The top conversations on APViewpoint last week were started by thought leaders Charlotte Beyer and Joe Tomlinson, and member Adam Butler. They generated thoughtful discussions on: industry changes disrupting the AUM-fee model; providing better retirement statements for clients; and risk-parity portfolio performance.
Charlotte Beyer’s What's the Matter with Robo? received nine comments from advisors discussing whether the robo model will be the first step towards total disruption of the AUM-fee model. Most APViewpoint members agreed with Beyer’s critique of AUM-fee structures, and stated that AUM arrangements “make no sense relative to the work performed or the individual capabilities of the selected advisor.” They also cited concerns about potential conflicts of interest, and argued that “the AUM fee model is flawed and creates incentives for adviser behavior that runs counter to the principles of the fiduciary standard of care.” In response some argued that, in certain situations, such as when advisors help their clients avoid “the big mistake” (selling due to panic) or save their client from a huge tax liability by shoring up their estate plan, clients are left feeling assured that the AUM fees they pay are worth it. Members agreed that an individual’s take on AUM fees depends on their perspective and biases, and suggested that an incremental change within a firm’s fee structure may be the best step.
Joe Tomlinson’s Providing Better Retirement Statements for Clients generated four comments from advisors applauding Tomlinson’s recent article on why clients need more frequent reporting that goes beyond asset-value statements and shows what their income in retirement will be. Advisors agreed with Tomlinson’s suggestions that Social Security be positioned as a present value (discounted based on TIPs rates) in client reports, and thought that including the tax partnership on sheltered assets was very wise. They also thought he was “spot on with his assessment of how to improve 401k statements,” and contended that “historical rates of return should not be on the first page of the statement.” Advisors proposed that, to further improve the way information is provided to investors about saving for retirement, income statements should rate the income categories based on risk or variability.
APViewpoint hosted another wellattended webinar on August 11, Risk Parity: The Antidote for Unbalanced Portfolios, presented by ReSolve Asset Management CEO Adam Butler. In this presentation, Butler discussed the benefits of constructing a broadly diversified and properly balanced risk parity portfolio. Based on the assumption that we can’t predict future returns, but we can expect assets to provide equal compensation for equal risk, Butler introduced a strategy that delivers positive performance in any economic environment. Butler showed that by targeting risk, maximizing diversification, and letting allocations happen, a risk parity portfolio can deliver consistent returns with much smaller drawdowns than traditional “balanced” approaches. Butler will be answering questions about his presentation in this follow up conversation, and a replay of the webinar can be viewed here.
APViewpoint will be hosting its next CFP CE eligible webinar, The Hidden Cues that Unlock Better Client Communication, on Thursday, August 18, at 4:15 PM ET. In this webinar, Bev will explore various aspects of "people reading," and outline specific steps advisors should take to connect with clients more effectively. You can register for the upcoming webinar here.
Marianne Brunet is a financial markets analyst with Advisor Perspectives.
