Friday, November 1, 2013

FINANCIAL ADVISOR INSIGHTS: Why One Advisor Turned Down Money Managers And Went For ETFs

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Friday, November 1, 2013

FINANCIAL ADVISOR INSIGHTS: Why One Advisor Turned Down Money Managers And Went For ETFs

FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.

Why One Advisor Turned Down Money Managers For ETFs (The Wall Street Journal)

Vern Sumnicht, founder of Wisconsin-based Sumnicht & Associates has used exchange traded funds (ETFs) to develop "portfolios that are more transparent and have fewer fees," he writes in a new Wall Street Journal column. After using money managers for larger accounts and managed mutual funds for smaller ones, for over 20 years, Sumnicht writes that over that time they "underperformed the index by about 2% on average--and that was equal to the fees associated with these accounts."

He founds ETFs to be more helpful to his clients. "An ETF never has to invest cash or sell stock to redeem shares. They don't have the fees money managers and mutual funds charge. They also offer great ways to allocate portfolios. As I began exploring them further, I saw that we could use ETFs for fixed income investing and more recently, alternative investments."

'It's Getting Frothy Man!' (Bank of America)

Investors poured $12.4 billion in global equity funds in the week ending October 30. $4 billion went to long-only funds. "Another $8-9 billion of inflows to long-only equity funds over next 2 weeks would trigger a contrarian 'sell' signal," writes Michael Hartnett of Bank of America Merrill Lynch in a note titled 'It's Getting Frothy Man!'.

"A breach of the 8.0 level on our Bull & Bear Index would make us more negative short term. Cash remains high, 4.4% in our October Fund Manager Survey, and needs to fall below 4.0% in the November survey to help trigger a tactical 'sell signal'."

BAML Bull & Bear Index

Advisors That Compare Themselves To Their Competition Have A Better Chance Of Staying On Top (Investment News)

Speaking to advisors at the Fidelity Inside Track conference, Mathias Hitchcock, vice president of Fidelity Institutional Wealth Services said advisors are more likely to stay on top if they compare themselves to their competition.

Megan Durisin at Investment News adds that some of the other key takeaways from his lecture are 1. Top firms are "more likely to bundle services in their overall management fees." 2. "High-performing firms have an average of 80 clients per adviser, versus 64 clients per adviser at other firms. The firms also manage an average of $113 million in assets per adviser, versus $75 million per adviser for other firms." 3. "72% of top firms close business in two or fewer meetings. That compares to 53% of other firms."

UBS Poaches $3 Billion Team From Merrill (FA Mag)

UBS poached a $3.1 billion team of four advisors for Merrill Lynch, reports Dan Jamieson of FA Mag. Craig Chiate, Mark Binder, Glenn Oratz and Scott Brown joined on Tuesday.

Eight other advisors have joined UBS as well. These advisors are James Chiate, Anthony Guinane, who moved to UBS' Irvine California office. Chris Gaal, Jeff Hamilton, James Axelson, and Barry Porter moved to the Newport Beach, California office. Scott Harries is at UBS' LA office and David Mandel is at the Encino, California office. These advisors shared clients with the Private Banking and Investment Group (PBIG) team of Chiate, Binder, Oratz and Brown. "Landing the PBIG team is seen as a coup for UBS. The PBIG unit serves the crème de la crème of advisors at Merrill," writes Jamieson.

If You Were A Fund Manager, Here Was The Key Decision You Had To Get Right This Year To Beat The Market (JP Morgan)

JP Morgan thinks 2013 is shaping up to be better for active managers, and that there was one particular decision that helped some beat the market.

"2013 is on track to be an improvement for active managers. Notably, there are now more Russell 1000 Growth managers beating the benchmark by at least 250bp than missing it (26% vs. 25%, respectively). And the overall net diffusion of beats less misses at -600bp (net missing), is the best figure since 2010. We believe some of this outperformance reflects whether a fund owned Apple (AAPL-OW). The stock is the largest S&P 500 weight (2.8% S&P 500; 6.8% of NASDAQ) and is flat YTD, subtracting nearly 100bp of performance from the market overall."