CC-BY-SA-2.0, FlickrPhoto: Gnuckx. It Takes 1.4 Million Dollars To Be Considered Truly Wealthy in the USA
According to the Modern Wealth Index, developed in partnership with Koski Research and the Schwab Center for Financial Research, nearly half of Americans (49%) believe saving and investing is the way to achieve wealth over time.
The survey, conducted among 1,000 Americans aged 21 to 75, shows respondents believe it takes $1.4 million to be considered financially comfortable. To be considered truly “wealthy,” that number increases to $2.4 million.
In the short-term, respondents say that other things make them feel wealthy in their day-to-day live, such as:
Spending time with family (62 percent)
Having time to myself (55 percent)
Owning a home (49 percent)
Eating out or having meals delivered (41 percent)
Subscription services like movie/TV and music streaming (33 percent)
Other things that make people feel wealthy in their daily lives include owning the latest tech gadgets (27 percent), having a gym membership or personal trainer (17 percent), and using a home cleaning service (12 percent).
According to the Modern Wealth Index, millennials are in many cases more focused on saving, investing and financial planning than older generations, and are almost as likely as Boomers to work with a financial advisor (22% and 25%, respectively) while Gen X lags (16%)
“The idea that financial planning and wealth management are just for millionaires is one of the biggest misconceptions among Americans, and one of the most damaging,” said Joe Vietri, senior vice president and head of Schwab’s retail branch network.
“Whether people think they don’t have enough money, believe it would be too expensive, or just find the whole concept too complicated, the longer they wait the harder it is to achieve long-term success. We must make planning and advice more accessible to more people. Simply put, we believe every American deserves a financial plan, regardless of how much money they have today,” Vietri concludes.
Pixabay CC0 Public Domain. 2017 Brought More Clients and AUM to the Biggest 25 Global Wealth Management Operators
Assets Under Management (AUM) at the top 25 global wealth management operators grew 17.0% on average this year, finds Scorpio Partnership’s 2018 Global Private Banking Benchmark. This means the top 25 operators now collectively manage 16.2 trillion dollars.
Just as a rising tide raises all boats, wealth managers were able to capitalize on favourable market conditions in 2017 as a core driver of growth. The FTSE All-World Index advanced nearly 22% during the year and global economic growth was estimated to have reached 3%, an uptick from 2.4% in 2016.
However, there were also positive indicators that firms achieved greater success in drawing additional assets from new and existing clients in 2017. On average, the contribution of Net New Money to AUM, which was flat in 2016, rose to 4.3% in 2017 for those firms who declared this data.
China Merchants Bank gained two positions, taking over Northern Trust and Pictec. BNP Paribas, Safra Sarasin Group, Banco Santander and Credit Agricole are the few non-American firms.
Asian firms grew the most, with a median increase in AUM of 15.2%, versus the 7.5% European ones got and the 13.8% from the Americans.
“Conditions have been exceptionally positive for global wealth management in the last 12 months, but wealth firms must also be given credit for starting to find new revenue” says Caroline Burkart, Director at Scorpio Partnership. “Our client engagement assessments throughout 2017 have indicated that client sentiment is on the up which is inevitable when markets are good.
Wealth firms should put processes in place now to measure and respond to customer feedback, so that when the next market downturn occurs, they have the insight they need to continue delivering a compelling client experience. A handful of wealth firms are starting to publish their client satisfaction data, highlighting that this is creeping up the agenda as a complementary measure to financial performance.”
Asia’s wealth managers achieved the most significant gains this year, with average AUM growth of 15.2% (in base reporting currency), compared to 7.5% among European operators and 13.8% among firms based in the Americas. Many wealth managers present in Asia continued to increase their focus in this region in 2017. In several emerging markets, strategic acquisitions contributed to inorganic growth in AUM.
Most notably, Bank of China – a new entrant to the top 25 table last year – stood out by reporting double-digit growth for a second consecutive year. The firm attributed its success to effective marketing, customer developed client profiles and proposition enhancements.
