Financial Advisor Reading List: September 2023

Sep 8, 2023 | Blog Posts

Picture of leaves

Summer is over; on to fall! Though with temps across the nation it seems we have more than a few dog days left. 

Regardless, the working world is back – vacations are over, kids are back to school, and the office often has the best AC. 

While you’re staying out of the heat, take the time to read up on what’s happening this September in Financial Advisor land. Here are suggestions from our team at CircleBlack.

1. Schwab execs declare RIA transition from TD a success

Source: InvestmentNews

Perhaps the biggest story of the month is Schwab completing the conversion of TD Ameritrade’s accounts, which, according to the Schwab team (and confirmed on our end by the experts here at CircleBlack), has gone well. “‘Today we can absolutely declare victory,’ said Tom Bradley, managing director of Schwab Advisor Services. ‘We’re not seeing any issues of any significance.’”

After being planned for over three years, “over the weekend, 3.6 million accounts and held across 7,000 registered investment advisors finally moved from TD to Schwab Advisor Services, the most significant step toward completing the integration of Charles Schwab Corp’s $22 billion acquisition. It’s one of the largest data migrations attempted in any industry, let alone in financial services, and countless hours from both Schwab and RIAs went into making the transition go off smoothly.”

“One flub reignited an old concern about how Schwab’s retail brokerage business competes with financial advisors. An email welcoming TD Ameritrade Institutional clients to Schwab talks about trading and wealth management services without mention of the RIA that brought those clients.”

More to come on this story, but this one was mostly smooth sailing for now. 

2. Emerging RIA Trends to Watch

Source: Nasdaq

We aren’t surprised to hear about the increased focus RIAs are putting on the technology they use, especially the need for a ‘single-pane-of-glass’ view from which to manage their business. We’ve been singularly focused on providing this for years.

“We also can’t ignore the need for highly functional technology platforms with client and asset data all in one place. It is imperative that RIAs understand business data in order to stay competitive with large and growing integrators.”

Also included are insights into how to connect with the next generation of investors, a large part of which will be hiring the next generation of advisors. 

“Connecting with next-generation clients outside of current client networks often starts with having younger advisors on the team. Next-gen clients tend to feel more comfortable with advisors who understand their current life stage. We have seen firms be successful in using online education – webinars or blog posts – to engage with prospective clients who are still in the accumulation phase.”

3. How Big A Gamble Is Monte Carlo For Advisors?

Source: Financial Advisor

It’s perhaps not a surprise that a modeling tool named after a gambling mecca might not be reliable, but there’s some fun background to its name. It was a code name intended to hide its true nature; the original work on these algorithms was done in the Los Alamos National Laboratory by Stanislaw Ulam as part of his research into building nuclear weapons – you may have him depicted on the big screen recently, in Christopher Nolan’s Oppenheimer.

The name was not intended to suggest that the model was risky or a gamble. However, like many algorithms, it suffers from a ‘garbage in, garbage out’ problem. And if you don’t know you’re putting in bad data, you won’t know you’re getting bad results! As Financial Advisor points out, a false sense of confidence is the real enemy here.

“Yet as helpful as they may be for calculating and comparing degrees of risk, some experts say their value can be overestimated and their limitations and shortcomings misunderstood—with disastrous consequences.”

“Besides shifts in market assumptions—such as whether interest rates are headed up or down—the simulation can’t predict how clients’ lives may change.

‘Monte Carlo does not plan for Armageddon or even Covid,’ said Harold Evensky, founder of Evensky & Katz/Foldes Wealth Management in Lubbock, Texas.”

“Not that Monte Carlo simulations should be ignored. ‘You would be a fool not to use the tools that are available to help make decisions,’ said Greg O’Donnell, founder and CEO of O’Donnell Financial Group in San Rafael, Calif. ‘At the end of the day, however, someone has to make a decision no matter what the Monte Carlo simulation says.’”

4. The income is back in fixed income

Source: RBC

With yields from bonds increasing over 100% in the last three years, fixed-income components of portfolios are potentially stronger than they’ve been in over a decade, according to RBC, and this may lead to a significant shift in the optimal way to balance a portfolio.

“We believe fixed income should take on a more prominent role in a balanced portfolio going forward because the yields available today approach, and in some cases exceed, the return targets in many financial plans. The return on a basket of bonds equally weighted between governments, investment-grade corporates, and high-yield bonds has risen above six percent for the first time in more than a decade; this approaches the return targets of many balanced portfolios.”

“Historically, periods between the final interest rate increase in a U.S. rate hiking cycle and the Federal Reserve’s first rate cut have seen bonds perform well relative to equities. While forecasting future central bank actions is always difficult, we think it is likely that we are nearing this point, given the magnitude of rate hikes that have already occurred and the fact that several leading economic indicators suggest the economic cycle is approaching its later stages.”

We’re sure we’re not alone, feeling that a little bit more stability in our portfolios will be most welcome! 

5. Reuters: US securities regulator charges 5 investment advisers with custody rule violations

Source: Reuters

The SEC has handed out over $500,000 in fines to 5 firms over custody rule violations. Manny Riskin, played onscreen by Jon Favreau in The Wolf of Wallstreet, had a particularly colorful warning about getting on the wrong side of the SEC, which isn’t fit to print here. But five firms learned it the hard way.

“The violations were related to rules for custody of client assets and included issues such as failing to conduct required audits and deliver audited financial statements to investors in a timely manner, the SEC said in a statement.

The firms – Lloyd George Management (HK) Ltd, Bluestone Capital Management LLC, the Eideard Group, Disruptive Technology Advisers LLC, and Apex Financial Advisors Inc – did not admit or deny the SEC’s findings.”

You can read the full SEC release here.


About CircleBlack

CircleBlack is an all-in-one technology platform for relationship-focused financial advisors. To learn how our software can help you build, manage, and grow your wealth management practice, get in touch to request a demo.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.

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