Thursday, February 28, 2008

One firm's approach to managing client fears

Wondering how to address your clients' fears during challenging markets?

Get ideas by looking at what others are doing.

For example, Forefield Inc., which provides educational content to advisors, recently sent an email suggesting advisors use their articles about:
  • Handling market volatility
  • Monitoring your portfolio
  • Balancing your investment choices
  • Understanding risk
  • Evaluating volatility
  • Dollar cost averaging

Have you discussed those topics recently with your clients? If not, maybe now is the time to do it.
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Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

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Tuesday, February 26, 2008

HSBC economist Stephen King says "Goodbye to all that"

The world that we took for granted is gone. No more rapid global growth. No more easy investment opportunities. No more excess liquidity.

That was the starting point for "Goodbye to all that," a Feb. 25 presentation to the Boston Security Analysts Society by Stephen King, chief economist and global head of economics for HSBC Group.

King, who's based in the U.K., brought a global perspective to the current housing and credit crunch in the U.S. "The U.S. housing crisis has become a transatlantic lenders' problem," he said. Why? Because in their quest for higher yields, institutional investors in the U.K and the eurozone became heavy investors in U.S. corporate bonds. By corporate bonds, he meant asset-backed securities, especially mortgage-backed securities. U.K. banks that have gotten burned are tightening their lending standards just like their U.S. counterparts.

King predicted that 2008's biggest negative surprise for financial markets might come from outside the U.S.: the sudden loss of momentum in the U.K. and elsewhere. In fact, he suggested that the U.S. dollar may appreciate in 2008 because economic risks are priced into the U.S. market, but not in Europe.

On the emerging market front, King said that those economies have decoupled from the U.S. "Slower G7 domestic demand growth may not be an emerging market disaster," according to him. But while some strategists stress the upside of emerging market demand for the U.S., King emphasized the downside. A slowly growing U.S. that's cutting interest rates will boost capital flows into emerging markets, where too much domestic demand will fuel inflation in fuel and food costs. That inflation will deliver another blow to the economies of developed nations.

________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.


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"Will the U.S. Sub-Prime Crisis Be as Bad as History Suggests?"

"If history is a good guide, the U.S. economy will stay in the doldrums much longer than we’d like—a minimum of two years. That’s the scary implication of 'Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison' by Carmen M. Reinhart of the University of Maryland and the National Bureau of Economic Research (NBER) and Kenneth S. Rogoff, Harvard University and NBER."

Read more of my article about Reinhart and Rogoff's research and what advisors say about its implications. This article appeared in the Feb. 26 issue of Advisor Perspectives.

_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

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Saturday, February 23, 2008

Financial Analysts Journal article favoring annuities

The Financial Analysts Journal writing favorably about annuities? That grabbed my attention.

In "The Longevity Annuity: An Annuity for Everyone?" in the Jan./Feb. issue of the Financial Analysts Journal, Jason S. Scott suggests that a relatively new product called a longevity annuity can maximize retirement spending for some retirees. This is especially true for retirees who:
  • Are in good health
  • Aren't very concerned about leaving a bequest
  • Have enough wealth to afford an annuity, but not so much that they needn't worry about outliving their assets
Here's how Scott, managing director of the Retiree Research Center at Financial Engines, describes this product.
"Longevity annuities are essentially immediate annuity contracts without the initial payouts. That is, a longevity annuity involves an up-front premium with payouts that begin in the future. For example, an age-85 longevity annuity can be purchased at age 65 with payouts commencing only when and if the purchaser reaches age 85.

Longevity annuities are better than immediate annuities because they "maximize the insurance benefit per premium dollar." Scott compares the cost of securing that future spending with bonds vs. with a longevity annuity. He finds that "the future spending that costs $1.94 to secure in the bond market costs only $1.00 in the annuity market. Thus, every annuity dollar allocated to finance spending at age 85 frees up 94 cents for additional spending."

What do you think? Is this something your clients should consider?


