According to The Third Annual Study of Advisory Success: Confidence and Concern in the New Digital Age, released this week at Pershing’s INSITE™ 2015 conference, advisors are fairly evenly divided between viewing digital advisors, also known as robo-advisors, as competition or irrelevant to their business. Perhaps most surprising in the research was that only 19 percent of advisors think digital advice can complement their practice.
“There is no question that digital platforms are transforming the industry,” says Ben Harrison, head of business development and relationship management at Pershing Advisor Solutions. “Though most advisors are familiar with digital advice, a relatively small percentage of advisors are currently using this technology. The biggest opportunity we see for transformation is for advisors to automate low-value tasks, expand their reach and profitability.”
The survey also found that just over a quarter of advisors surveyed (27 percent) believe digital advice is irrelevant to their practice; while nearly another quarter (23 percent) feel that digital advice represents competition. By means of comparison, one-third (33 percent) of the advisors ages 18-34 consider digital advice to be competition, and only nine percent think they can complement their business. Comparatively, 27 percent of advisors between the ages of 35-54 view digital advice as competition, while only 16 percent of advisors over the age of 55 view them as competition
In general, price was cited by respondents as one of the most threatening factors of digital online financial providers. More than three quarters of advisors surveyed say the low cost of digital advice will pose some sort of threat to their practice. This data is underscored by the finding of a different study that found more than half of investors surveyed agreed that the investment advice most financial advisors offer is not worth the one percent fee.
“It is short-sighted to limit the ways technology can complement a business to only digital advice,” said Kim Dellarocca, managing director at Pershing. “Digital advice is important, but it is only one area where a firm needs to evolve their technology strategy to deliver a wealth management experience that mirrors the expectations of today’s consumers and workforce.”
The study suggests action steps for advisors to transform digital innovations into drivers of positive change and business growth, including:
Plan your approach to technology adoption. Advisors should understand where they sit on the digital spectrum and create a plan for where they want to be. Most begin by automating repetitive or low-value- tasks in their business. Once implemented, only then should they systematically work towards adopting increasingly sophisticated tools.
Make high-touch practices even more efficientand more personal. Digital tools, like those that automate client communications can help preserve the “high touch” experience many advisors are known for, but in a more efficient and more personal way that is customized to clients’ specific interests.
Improve your profitability and technology appeal. By automating key tasks that support the delivery of wealth management services, advisors can increase their margins and productivity. Advisors can use that gained time and resources to focus on higher valued activities like service delivery and more in-depth financial planning. Infusing technology into your business with greater self-service tools and more automation, not only adds to profitability, but creates a more modern feeling for client communications and interactions that today’s tech savvy investors crave.
Articulate your value. As investors and advisors both respond to digital advice trends, it is more important than ever for advisors to educate their clients about the work they do on their behalf– and the distinct value and wisdom the advisor offers in relationship to the fees they charge.
Be realistic about focus of the practice. If advisors have an appetite for tech-enabled growth, they should invest time and money in the latest capabilities. If not, their focus should shift towards financial planning or serving wealthy or hands-off investors.
Ireland is seizing the opportunity offered by the soaring popularity of passive investments to widen its lead as Europe’s top domicile for exchange-traded funds (ETFs), according to the latest issue of The Cerulli Edge – Global Edition.
Cerulli Associates dismisses Luxembourg’s attempt to win ground in this arena by its scrapping the subscription tax for ETFs as too little, too late. The global analytics firm is also skeptical that the United Kingdom’s scrapping of stamp duty on ETF trading will enhance London’s hopes of becoming a serious domicile player for the index-linked funds anytime soon.
Flows into Dublin-domiciled ETFs accounted for 85% of all European ETF flows in 2014, while assets under management (AUM) in Dublin ETFs has tripled since the end of 2011, to stand at €223 billion (US$250 billion). AUM in other domiciles rose 56% over this period.