Yazann Romahi, Photo J.P. Morgan AM. J.P. Morgan Asset Management Takes Nine U.S. ETFs to Mexico
J.P. Morgan announced the expansion of its business in Mexico and the launch of nine US equity ETFs. Leveraging J.P. Morgan’s existing capabilities and expertise, the funds will be managed by an investment team led by Yazann Romahi, CIO of Quantitative Beta Strategies and Portfolio Manager at J.P. Morgan Asset Management.
“The listing process of US ETFs in Mexico underscores our commitment to providing choice for Mexican investors, what believe are, some of the best and most innovative products to market,” said Juan Medina-Mora, representative in Mexico for J.P. Morgan Asset Management. “The ETFs allow investors to customize their portfolios in an effort to meet distinct outcomes, also considering currency-hedged alternatives.”
The funds, which are designed to provide exposure to traditional indexes for better risk-adjusted returns, are:
J.P. Morgan Diversified Return Global Equity (JPGE): The fund is designed to provide global equity exposure with potential for better risk-adjusted returns than a market cap-weighted index. It tracks the FTSE Developed Diversified Factor Index.
J.P. Morgan Diversified Return International Equity (JPIN): The fund tracks the FTSE Developed ex-North America Diversified Factor Index, which utilizes a rules-based approach combining risk-weighted portfolio construction with multi-factor security screening based on value, low volatility, momentum and size factors.
J.P. Morgan Diversified Return International Currency Hedged (JPIH): The fund is designed to provide core developed international equity exposure with potential for better risk-adjusted returns than a market cap-weighted index. It tracks the FTSE Developed ex North America Diversified Factor 100% Hedged to USD Index.
J.P. Morgan Diversified Return Emerging Markets Equity (JPEM): The fund is designed to provide emerging markets equity exposure with potential for better risk-adjusted returns than a market cap-weighted index. It tracks the FTSE Emerging Diversified Factor Index.
J.P. Morgan Diversified Return U.S. Equity (JPUS): The fund tracks an index whose methodology is designed in an effort to capture market upside while providing less volatility in down markets compared to a market cap-weighted index, the Russell 1000 Diversified Factor Index.
J.P. Morgan Diversified Return U.S. Mid Cap Equity (JPME): The fund is designed to provide U.S. mid-cap equity exposure with potential for better risk-adjusted returns than a market cap- weighted index. It tracks the Russell Midcap Diversified Factor Index.
J.P. Morgan Diversified Return U.S. Small Cap Equity (JPSE): The fund is designed to provide U.S. small-cap equity exposure with potential for better risk-adjusted returns than a market cap-weighted index. It tracks the Russell 2000 Diversified Factor Index.
J.P. Morgan Diversified Return Europe Equity (JPEU): The fund is designed to provide developed Europe equity exposure with potential for better risk-adjusted returns than a market cap- weighted index. It tracks the FTSE Developed Europe Diversified Factor Index.
J.P. Morgan Diversified Return Europe Currency Hedged (JPEH): The fund is designed to provide developed Europe equity exposure with potential for better risk-adjusted returns than a market cap-weighted index. It tracks the FTSE Developed Europe Diversified Factor 100% Hedged to USD Index.
J.P. Morgan Asset Management’s ETF suite in the U.S. features 22 product offerings with over 4 billion dollars in assets under management. J.P. Morgan achieved a top ten position in flows in the U.S. across smart beta ETFs in 20161. J.P. Morgan was also named one of the “Most Trusted” ETF providers according to Cogent Reports’ 2016 Advisor Brandscape report
Pixabay CC0 Public DomainSecond Presidential Debate. While Mexican Presidential Candidates Propose Nothing To Amend The Pension System, Fundamental Improvements Are Required
In countries with less sensitive problems because of low pensions, presidential aspirants usually propose improvement measures, general reforms to mitigate disadvantages for former workers, and modifications aimed to avoid poverty for those who are still active. In Mexico, candidates to executive power have not expressed their proposal, if they have it, to rectify the expected retirement conditions of affiliates to the local pension system, SAR.
