Gaining Perspective

The wealth management industry is consolidating. A global pandemic did not slow the pace of merger and acquisition activity, with advisory practices being bought up by roll-up firms, banks and larger advisory firms. Some of the activity was fueled by private equity money and cheap debt financing abetted by the low-interest rate environment. Some of the activity is from publicly traded firms. Here to talk with me today about this and other key trends in the wealth space is Maura Creekmore.

Over the past year there has been a groundswell of interest in passive ESG ETF products as investors look to fill the core areas of their investment strategy with more sustainable solutions, while gaining substantial returns. Despite the increased interest, financial advisors and retail investors have been slower to embrace this generational-driven change due to a lack of education or by not having the investment solutions at the ready.

Fear of inflation and nerves around the all-time equity market highs are driving investors to seek protection from the volatility markets experienced during the pandemic. More importantly, investors are starved for income.  We are recording this in mid-July, and the 10-year Treasury is yielding only 130 basis points. Here to talk about a solution to those challenges is Troy Cates.

At the beginning of July, Equitable announced the addition of customized managed accounts and a cash balance plan to its group retirement plans for small-to-medium sized businesses. These additional services will allow business owners and their employees to further tailor their investment portfolios and allow business owners to lower their tax burden.

These solutions come at a critical time for small-to-medium sized business owners saving for retirement. Research conducted by Equitable showed that while almost 40% of small businesses have reported a loss of income due to COVID-19, only 12% have stopped or lowered their retirement contributions and only 2% pulled money out of the markets.

My guest today, Rick Bookstaber, has held chief risk officer roles at Morgan Stanley, Salomon, Bridgewater, and the University of California Regents Pension Fund and served at the U.S. Treasury in the aftermath of the 2008 crisis. He is the author of The End of Theory (Princeton, 2017) and A Demon of Our Own Design. He is founder and head of risk at Fabric RQ.

The Boston Consulting Group just released its 19th annual Global Asset Management report. The report, The $100 Trillion Machine, takes a look at some of the most promising ways that asset managers can become private market investment leaders in a post-pandemic economy, including developing products for retail investors, gaining an edge in advanced data and analytics, and moving to the forefront of ESG strategies for private-market portfolios.

Early adopters to VIX options, Brian Stutland and Joe Tigay were active pit traders who grew the firm into the largest electronic market makers of VIX options at a time when VIX popularity was second only to the SPX. The team identified a knowledge gap for advisors wanting to hedge for their customers versus experienced traders. Using their expertise, the team forged Equity Armor Investments into an advisory firm in 2011, developing strategies and supporting advisors with access to professional VIX hedging knowledge that few industry professionals possess.

With the SECURE Act 2.0, Improving Access to Retirement Savings Act, looking like it will become law, 401(k)s and other retirement plans finally have a chance to recover some of the ground lost as defined contribution plans eclipsed defined benefits. 

Charitable giving is triggered by one of five events, when clients have:

1.  Experienced a financial life-changing liquidity or similar event;

2. Had a life-threatening health situation themselves or have a family member who has, and they want to honor them;

3.  Expressed an interest in talking to the next generation about their wealth;

4.  Stated the intention to establish a legacy; or

5.  Volunteered their time or sit on a nonprofit board.

Today's market presents a unique set of challenges to building robust portfolios. Advisors have a wide range of client preferences and needs that those portfolios must address. My guest, Eric McArdle, is here to discuss how to identify the most critical portfolio challenges, both market-based and client-based, and how to directly address them by deploying options.