Cerulli notes that tax advantages, infrastructure and a history of delivery for asset management companies all work to the Emerald Isle’s advantage when it comes to a choice of domicile. It contends that factors such as the absence of tax on investment funds, and Ireland’s strong taxation treaties with other countries, notably the United States, are crucial considerations for investors choosing ETFs.
“The phrase ‘ETF price war’ may have become a cliché, but for sound reasons. Companies such as Vanguard, one of the biggest ETF players, are looking to undercut rivals. Last year it slashed the charge for one of its Dublin-domiciled S&P 500 UCITS [Undertaking for Collective Investments in Transferable Securities] ETFs to 7 basis points. With costs in this sort of bracket, tax differences will be keenly felt,” says Barbara Wall, Europe research director at Cerulli.
She notes that for some companies, the difference is enough to justify moving ETFs from their existing Luxembourg domicile. Deutsche Asset & Wealth Management is in the process of changing much of its ETF range from synthetic to physical. The latter are often seen as easier to understand. But by moving the domicile to Ireland at the same time, it can realize tax advantages not available in Luxembourg. It has announced the closures of several Luxembourg funds–including products tracking the S&P 500–which will be merged into Ireland funds.
Brian Gorman, an analyst with Cerulli, notes that after gaining Irish domicile, the next stop for many ETFs is the Irish Stock Exchange (ISE). “Although the ISE offers limited scope for trading, an ETF can then quickly gain admission to trading on the London Stock Exchange, the biggest and most liquid market in Europe. The cost of access via this route is much lower than taking the direct option. Many providers are choosing to trade their ETFs across a range of stock markets.”
CC-BY-SA-2.0, FlickrCourtesy photo. Michelle Trilli Joins Pioneer Investments as US Offshore Wholesaler
Pioneer Investments has hired Michelle Trilli as the NY based US Offshore Wholesaler for the firm, reporting to Jimmy Ly, SVP Senior Sales Manager US Offshore, who is based in the Miami office. Michelle will be responsible for managing the sales and distribution activity of the International business in the Northeast region of the U.S.
Michelle joins Pioneer Investments with 12 years of experience in offshore sales and managing key accounts across North and South America. “With 3 years serving as a Vice President at Permal and the prior 9 years spent at Annaly Capital Management, we are confident and excited that Michelle will add significant value to our team right away”, said Jose Castellano, Managing Director for Latin America, North America Offshore and Iberian markets.
Investing in Emerging Markets continues to prove challenging and volatile, but Standard Life Investments has produced a heat map to assess the vulnerability of emerging market economies to future shocks. The risk profiles of emerging economies have changed considerably in the past six months. That is the period that will take the map and research to be updated with the aim of helping investors and fund managers improve their understanding of the large amounts of economic and financial data and potential threats currently facing emerging markets.
Countries such as Mexico and India generally look safer now, while conditions in already risky countries like Brazil and Malaysia have deteriorated further. The largest reduction in vulnerability was in Ukraine and Russia, thanks partly to better management of monetary policy, although this could change if there is a re-escalation of conflict between the two countries.
Jeremy Lawson, Chief Economist, and Nicolas Jaquier, Emerging Markets Economist for the Emerging Market Debt team created the heat map in October 2014 and produced an update in May 2015 which incorporates data following the two main shocks in recent months – the collapse in oil prices and sharp rise of the dollar.
Jeremy Lawson, Chief Economist, Standard Life Investments said: “Risk improvement was particularly prevalent in Eastern European countries such as Poland, Hungary and the Czech Republic, thanks to improving fiscal policy and falling inflation. Mexico and the Philippines which scored amongst the most resilient back in October also continued to strengthen – as a large oil importer the Philippines benefitted from falling oil prices. India and Indonesia were also out-performers, cutting fuel subsidies and spending more on infrastructure.
“At the other end of the spectrum, vulnerabilities are heightened in economies with large macroeconomic imbalances or reliance on exporting commodities, such as Brazil, Chile, Malaysia and Turkey.