Insufficient pensions for current workers are expected, even with higher contribution
What do we have to ask to candidates? In some opportunities it has been repeated that with current mandatory contribution (CR) and applying composed profitability, the pretended replacement rate (RR) of workers could be as higher as 26%, clearly exiguous to lead a decent life. If the CR were to be increased now to 14% –a net rate of 13.0% after fees– and the annual weighted average profitability were 4%*, those who began their working life along with the SAR and accumulate uninterrupted contributions and returns in 21 years could consider their pension will be equivalent to around 45.5% of their last salary (or 53% if we assume annual returns of 5% instead of 4%). The 45.5% of RR is the consequence that half of the active life of these affiliates has already gone (so, 0.5% of active life over 26% of expected RR = 13%), and of taking into account that the new quota plus the next profitability would only influence the remaining years of work, provided that they do not go through periods of unemployment (so, 0.5% over RR of 65.0%= 32.5%).
If we start from the basis that the reform to the Chilean system was proposed by the fact that the RR of retirees did not reach the 80% projection of their last salary, this supposed increase in the CR of the SAR would be clearly insufficient for the Mexican workers’ pension to meet the necessary expenses in their retirement. Under these parameters, those who have few time of affiliation could aspire to higher pension tan 45.5%. In its case, the expectation of RR of 65% (through annual returns of 4%) or 80% (through returns of 5%) could only be reached by the new affiliates, those who began to work together with the application of the new CR.
With this simple thought –and the mirror of the Chilean model–, it can be realized that the increase of 115% of the contribution, from 6.5% today, without other complementary measures, would not solve the trouble of those who already have a working path. Assuming that the pension equivalent to 65% of salary, trough returns of 4% it would be taken as adequate by the future affiliates then it is clear that two kind of measures have to be determined; if that were not the case, there would be more problems and more solutions would have to be demanded.
Inquire to candidates in the remainder of the campaign
In the way that it is worrisome the candidates have not spoken, it baffles that those affected, nor the media, have demanded proposals or ideas for amendment. In other countries, a large proportion of voters decide according to pensions.
It would be believed that the man who was minister of Finance (in two six-year terms) would be able to make proposals or outlines of corrective projects; not just because his technical career but also because the influence he had over Comisión Nacional de Ahorro para el Retiro: the head of Finance is member of the Governing Board of the Commission, which in turn is attached to the ministry as a decentralized body. Even with that he has not made a single allusion to SAR.
That does not exempt the other aspirants, that considering they do not have experience in the sector are supported by teams that know the issues and worrying aspects of the country, and could be sensitive to the problem and commit to amend it.
The insufficiency of the RR is one of the concerns, but not the only one, about the pension system. There are other pending. Is exposed because it is the core, which will constitute the pension itself, the amount on which the sustenance will depends since retirement. In the remainder of the campaign, it is desirable that workers, media and academics inquire about it to the candidates.
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* Please see “Aumento en la Contribución del Sistema de Retiro en Chile: Beneficios e Implicaciones”, Fitch Ratings. October 16, 2017.
Column by Arturo Rueda. English version by the author
Pixabay CC0 Public DomainRobeco, courtesy photo . Robeco Appoints Bart Oldenkamp as Head of Investment Solutions
Robeco has hired Bart Oldenkamp as Head of Investment Solutions, effective July 1st, 2018. In this role, he will be responsible for further expanding Robeco’s Investment Solutions business, which includes services such as fiduciary management and multi-asset solution products.
He will succeed Martin Mlyná, who currently holds this role, while also serving as Managing Director at Corestone, Robeco’s manager selection platform. As from 1 July 2018 he will focus fully on his position at Corestone to further increase its added value for clients and to further grow Corestone’s multi-manager business.
Gilbert Van Hassel, CEO of Robeco, said: “I welcome Bart to Robeco; in him we have found a highly experienced professional to fulfil this crucial role for our clients with a strong network and reputation in the area of fiduciary management and investment solutions. This appointment underlines our commitment and ambition to grow our fiduciary business, which is a key element of our strategy for 2017-2021.”
