In January, Citywire's Raj Dhaliwal toured the Golden State’s main investment hubs to learn more about the region’s advisory market and its links to Mexico and Asia.
At Citywire Americas, we are expanding our reach into the financial advisor space. One of my primary goals this year will be to meet with international financial advisors to gather market research and gauge which topics pique their interest.
Each encounter reveals different preferences, but meeting as many financial advisors as humanly possible from diverse geographical locations over the next few months will give us a good starting point.
To kick-start this effort, I began my trip to California by meeting with two financial advisors at a San Diego-based global private bank.
The purpose of this meeting was to find out the content financial advisors would prefer to read and the types of products they are interested in. After chatting for a little while we were able to generate a robust list of ideas. One topic that was discussed in length was transparency and how the Common Reporting Standard is changing the international investment landscape. Both of these advisors were interested in how the industry is evolving away from estate planning at the individual or family level toward product efficiency.
Another topic we discussed is something that is on every investor’s mind these days – technology, particularly the rise of digital currencies and artificial intelligence. The role that technology plays in finance will only continue to grow with time, so it is crucial that financial advisors have the necessary tools to be able to adapt.
Politics was also on the agenda, particularly the role it plays in markets around the world. Lastly, we discussed some of the trends that have already taken hold in the 40 Act market that will likely filter through into the Ucits market, such as the move from active to passive management and the rise of impact investing.
Later that day, I stopped by the offices of Rafael Benrey at IPG in San Diego. IPG, founded in 1983, is an independent broker-dealer servicing both international and domestic clients.
Benrey was hired onto IPG’s investment committee in April 2016 and is now in charge of overseeing its fund strategy. He works alongside the firm’s chief investment officer, Todd Crescenzo, and its chief operating officer, Gil Addeo.
Traditionally, IPG has been focused on fixed income strategies, but in recent years the firm has tried to expand its reach. The firm has built out core model portfolios for its clients, composed of ETFs and mutual funds to gain exposure outside of fixed income. To allow clients to select a risk level that is appropriate for their needs, the firm has created three variations of these portfolios.
The asset allocation positioning within these portfolios is determined by IPG’s investment committee, which meets on a monthly basis and is led by Crescenzo. IPG offers their mutual fund strategies through both onshore and offshore vehicles to allow any type of client to access the strategies regardless of their tax status. The assets in these portfolios have quadrupled over the past two years.
Currently, about 75% of IPG’s client book is offshore; however, they are looking to expand their presence in the onshore market over the coming years.
Later in the week, I made my way up to San Francisco. Although it was raining and a thick fog enveloped the city, I decided against a warm Uber ride and chose instead a quick journey on a San Francisco cable car to meet with a financial advisor from a reputable broker-dealer who for compliance reasons wished to remain anonymous.
When probed about his clients’ product appetites, he said that most of his clients are extremely sophisticated, with plenty of knowledge about financial markets. A typical client portfolio is rather aggressive, with 60% invested in equities and the remaining 40% in fixed income strategies.
One trend that has helped to shape the Asian market is the move toward passive management. He explained that ever since the financial crisis of 2008, mutual funds have experienced significant falls in sales, while ETF sales have been slowly on the rise. However, he believes that a move back to active management is imminent given the level of volatility in the market.
This article was originally published in the February 2018 edition of the Citywire Americas magazine.