“The dispersion of risk highlights that emerging markets should not be analysed as a homogenous group, it’s essential that investors adopt an active unconstrained approach. Whilst emerging market risk remains well below pre-Asian crisis levels, the next challenge ahead will be the beginning of the Federal Reserve’s rate hiking expected in the second half of 2015 – it’s the pace of this that will prove critical.”
CC-BY-SA-2.0, FlickrPoto: Takuya Oikawa
. Visit to The Bay Area: Wear, Watch and Pay
An important area of focus in the Robeco Global Consumer Trends Equities fund is the emergence of the digital consumer. Consumers are spending more and more of their time and money on internet as a result of the strong growth in smartphones, tablets and other internet-linked gadgets. They are also using social media such as Facebook and Twitter more often and e-commerce is absorbing a larger portion of their monthly budget.
Where better in the world to get up to speed with developments relating to the digital consumer than the Bay Area of California? San Francisco and of course Silicon Valley – the technology Valhalla located on the south side of the bay – fall within this metropolitan area of more than seven million inhabitants. “The Bay Area is the place to be – not only is this where the head offices of the major players such as Google and Apple are located, leading conferences in the field of technology are also held here”, said Jack Neele, portfolio manager of RobecoGlobal Consumer Trends Equities fund.
Neele visited Morgan Stanley Technology, Media & Telecom Conference in San Francisco where as many as 240 representatives from the industry and 1200 investors gathered to discuss the major developments in these three sectors. “The combination of technology and media made it a useful visit, because an increasing amount of media consumption is occurring via the internet. On the last day of the conference we went to Silicon Valley by bus to visit some companies, one of which was Apple. We had an appointment there to talk to the financial top man, Luca Maestri, about the company’s future prospects”, related the portfolio manager.
The growth of mobile internet was a focus area again this year and three verbs dominated the discussion – wear, watch and pay. What are the most important developments from the perspective of the fund? That is the Jack Neele opinion:
1. Apple Watch – the most important wearable developed to date – as yet its impact is limited: The new Apple Watch is in the shops this month. Its market potential has fueled numerous discussions among analysts and investors. Some see it as a revolutionary product like the iPhone, of which there are currently around 300 million in use worldwide. Apple Watch should also ensure that the company enters new markets, such as the luxury goods sector. But others see the Apple Watch as a niche product with limited potential, a gadget like the many mobile fitness apps currently available. Which group is right?
I have taken up my own position somewhere between the two. Given Apple’s expected sales of USD 225 billion in 2015, I don’t expect the Apple Watch to make a significant contribution to the company’s earnings.
However, Apple Watch is the first wearable that consumers really want. Wearables are a new generation of mobile devices that can be worn on ones body. The Apple Watch has many handy functions like being able to phone easily, receive messages and retrieve your boarding pass, in addition to medical applications to monitor heart rate and blood pressure.
The Apple Watch’s major breakthrough will come when telecom companies start to offer it in combination with the iPhone. A bundling of the Apple Watch with a phone subscription could encourage many people to strap on this device. But initially the Apple Watch will only be sold in the Apple Store. In other words, I don’t expect to see the real breakthrough just yet.
2. Innovation is making video increasingly important on social media: Video for mobile internet is increasing in importance and Facebook is in a strong position. More hours of video are now being watched on Facebook than on Google subsidiary, Youtube. Most of the videos on Facebook are user generated content, for example, homemade footage of an Easter egg hunt that you can share with family members. But in the future Facebook may well start offering other content such as films and sport.
Facebook and Youtube both show advertising films, but the first offers important advantages from the user’s perspective. The users themselves click on the Facebook advertising films by choice, whereas the YouTube viewer is subjected to unsolicited commercials. I therefore expect Facebook to have considerable success when it comes to online video.
Another company that is betting heavily on video through new innovations is Twitter. Through a subsidiary company it has devised peer-to-peer streaming. This means that users can send live pictures via their telephones to their contacts. So you can watch live with someone. For example, footage of disasters or even football matches.