Oldenkamp said: “I am excited to join Robeco and I am looking forward to working together with clients to achieve their financial objectives. I am confident that based on Robeco’s strong academic and research driven approach we will be able to further strengthen our solutions for clients and achieve sustainable growth of our business.”
He previously worked at NN Investment Partners, where he was Managing Director Integrated Client Solutions. Before that, he headed the Dutch office of Cardano, a consultancy firm specialized in fiduciary management, risk management and investment advisory services, after having held various positions at ABN Asset Management, including Global Head of LDI & Structuring and Product Specialist Structured Asset Management in the US. He is the academic director of the Pension Executive program at the Erasmus School of Accounting & Assurance, and a non-executive board member at the pension fund for the Dutch railway transport sector. He holds a PhD in Econometrics from Erasmus University Rotterdam.
Photo . Itaú Unibanco Celebrates 21 Years of Listing on the New York Stock Exchange
Itaú Unibanco is celebrating 21 years of listing on the New York Stock Exchange (NYSE), the largest exchange by trading volume. To celebrate the date, Itaú received the honors at the traditional “closing bell” ceremony, which marks the conclusion of the trading day on the NYSE. At the event Candido Bracher, Chief Executive Officer of Itaú Unibanco; Eduardo Vassimon, General Director – Wholesale; Caio David, Executive Vice President, Chief Financial Officer (CFO) and Chief Risk Officer (CRO); Alexsandro Broedel, Executive Officer for Finance and Investor Relations; and Christian Egan, Executive Officer for Global Markets and Treasury as well as Roberto Setubal, Co-Chairman of the Board of Directors were present.
“The fact that we have shares traded on the New York Stock Exchange has contributed to the bank’s growth and made us better known around the world, helping us to expand the number of foreign investors among our shareholders. We are very satisfied with the results of these 21years of listing”, says Candido Bracher.
During this period, the shares of Itaú Unibanco (identified by the ITUB ticker symbol) have been turning in a consistent annual performance, appreciating on average by 16% (considering the reinvestment of dividends) and with a recurring return on equity of 24.4%. Over the period, US$ 32.7 billion has been distributed in dividends and Interest on Capital, net of income tax.
In the first quarter of 2018, Itaú’s shares recorded average daily trading amounts of, R$ 535.3 million (US$ 161.1 million) on the NYSE and R$ 724.7 million (US$ 218.0 million) on the Brazilian stock exchange, B3, and totaling R$ 1.3 billion (US$ 379.1 million). The total trade volume was 41.5% greater than the same period in 2017. On B3, growth was 68.7% and on the NYSE, 16.2%.
Pioneering spirit and appreciation
Unibanco was the first Brazilian bank to trade its shares on the New York Stock Exchange in 1997. Itaú launched its American Depositary Receipt (ADRs) program on the NYSE in 2002. Following the merger of Unibanco with Itaú in 2008, the shares of the two banks were unified.
Currently, 67% of the 3.2 billion preferred shares of Itaú Unibanco pertain to foreign investors, 38% trading on B3 and 29% on the NYSE. The remaining 33% belong to Brazilian nationals and were traded on B3. The numbers reflect shares in the free float, that is those free for negotiation in the market and excluding those shares in the hands of the controlling shareholders or held as treasury stock.
This performance is the outcome of a transparent agenda in the relationship of Itaú Unibanco with the capital markets started in 1996, with presentations in the United States and Europe for disclosing the bank’s corporate governance practices and for emphasizing its respect and consideration for its shareholders.
“The sustainability of any organization depends on how it interacts with its employees, clients, shareholders and society in general. For this reason, we run a far-reaching agenda of events and meetings for understanding investor requirements and to disclose the strategies and results of our businesses, based on clarity, transparency and on a long-term vision”, says Caio David.
Itaú Unibanco has 121 thousand direct shareholders and a further approximately 1 million indirect shareholders through participation in Brazilian investment and pension funds which hold the institution’s shares.
In the past three years, Itau contributed Value Add to the economy of R$ 189.4 billion (US$56.9 billion), distributed as remuneration to the employees (30%); taxes, charges and contributions (30%); profits and dividends to all shareholders (19%); reinvestments in the operations of the bank (19%) and rents (2%).