_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

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Sunday, February 17, 2008

Nice analogy in credit default swaps article

Sometimes my head hurts when I try to understand credit default swaps. That's why I smiled when I read this analogy in Gretchen Morgenson's "Arcane Market Is Next to Face Big Credit Test" in The New York Times.
"It would be as if homeowners, facing losses after a hurricane, could not identify the insurance companies to pay on their claims. Or, if they could, they discovered that their insurer had transferred the policy to another company that could not cover the claim."
You'll have to read the article to appreciate how nice this analogy is.

_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

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Saturday, February 16, 2008

Speaking to high net worth audiences

I agree with PR expert Beth Chapman's advice in her recent newsletter that your preparation for speaking to high net worth clients should include:
1. Honing your speaking skills
2. Understanding that educational, non-self-serving content is required
3. Trusting that your current clients are the conduit you need to the audiences you seek.

I was intrigued by her suggestion that you
"Offer to speak to your clients' social groups, condo associations, or at a coffee in their homes for ten or more friends. I can hear you now -- this is so low brow, good grief. But, wait. Don't misjudge the importance of small groups of clients and who they know. Your existing clients have conduits to all the high net worth groups you wish to access. But you have never asked your clients to introduce you to these target groups as a speaker, have you?"
_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.



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Friday, February 15, 2008

Retirement at risk, but can be saved, says researcher Alicia Munnell

Most Americans won't have enough income for a comfortable retirement. However, individuals, employers, and the government can take steps to improve the situation, said Alicia Munnell in her presentation on "Retirement 'At Risk': The Changing Landscape of Retirement in the U.S." to the Boston Security Analysts Society on February 14. Munnell is Peter F. Drucker Professor of Management Sciences at Boston College Carroll School of Management and director of B.C.'s Center for Retirement Research

A three-legged stool of Social Security, employer-sponsored pensions, and individual savings used to support retirement better than it does today. The situation is only going to get worse because:

  • Social Security will replace a smaller percentage of income in the futur
  • The shift to 401(k)s--and individuals' bad decisions about them at every step of the process--is not working as well as it could
  • Individuals save virtually nothing outside employer-sponsored retirement plans

As a result, 43% of households are at risk of not maintaining their standards of living in retirement. That's according to the National Retirement Risk Index, which you can read more about in "Is There Really a Retirement Crisis? An NRRI Analysis," a paper co-authored by Munnell.

To improve Americans' outlook for retirement, Munnell called for:

  • Individuals to work longer, to save more through 401(k)s and IRAs, and to consider tapping their home equity in retirement
  • Employers to revise personnel policies to encourage older workers and to make 401(k)s more effective through automatic provisions
  • Government to redefine what's old (in other words, no early retirement at 62) and to help individuals to save more, possibly by introducing a new tier of funded, privately managed retirement savings

I was intrigued by Munnell's suggestion that the government require that some percentage of 401(k)s should default into an annuity once the account holder begins withdrawals.

You can learn more about research by Munnell and B.C.'s Center for Retirement Research.

By the way, that 43% statistic might prove useful for starting a retirement savings conversation with your clients.

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Feb. 16 update

Research from the Urban Institute supports Munnell's advice about individuals working longer. It found that:

  • On average, working an additional year increases annual retirement income about 9 percent (figure 1).
  • Working an additional five years boosts annual retirement income about 56 percent.
  • The impact is even larger for people at the lower end of the income distribution.
I read about this in the Feb. 16-17 Wall Street Journal.


_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

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Tuesday, February 05, 2008

"Young Millionaire Investors Best Positioned to Survive Market Volatility"

"Due to broader diversification in their investment portfolios and a willingness to own more alternative assets and newer, non-traditional investment products, younger millionaires may be more likely than older generations to limit the impact of potential market turbulence over the coming year..." according to a Jan. 2008 press release from Northern Trust about its "Wealth in America" report. A 56-page summary of the report is also available on the Northern Trust website.

_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

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Monday, February 04, 2008

"Stock Price Correlated to Likeability of Super Bowl Ads"

"When TV viewers like a company's Super Bowl commercial, the company's stock price goes up, according to a study by researchers in the University at Buffalo School of Management and Cornell University."

It's not too late to watch the Super Bowl ads to assess them for likeability.

_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

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