3. Market for mobile payments is growing rapidly and undergoing major changes. Firstly, I expect targeted takeovers by Paypal, which will be split off from eBay and gain a separate market valuation. I expect a higher valuation than it currently has under eBay, as Paypal is growing at a faster pace. This higher valuation can be used to help fund new acquisitions to bolster its market position. By issuing new shares the company can finance takeovers.
Facebook is also becoming more active in the field of peer-to-peer payments. The company announced that you can make payments to your friends via the Facebook Messenger chat function. A handy application, for example, if you go out for dinner with friends and want to chip in to pay a collective bill. This extra functionality is strengthening Facebook’s position in the market.
My visit to the Bay Area confirmed my impression that the technology, media and telecom sectors are all undergoing major changes, and that the latest developments are further strengthening the market positions of major players like Apple, Twitter and Facebook.
This publication is intended to provide investors with general information about Robeco’s specific capabilities, but it is not a recommendation to buy or sell specific securities or investment products.
CC-BY-SA-2.0, Flickr1 de junio de 2015 - (de izquierda a derecha) Francisco Galindo Vélez, Embajador de El Salvador en Francia firmado el . El Salvador se une a los esfuerzos internacionales para luchar contra la evasión fiscal internacional
El Salvador’s Ambassador to France, Mr. Francisco Galindo Vélez, signed the Convention in the presence of Mr. Carlos Cáceres, El Salvador’s Minister for Finance.
El Salvador is the 8th Latin American country and the 3rd member of the Central American Common Market – after Costa Rica and Guatemala – to join the Convention.
OECD Secretary-General Angel Gurría offered congratulations during the signing ceremony, saying that it “sends yet another strong message to the international community about El Salvador’s commitment to fighting international tax avoidance and evasion by increasing transparency”. He added that the OECD “looks forward to its rapid entry into force so that El Salvador can seize this opportunity to build trust in its institutions and reinforce the rule of law.”
Developed by the OECD and the Council of Europe, the Convention provides a comprehensive multilateral framework for the exchange of information and assistance in tax collection. Its coverage includes administrative assistance between tax authorities for information exchange on request, automatic exchange of information, simultaneous tax examinations and assistance in the collection of tax debts.
Since the G20 put financial sector transparency and tax evasion on the international agenda in 2009, the Convention has become a central element of international cooperation efforts. It is seen as the ideal instrument for swift implementation of the new international Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries as well as automatic exchange of country by country reporting under the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project
El Salvador became a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes in 2011. El Salvador’s Phase 1 peer review report, which demonstrates their high level of commitment to the international standard for tax transparency and exchange of information, was published in March 2015.
CC-BY-SA-2.0, FlickrPhoto: Moyan Brenn. Schroders Launches EM Multi-Asset Fund
UK asset manager Schroders has announced the launch of a new multi-asset fund aimed at offering investors access to emerging markets.
The Schroders ISF Emerging Multi-Asset Income Funds, which is managed by portfolio manager Aymeric Forest invests globally in equities, bonds and other emerging market asset classes, including derivatives.
The share of stocks or equities within the overall portfolio can fluctuate between 30 and 70%.
“The price to book ratio of, for example, the valuation of emerging market equities is currently still 50% below that of the US S&P 500 index” comments Forest.
The fund aims to achieve an annualised return of 7% to 10%with a volatility of 8% to 16%.
CC-BY-SA-2.0, FlickrCourtesy Photo. Access the Presentations and Photos from Pioneer Investments’ Due Dilligence Conference for UBS and Morgan Stanley in Dublin
On May 20-22nd Pioneer Investments hosted its exclusive due diligence conference at the Powerscourt Hotel in Dublin for UBS and Morgan Stanley attendees.
The event, attended by a select number of 70 financial advisors from UBS and Morgan Stanley with long-standing ties and business with Pioneer, was aimed to provide promising insights into timely portfolio management strategies and to highlight how to address the growing need for income generation. All copies of the event’s presentations and photographs are available on the dedicated event microsite (click here).