New Cycle
In September 2017, the bank changed the maximum limit for payment of Dividends and Interest on Capital, and previously set at 45% excluding share buybacks, introducing a payout (percentage of net profit distributed to the shareholder) of 83% (including buyback of its own shares). In the light of the new remuneration practices, Itaú’s shares have now also become attractive to investment and pension funds where the strategy is to prioritize assets with higher levels of payout and efficient capital management.
In 2017, the bank distributed US$ 5.3 billion in dividends and interest on capital, the result of a recurring net income of US$ 7.5 billion.
Pixabay CC0 Public DomainFederico Tomasevich, CEO at Puente. Puente Will Exclusively Distribute a Partners Group Vehicle in Argentina, Uruguay and Paraguay
After the new Argentine legislation allows Argentine investors to operate financial instruments abroad, provided that they have a local agent as a link to the operation abroad. Puente announced an agreement with Partners Group, one of the leading investment groups in the world, to exclusively distribute one of its innovative investment instruments in Argentina, Uruguay and Paraguay.
“We are very excited about Partners Group’s decision to choose us as its exclusive partner in Argentina, Uruguay and Paraguay, which further strengthens our investment platform, particularly in terms of alternative investments. It presents an opportunity to those that seek to diversify their portfolio, maximizing their capital through investments in private equity, real estate, private debt, and infrastructures. This strategy allows the investor to access dollar returns that aim to be above most of the options available today in the market, with investments with lower volatility and that have a low correlation with traditional markets,” said Federico Tomasevich, President of Puente.
With its head office in Switzerland and 19 offices around the world such as New York or Houston, Partners Group manages more than 74 billion dollars in assets invested in private equity, real estate, private debt and infrastructure projects.
“Partners Group, through Puente, makes available to the Argentine, Uruguayan and Paraguayan investment market, a modern and efficient investment alternative that gives access to Puente’s clients to investments in private markets, which are typically only accessible to large institutional investors. We are very enthusiastic about this agreement with Puente, a renowned institution in the markets in which it operates,” said Gonzalo Fernández Castro, Head of Private Equity for Latin America at Partners Group.
Puente has over 3,400 million dollars in assets under management.
Wikimedia CommonsCourtesy photo. Above 3%. Is the Party Over?
It has been a long time coming but we have finally been given a wake-up call: the 10-year US Treasury bond yield has gone above 3%. So, now what? Should we prepare our fixed income portfolios to hedge interest rates in case of further hikes? Or should we increase the duration to take advantage of potential corrections below 3%?
In a time before Central Banks routinely employed cash injections and mass bond purchasing, textbooks on macroeconomics traditionally taught that 10-year yields responded to a simple formula: expected growth + inflation expectations. So, if we consider just these two factors and we believe the consensus forecasts for the coming years are valid, we could conclude that we will soon be grazing the 5% mark for the 10-year US Treasury bond. The reality is not all that simple and recent years have served to cast doubt on some of the principles we learnt during our studies, as they reflect a new reality in the interrelationships among economic variables. For instance, after several years of unlimited liquidity, inflation is only now beginning to rise slightly or even though the Federal Reserve increased official rates and four hikes are expected for this year, the dollar has weakened.
Some official projections for US economy growth include: IMF: 2.9% for 2018 and 2.7% for 2019; and OECD: 2.9% for 2018 and 2.7% for 2019. Yes, the figures look good. No doubt about it. But they do not point to accelerated growth that could justify inflationary pressures and aggressive rate hikes and we cannot rule out the possibility that these forecasts will fall in the coming quarters. After 35 straight quarters of economic expansion in the US, we may beat the record of 39 quarters set in the 90s, which culminated in the technology bubble (“dotcom”). Let’s face it, until Trump’s fiscal stimulus peters out, the tailwind will continue to blow for consumption, investment expenditure and the real estate sector. However, we are not looking at an abrupt rally, but an ongoing slow and steady pace for growth. In other words, even if we stick to the traditional factors that we mentioned, which determine the 10-year yield, we are not anticipating an environment that justifies much higher rates than now. We might also add other “non-traditional” factors into the equation, such as the impact of the behaviour of some very influential players in the sovereign debt market like China (largest foreign holder of US Treasury bonds), insurance companies and sovereign wealth funds.
Nor are we convinced by those who predict an imminent recession and a return to yields below 2% for the 10-year US bond. One of the arguments that has become popular among proponents of this position relates to the yield curve inversion. That is to say, a lower interest rate for the 10-year than the 2-year bonds. Historically, the inverted yield curve has been one of the best indicators of recessions. In fact, all the recessions suffered by the US since the 1960s have been preceded by yield curve inversions. Recently, the slope has reduced, but there is still a 50-basis point spread between the 10-year and the 2-year bonds. And we believe that this reduction is due more to the non-traditional dynamics that we have mentioned, which are sustaining the 10-year yield level, than to signs of an imminent recession.
And what about the voices warning us of another consumer delinquency crisis caused by official rate hikes? The market is discounting a total of four rate hikes by the Federal Reserve for this year. Despite the rise in the short rates, which brings an increase in consumer credit costs, we are still not seeing alarming increases in the delinquency rate among the various classes of consumer loans. If rates continue to increase more aggressively, we could indeed see this but, for now, it is not our base case.
Even if we think that the rate hikes will not be sufficiently aggressive to rain on our parade, we do need to be prepared for unexpected summer downpours. We choose not to fully hedge interest rate risk, but we are carefully looking at the relative value and potential risks. With a spread of just 15 basis points between the 5 and 10-year US Treasury bond yields, can we justify assuming an additional 4 years of duration risk? We do not think so.
Wikimedia Commons. Indosuez Wealth Management Looks to Expand in Mexico and Has Hired Ignacio López-Mancisidor for Miami
Ignacio López-Mancisidor has recently joined the offices that Crédit Agricole Indosuez Wealth Management has in Miami, as relationship manager.
In his new responsibilities, he will report to Jon Diaz Valdenebro, managing director of CA Indosuez Wealth. Both professionals met when they worked at Santander Private Banking International.
CA Indosuez is also fueling its large clients business in Mexico. Credit Agricole already had a presence in the country through CACIB, the Corporate and Investment Banking division of the French bank, but the expansion will now be under its own brand, Indosuez Wealth Management.
Both López-Mancisidor and Valdenebro are part of the team led by Mathieu Ferragut, CEO and head of the division of Indosuez Wealth Management in the Americas and member of the Executive Committee of the firm.
López-Mancisidor arrives from Noctua Partners, an independent wealth management firm based in Miami, where he has spent his last year of his career. He also developed a large part of his professional career at Santander Private Banking International.
He has a degree in Media Management, with a specialty in Communication and Economics from the University of Miami, and a master’s degree in Corporate Communication from the Instituto de Empresa.
Credit Agricole Private Banking has about 100 specialized employees in Miami at its offices at 600 Brickell Avenue, dedicated to wealth management for the clients of Indosuez Wealth Management.
Pixabay CC0 Public DomainPhoto: hotel Le Parker Meridien. The Sixth Edition of the Mexico PE Day in New York is Approaching
The AMEXCAP is organizing its sixth Mexico Private Equity Day in New York. The event will take place between June 6th and June 7th at the hotel Le Parker Meridien.
The main objective of this flagship event is to attract foreign investments in Mexico, as well as cement bonds and develop synergies between players operating in Mexico and international participants. The most dynamic LPs, GPs and specialized advisory firms will share their experiences in the Mexican PE market.
Mexico has yet to face several challenges in 2018. Among the most important ones are the resumption of the NAFTA negotiation rounds, as well as the Presidential elections in Mexico. However, 2017 was a great example of Mexico’s strength, as it faced many adversities, emerging victorious from pessimistic economic forecasts, protectionist policies from the US Government and two major earthquakes.
To register with the 25% discount on the non-member rate follow this link and use the code: ULPE191A103.
