Model Portfolios Surging as Advisers Seek Quick Ways to Invest Client Money

 https://www.wsj.com/articles/model-portfolios-surging-as-advisers-seek-quick-ways-to-invest-client-money-11607091645?st=czubzqkz6ndch4l&reflink=desktopwebshare_permalink

Model portfolios are ready-made fund combos delivered through financial advisers and brokerages to everyday investors. 

The portfolios come in all shapes and sizes and are today surging in popularity as advisers seek quick ways to invest client money. A portfolio might use a classic investment formula of 60% in equity strategies and 40% in bond funds split between a dozen funds, for instance, or use algorithms to dynamically shift the funds it invests in as markets change.

Model portfolios take some of the human emotion out of investing.

Model portfolios are the latest example of the growing influence of bundled financial products on modern markets.

The models’ rise follows a decadelong transformation of Wall Street. Index funds that mirror markets and robo advisers that automate advice lowered the cost of investing. Human advisers were under pressure to provide cheaper services. Some moved to offering fee-based portfolios filled with low-cost funds—rather than giving priority products that would bring commissions.

Cheap exchange-traded funds provide abundant building blocks for models. Some asset managers jumped into models as a way to distribute their own funds in bulk.

After the 2008-09 financial crisis, brokerages tried to rein in advisers who took excessive risks. Encouraging them to use pre-vetted model portfolios was one way to curb rogue trades.

Broadridge expects U.S. model portfolio assets to more than double to $10 trillion by 2025.

Investor advocates warn that the multitrillion-dollar force comes with risks for consumers. Firms in the model-portfolio business face few regulations when it comes to reporting performance to potential clients. Some models contain unproven funds.

Morningstar's Don Phillips talk about trends in personal investment

 https://www.wsj.com/articles/inspired-by-moms-etfs-an-elder-statesman-reflects-on-the-changes-in-fund-investing-1494209220

From WSJ May 7, 2017

 the biggest change you have seen in the fund world?

Today, people know they need to invest in funds. They’re seeking out the information and looking for the right characteristics. there’s a much higher chance you will end up in a good fund, satisfied with the results. Today, almost no money goes into funds with above-average expenses.

Investors in mutual funds—and equities, too—get a far better shake here (in the U.S.) than anywhere else in the world. There’s no other market in the world where you know if your mutual-fund manager invests in his or her own mutual fund. The U.S. is the one market where that transparency now exists.

What has changed most about the audience for funds as witnessed by your years at the Morningstar conference?

People are talking much more about the process of assembling portfolios. A lot more talk about passive investments.

What hasn’t changed over all these years that you think needs to?

What hasn’t changed is that an awful lot of people still aren’t participating in the investment process, not using the great low-cost funds and investment vehicles that are available to them.

Half of American workers don’t participate in any kind of a retirement plan, so there are huge communities that feel the financial-services industry has turned its back on them. Somehow the financial-services industry has not reached out to them as effectively as they need to, because we live in an era where the responsibility of saving for your retirement has been transferred from your employer or the government to the individual.

The Lure of Nontraded REIT May be an Illusion

(source: Small Investors Pour Cash Into Reborn Real-Estate Funds, WSJ.com, https://www.wsj.com/articles/small-investors-pour-cash-into-reborn-real-estate-funds-11578398401?mod=article_inline&tesla=y retrieved 6/24/2020)

These funds, which have been around for 20 years. Proponents say they offer more direct exposure to the property market than public REITs, which can be subject to stock market volatility that can whipsaw these real-estate companies’ shares even when property markets are doing well.

Many analysts believe a traditional stock and bond portfolio will likely produce annual returns between 2% to 5% over the next three to seven years. 

Nontraded REITs have plenty of critics, who say that investors get the cheapest commercial real-estate exposure with public REITs, which cost the same brokerage fee to buy or sell as any other listed stock.

Trading liquidity is also much better with a listed company. Investors who need to cash out of mall giant Simon Property Group or New York office landlord SL Green Realty know they can do so with a simple call to their broker.

It can be trickier with a nontraded REIT. While most of the new ones will buy back stakes from investors needing their money, they will start limiting redemptions if they get too many requests at once.

Detractors also say some of these REITs pay dividends partly from the capital they are raising from investors. That increases the risk of a dividend cut if the REITs can’t generate enough cash from property investments.

This dividend pledge is “a marketing gimmick in my mind,” said a portfolio manager.

Many of today’s REITs charge upfront fees of less than 5%, but also take a piece of the profits if they exceed a certain amount. Nontraded REITs in the first half of the last decade charged upfront fees as high as 13%. 

The old crop of nontraded REITs also were structured as closed-end funds that promised to liquidate and return money to investors after a number of years. Some were slow to report the true value of the funds, leaving investors in the dark about the value of their shares until the funds liquidated.

How To Teach Your Children About Money

Search Results

Web results

How To Teach Your Children About Money

https://www.barrons.com/articles/teach-your-kids-about-money-in-4-steps-51575028801?mod=article_inline&tesla=y

Teach Your Kids About Money in 4 Steps

https://www.barrons.com/articles/teach-your-kids-about-money-in-4-steps-51575028801?mod=article_inline&tesla=y