Pioneer Investments thanks all participants of the event and remains committed to providing best in-class solutions to meet various clients’ investment needs, along with outstanding service and support.
Fitch Ratings has assigned a ‘BBB-‘ rating to Petroleo Brasileiro S.A.’s (Petrobras) proposed senior unsecured century notes issuance. The notes, which mature in 2115, will be issued through its wholly owned subsidiary, Petrobras Global Finance B.V. (PGF), and will be unconditionally and irrevocably guaranteed by Petrobras. Proceeds will be used for general corporate purposes. Fitch currently rates Petrobras ‘BBB-‘. The Rating Outlook is Negative.
Key rating drivers
Petrobras’ ratings continue to reflect its close linkage with the sovereign rating of Brazil due to the government’s control of the company and its strategic importance to Brazil as its near monopoly supplier of liquid fuels. Absent implicit and explicit government support and its defacto monopoly position, Petrobras’ credit quality is not commensurate with an investment grade rating.
Government support is evidenced by the recent lending commitments offered by stated-owned Banco do Brasil and Caixa Economica Federal as well as the decision to maintain gasoline and diesel prices at the pump significantly above international levels in order to bolster Petrobras’ cash flow generation. By law, the federal government must hold at least a majority of Petrobras’ voting stock. The government currently owns 60.5% of Petrobras’ voting rights, directly and indirectly, and has an overall economic stake in the company of 48.9%. Petrobras’ cash position is sufficient to meet its short-term funding needs.
Petrobras’ Negative Outlook reflects the uncertainties surrounding the company’s ability to deleverage its balance sheet over the medium term. Petrobras may face challenges to deleverage its capital structure organically as the corruption scandal may result in delivery delays of production units.
Fitch will continue to monitor Petrobras’ strategy to strengthen its capital structure and expects the company to release coherent deleveraging program once the company releases its revised business plan for the next five years. Should Petrobras succeed in placing this proposed debt issuance, it will be viewed as a positive step in regaining access to the debt capital markets, which the company relies on in order to support its investment plans and funding needs.
Amy Belew, global head of ETP research at BlackRock comments on the May ETP Landscape Report the firm just presented, that Global ETP flows of $18.3bn were concentrated in developed market EAFE equities and Japan funds. Europe and U.S. flows were modest as mixed economic data for both regions has led to uncertainty over growth prospects. Still, 2015 asset gathering remains ahead of the record year-to-date pace set in 2013 and nearly matched last year on the way to a new full-year high.
Broad developed markets equities gathered $6.4bn as demand remains robust for non-U.S. exposures. EAFE ETPs accounted for $4.2bn, with an additional $2.1bn going to global funds. These categories have quickly accumulated $35.8bn year-to-date and are set exceed the average of $45bn over the past two years.
Japan equities maintained momentum with $5.8bn as the Nikkei 225 Index reached its highest level since 20002. Flows were driven by strength in corporate earnings. Locally-domiciled funds led, though asset gathering has also picked up for U.S.- and Europe-listed funds.
Currency-hedged equities brought in $3.4bn, slowed early in the month by a stretch of U.S. dollar weakening that began in April. Flows have proven responsive to currency movements, and resumed toward the end of May across EAFE, Europe and Japan funds as the dollar exhibited renewed strength.
Broad EM equities gathered $1.6bn, and flows have now trended higher during consecutive months for the first time since August. Improving returns, accommodative Chinese government policies and the pause in dollar appreciation have helped turn flows around.
Fixed income flows overall were flat and have been volatile with investors uncertain as to when rates may begin to move higher. Pockets of strength persist, including U.S. investment-grade corporate funds, which gathered $0.9bn, and EM debt, which added $0.5bn to bring year-to-date flows to $3.2bn. But U.S. Treasury funds shed ($2.8bn). Year-to-date fixed income flows remain ahead of the record pace established last year, driven by investment grade and high yield corporate bonds.
