appeal of this proposal is the informed prognostication of another commenter, Six , who offers reasons why trends are heading toward salaried advisors at fewer and bigger firms with compressed compensation. Six anticipates an increasing standardization of highly vetted fiduciary advice. Advisors already weighed down under the yoke of a rules-burdened corporate environment might therefore want to work harder and sooner to foster the kind of practice Max described. There’s always room for a good advisor, right? Check out their detailed comments, and let us know your thoughts here! Herewith today’s advisor-related news and views:

How To Get Statistically Significant Alpha In A Hurry: Financial Advisors’ Daily Digest

MFS Investment Management argues active management can consistently deliver alpha; Mark Hebner says investors would be better off seeking beta. Ronald Surz says investors need not wait decades to determine statistically significant alpha; he offers “microwave alpha,” a quick way to measure manager skill. Jack Waymire gives five reasons why mobile-optimized websites are no longer a luxury for financial advisors. To frightened investors who sense something bad is due after a seven-year bull market and amidst a wobbly economy, MFS Investment Management’s commercials touting a “significant advantage to active management” may be striking just the right chord. These investment pros are working to reduce “downside volatility” and to “consistently deliver alpha,” says the investment firm’s one-and-a-half-minute commercial on the power of active management. But of course, not everybody’s having it. RIA Mark Hebner, a proponent of indexing, applies statistical tests to MFS’ fund lineup and suggests just one out of 87 funds has any alpha to offer (and even that one could be a fluke, Hebner further argues). He concludes that investors would be better served seeking beta. Hebner has previously argued that it could take something like a century to evaluate investment skill in a statistically significant way. Comes along SA contributor Ronald Surz, an innovative thinker, and proposes a method to deliver statistical significance in years rather than decades: “microwave alpha,” he calls it . This quick-cooking alpha is achieved through portfolio simulations: “The breakthrough determines statistically significant success in the cross-section rather than across time… A portfolio simulator creates all the portfolios the manager might have held, selecting stocks from a custom benchmark – thousands of portfolios… To state an extreme example, a return of, say, 1000% is significant, and you don’t have to wait 50 years to declare it significant.” With no further ado, we’ve got many other advisor-relevant stories to start your week with: Your comments on any of the above are, as always, most welcome below.

Why Active Management Spells Disaster For Retirees: Financial Advisors’ Daily Digest

Fidelity Contrafund (MUTF: FCNTX ), despite its generally positive reputation, represents a risk that retirees cannot afford to take in the opinion of Seeking Alpha contributor Eric Nelson, an advisor with Servo Wealth Management. The essential problem is that retirees have just one chance to get it right, and can’t afford the risks of style drift or underperformance that any active manager presents. Better to arm yourself with small- and value-tilted index funds, and critically, an advisor who will prevent client drift at just the wrong time, Nelson argues. We’d love to hear your thoughts on all this, in the comments section below. Note to readers: Financial Advisors’ Daily Digest will not be published on Thursday. But we’ve got a few extra links of advisor-related stories to hold you till Friday: