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As Markets Tumble, Financial Advisors Rethink Growth Prospects, Finds Natixis Investment Managers 2022 Survey of Financial Professionals

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  • Canadian financial advisors look for double-digit growth in their business, primarily driven by new assets from new clients.
  • Vast majority of client assets are now in model portfolios as focus of wealth management business transitions from portfolio management to holistic financial planning.
  • Advisors see generational wealth transfer as crucial to business success, but only one-third prioritize next-generation heirs as new business targets.

 

BOSTON–(BUSINESS WIRE)–Financial advisors are looking to increase client assets under management (AUM) by 5% (median) this year, and with little of that likely to come from market performance, they are counting primarily on new assets from new clients to grow their business, according to findings from Natixis Investment Managers (IM) 2022 Survey of Financial Professionals, published today.

 

Natixis IM surveyed 150 financial advisors across Canada, as part of a larger global survey of 2,700 financial professionals. The Canadian findings presented here provide insight about advisors’ growth strategies, the challenges they face, and how they are adapting their business to changes in the market.

Over the next three years, financial advisors are targeting a median annualized growth rate in AUM of 15% and 10 new clients per year. While the long bull market helped turbo charge asset growth over the past ten years, advisors aren’t counting on double-digit returns over the long term. Rather, the survey suggests that advisors are looking to catch a tailwind from the vast amount of money in motion, including rollover retirement assets and the transfer of significant generational wealth. Many may be hard-pressed to hit their targets unless they also adapt their business practices and assumptions.

The survey found:

  • Client acquisition is the most difficult way for advisors to go about growing their business. When asked which business growth strategy is most challenging, they were two times more likely to say winning new assets from new clients (45%) than gaining more assets from existing clients (20%). Nearly one in three (29%) say retaining clients is most challenging.
  • 65% of advisors say that establishing relationships with clients’ next-generation heirs is the most important factor for the growth of their business, yet 50% say it’s difficult to make progress at it since it takes so much time.
  • 59% say that demonstrating their value beyond portfolio construction is one of the most important factors for their success, but 42% say it’s challenging because of the time needed to deliver a broader range of advice and services.

“Advisors have to expand their capacity to grow their business while meeting the needs of new and existing clients,” said David Giunta, President and Chief Executive Officer for the U.S. at Natixis Investment Managers. “Advisory relationships are no longer defined by transactions in an investment portfolio, but rather by a deeper understanding of clients’ financial needs and the services they feel add the most value for the money. Technology and product innovation are helping advisors deliver the consistent investment experience clients expect while supporting the transition of their business to a broader focus on financial planning.”

Modeling the business for new clients

One key way advisors are expanding their capacity on the planning side is by using model portfolios on the investing side. On average, 84% of client assets under management are in model portfolios, including 47% of assets in models that advisors build themselves, 29% in models built and managed by their firm, and 23% from third-party asset managers.

The survey found:

  • 83% of financial advisors find that financial planning services are what clients whose assets are in model portfolios value most about the relationship, followed by tax management (60%), financial education and engagement with family members (51%), and trust and estate planning services (50%).
  • Among the small percentage (16%) of advisors who don’t use model portfolios, half (54%) say that personally building clients’ investment portfolios is essential to their value proposition.

“The actively-managed, risk-adjusted performance features inherent in model portfolios make them particularly compelling in the current market environment,” said Marina Gross, Co-Head of Natixis Investment Managers Solutions. “Our portfolio consulting practice shows that core moderate-risk model portfolios consistently deliver higher risk-adjusted returns with less volatility than the broad market, enabling advisors to focus more time on long-term goals, than short-term performance.”

The survey found the most effective ways financial advisors are incorporating model portfolios into their practice are by:

  • Transitioning assets on a case-by-case basis, depending on each client’s willingness (65%)
  • Focusing on new assets from new clients (39%)
  • Transitioning client assets in phases, eventually moving the entire client base into model portfolios over time (34%)

About one in three advisors (29%) have found it effective to focus their use of model portfolios on retirement drawdown clients, while one in four (25%) say it was best to take the plunge and move their entire book of business into model portfolios all at once. Few have found it particularly effective to reserve their use of model portfolios for clients who represent less revenue potential, including clients with lower balances (15%) and younger clients (12%).

Prospecting efforts come into focus

In their search for new clients, financial advisors are looking in all the usual places, with most (77%) considering the life stages of their prospects. Almost all advisors (98%) say that pre-retirees, or people between the ages of 50 and 60, are their top priority, while 64% focus on prospects who are at or just entering retirement. Seven in ten (70%) prioritize older accumulators, or people between the ages of 35 and 50 who are in their peak earning years and likely in need of comprehensive financial services to address multiple financial goals such as saving for retirement, funding education, and managing debt.

Given the market environment and generational transfer of wealth underway, advisors may be missing opportunities to reach the oldest and youngest group of potential clients.

  • Only 33% of financial advisors are focused on post-retirees, many of who are drawing down versus accumulating assets but who still need robust financial planning and advice to protect, use and pass on their assets.
  • 34% place a high priority on prospecting for clients between the ages of 18 and 35, members of Generations Y and Z, who represent the fastest-growing segments of Canada’s population1.

Beyond age segmentation, advisors are tailoring their business offering and business development strategies to appeal to specific high-valued groups. When asked which segments they are prioritizing for client acquisition and retention, the survey found that, again, advisors might be overlooking opportunities to meet the distinct needs of certain segments, namely women and the LGBT+ community. Moreover, relatively few are targeting next-generation heirs despite their importance to the success of their business.

The survey found:

  • 83% of advisors are focused on professionals, such as lawyers, doctors, and corporate executives and nearly as many (75%) are targeting business owners
  • 75% are focused on HENRYs (High Earners, Not Rich Yet)
  • 35% prioritize next-generation heirs
  • 29% are concentrating on the needs of women
  • 4% are focused on the LGBTQ community

Natixis Investment Manager’s global report on the findings of its 2022 survey of Financial Advisors can be found here.

1 Statistics Canada, Census of Population, 2021, reported in A generational portrait of Canada’s aging population from the 2021 Census, released April 27, 2022.

Methodology

Natixis Investment Managers surveyed 150 financial advisors across Canada, as part of a larger global survey of 2,700 financial professionals in 16 countries. Data were gathered in March and April 2022 by the research firm CoreData with additional analysis conducted by the Natixis Center for Investor Insights.

About the Natixis Center for Investor Insight

The Natixis Center for Investor Insight is a global research initiative focused on the critical issues shaping today’s investment landscape. The Center examines sentiment and behavior, market outlooks and trends, and risk perceptions of institutional investors, financial professionals and individuals around the world. Our goal is to fuel a more substantive discussion of issues with a 360° view of markets and insightful analysis of investment trends.

About Natixis Investment Managers

Natixis Investment Managers’ multi-affiliate approach connects clients to the independent thinking and focused expertise of more than 20 active managers. Ranked among the world’s largest asset managers1 with more than $1.3 trillion assets under management2 (€1.2 trillion), Natixis Investment Managers delivers a diverse range of solutions across asset classes, styles, and vehicles, including innovative environmental, social, and governance (ESG) strategies and products dedicated to advancing sustainable finance. The firm partners with clients in order to understand their unique needs and provide insights and investment solutions tailored to their long-term goals.

Headquartered in Paris and Boston, Natixis Investment Managers is part of the Global Financial Services division of Groupe BPCE, the second-largest banking group in France through the Banque Populaire and Caisse d’Epargne retail networks. Natixis Investment Managers’ affiliated investment management firms include AEW; AlphaSimplex Group; DNCA Investments;3 Dorval Asset Management; Flexstone Partners; Gateway Investment Advisers; Harris Associates; Investors Mutual Limited; Loomis, Sayles & Company; Mirova; MV Credit; Naxicap Partners; Ossiam; Ostrum Asset Management; Seeyond; Seventure Partners; Thematics Asset Management; Vauban Infrastructure Partners; Vaughan Nelson Investment Management; and WCM Investment Management. Additionally, investment solutions are offered through Natixis Investment Managers Solutions and Natixis Advisors, LLC. Not all offerings are available in all jurisdictions. For additional information, please visit Natixis Investment Managers’ website at im.natixis.com | LinkedIn: linkedin.com/company/natixis-investment-managers.

Natixis Investment Managers’ distribution and service groups include Natixis Distribution, LLC, a limited purpose broker-dealer and the distributor of various U.S. registered investment companies for which advisory services are provided by affiliated firms of Natixis Investment Managers, Natixis Investment Managers S.A. (Luxembourg), Natixis Investment Managers International (France), and their affiliated distribution and service entities in Europe and Asia.

1 Cerulli Quantitative Update: Global Markets 2021 ranked Natixis Investment Managers as the 15th largest asset manager in the world based on assets under management as of December 31, 2020.2 Assets under management (“AUM”) of current affiliated entities measured as of March 31, 2022 are $1,320.6 billion (€1,187.6 billion). AUM, as reported, may include notional assets, assets serviced, gross assets, assets of minority-owned affiliated entities and other types of non-regulatory AUM managed or serviced by firms affiliated with Natixis Investment Managers.3 A brand of DNCA Finance.

This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted.

The data shown represents the opinion of those surveyed, and may change based on market and other conditions. It should not be construed as investment advice.

All investing involves risk, including the risk of loss. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

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EQB sees mortgage growth moderating following 'tough' quarterly report – Financial Post

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‘Clearly, homebuyers are sitting on the sidelines a little bit more’

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Challenger bank EQB Inc. is expecting growth in conventional loan originations to moderate over the rest of the year as a real estate slowdown weighs on demand.

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In an interview on Wednesday, chief executive Andrew Moor said Equitable Bank — the company’s schedule I bank — has seen some slowing in activity in terms of new mortgage applications, but that that was to be expected with rapidly rising interest rates.

“Clearly, homebuyers are sitting on the sidelines a little bit more,” Moor said, adding that the bank saw weaker results in Ontario, which makes up more than half of its business, while provinces in the west were stronger.

EQB, formerly Equitable Group Inc., nevertheless maintained its full-year guidance for 2022, expressing confidence in meeting its objectives despite sector volatility.

The bank added that it has taken “risk-managed actions” over the first two quarters, which Moor said include being more cautious in areas further from city centres.

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“We’ve been just trimming back a little bit in our risk appetite in some of those areas,” he said.

EQB said it also continued to proactively adjust its underwriting approach to respond to elevated risks from inflation, the Bank of Canada’s response to inflation and its expectations of changing collateral values.

This is a tough quarter report

Andrew Moor

Although still expecting EQB to deliver on its growth targets, some analysts are taking a cautious stance on the mortgage finance sector as risk remains elevated.

“Several factors represent downside risks that will continue to constrain sector valuations and share price performance near term, such as rising regulatory and policy uncertainty, rapid rise in interest rates, and housing market risk,” said Jaeme Gloyn, an analyst at National Bank of Canada Financial Inc., in a note to clients.

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Gloyn cut his estimated target price to $73 per share from $75, while maintaining an “outperform” rating on the stock.

EQB reported strong performance on quarterly net interest income on Tuesday with an all-time record of 15.6 per cent return on equity for the year-to-date period. Conventional lending growth in its core operations grew 36 per cent, year over year.

However, Equitable said severe capital market volatility led to mark-to-market losses of $8.7 million on its non-interest income investment portfolio, which it said was conceived so Equitable Bank can gain access to early-stage technologies.

  1. The penetration of the Canadian reverse mortgage market is lagging behind other developed economies, a DBRS Morningstar report says.

    Reverse mortgage market has plenty of room to grow, but risks abound

  2. Equitable Group Inc. will hike its quarterly dividend after recording its best-ever quarter on the back of strong loan-origination growth.

    Equitable posts best earnings ever as mortgage business stays strong

  3. EQ Bank, a subsidiary of Equitable Group Inc., in Toronto.

    The ‘stealthy enablers’: Canada’s smaller banks court fintechs as industry dynamics shift

  4. EQ Bank, a subsidiary of Equitable Group Inc, in Toronto.

    Takeover of Concentra furthers Equitable’s ‘challenger bank’ ambitions, CEO says

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Moor said the bank is “very much fintech-enabled” and they’ve invested in some of the leading fintechs in Canada, including Borrowell and Wealthsimple.

“This is a tough quarter report. Despite taking a by-the-book approach to achieve and ultimately deliver strong core earnings growth, our efforts put in Q2 are offset by mark-to-market declines primarily in our strategic investment portfolios due to a downdraft in North American equity markets,” Moor said during Wednesday’s earnings call.

EQB said it expects volatility to continue in the second half of 2022, but this does not reflect the underlying strategic value of these investments.

The bank’s adjusted diluted earnings per share for the three months ended June 30 were $1.75, down from $2.64 a year ago.

For the current quarter, Moor said EQB is prioritizing its introduction of EQ Bank’s payment card, the launch of EQ Bank in Québec and its acquisition of Concentra Bank, which is expected to close later in the year.

• Email: dpaglinawan@postmedia.com | Twitter:

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1 Investment You Should Have at Every Age – GOBankingRates

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For a number of reasons, your 50s is the time to start really amping up your retirement savings accounts. Although you hopefully opened a 401(k) or IRA in your 20s or 30s, this is the time to maximize your contributions. For starters, you’re likely at your peak earnings level, so you’ll be able to sock more away without it affecting your lifestyle. Second, once you reach age 50, you’re allowed to make “catch-up” contributions to your retirement plans. For 2022, you can contribute an extra $1,000 to your IRAs, for a total of $7,000 in any given year. But if you have a 401(k) plan, you can kick in an extra $6,500, for a total of $27,000 per year. If you earn enough money to be able to do it, this means you can put $270,000 in your 401(k) plan from age 50 to 60, which can provide a huge boost to your retirement nest egg.

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Investment manager convicted over $121 Cayman fund – Reuters

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REUTERS/Lee Jae-Won (SOUTH KOREA – Tags: BUSINESS)

LONDON, Aug 10 (Reuters) – An investment manager of a collapsed 100-million-pound ($121 million) Cayman Islands-based legal financing fund was on Wednesday convicted by a London jury of fraudulent trading, fraud by abuse of position and money laundering.

Timothy Schools, a 61-year-old former lawyer who founded Axiom Legal Financing Fund in 2009 to provide loans to law firms pursuing no-win-no fee lawsuits, siphoned off nearly 20 million pounds of investor money to buy luxury properties and cars, the UK Serious Fraud Office (SFO) said in a statement.

His lawyer, David Hanman of Cobleys Solicitors, said he would not be commenting ahead of his sentencing on Thursday.

The jury at London’s Southwark Crown Court failed to reach a verdict for a second defendant, former independent financial adviser David Kennedy. The SFO has 21 days to decide whether to call a retrial. His lawyer was not immediately available for comment.

A third co-defendant, former lawyer Richard Emmett, was acquitted.

“It’s unbelievably horrible to have your reputation called into question,” Emmett said in a statement. “I now wish to get on with my life and career, which this unfounded prosecution by the SFO has placed on pause.”

The Axiom fund was an unregulated collective investment scheme that secured more than 100 million pounds from around 500 investors, who were told a panel of quality law firms would use their funds to back legal cases with a high chance of success.

But tens of millions of pounds were paid to three law firms that Schools either owned or held an interest in, the SFO said.

He diverted more than 19.6 million pounds ($23.76 million) into offshore bank accounts, buying shares in a ski hotel in France and a 5-million-pound fishing and shooting estate in Britain, it said in the statement.

The lawsuits funded by Axiom, meanwhile, were often lost at court and insurance policies failed to cover losses.

Schools covered up the failures by arranging for the repayments of old loans with new Axiom loans, the SFO said.

($1 = 0.8249 pounds)

Reporting by Kirstin Ridley; Editing by Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Trust Principles.

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