Archive for December, 2012

Top 10 (or 12) 2013 Predictions

Thursday, December 20th, 2012

As 2012 comes to a close, it’s time to make predictions for next year. With no election, I at first thought it might be difficult to come up with predictions, but as I began to write down some ideas, I found that there is indeed a lot going on worthy of discussion. Unfortunately, I am anticipating a difficult 2013, in large part driven by political uncertainty here and abroad. Here goes:

10 – Regardless of how the current fiscal cliff negotiations end (I am thinking there will be a small deal to get us through either just before or just after Dec. 31), no grand bargain will take place next year – on either tax reform or entitlement reform. Obama’s continued campaigning to rally public support for his ideas has ensured that Republicans will do almost anything to block him next year. Not saying that this behavior is right – it’s just inevitable.

9 – The one area where we will see major legislation is immigration reform. The Republicans desperately need an image boost here, and so this is the one exception where the two parties will work together to pass something. (Given the events in Newtown next week, there will be some movement on gun control, perhaps a ban on assault weapons, but more far-reaching gun control will be hard to attain.)

8 – The Euro crisis will deepen once again after a relatively quiet 2012. Italian elections could become a farce, and Greece, Spain and Portugal remain trouble spots. I don’t see any exits from the Euro in 2013, but I do expect more dissent from the populaces of the Northern European countries.

7 – By the end of 2013 Hillary Clinton will strongly signal (if not outright declare) her intention to run for President in 2016.

6 – Merkel will win re-election in Germany, but her victory will be very small and her party will be weakened as German voters show their displeasure over the continued drain the Euro crisis is having on the country.

5 – The stock market will be down for the year, perhaps by 10%. I think January is going to be a very tough month as realty sets in that the country’s finances are in real trouble. Even if the fiscal cliff is partially solved, it will hit home that tax rates are going to go up (in part because of some of the provisions of Obamacare going into effect) and people will realize that the recovery is not as strong as believed. Encouraging employment numbers will reverse, and the reality will set in that the numbers have been skewed by more people leaving the work force – which is not a positive sign.

4 – The US economy will not go into a major  recession, though it may come close and may even technically experience a minor recession. As stated above, I see growth slowing. I also see declines in consumer sentiment and business confidence, but I don’t think the slowdown will be enough to push us into a major downdraft.

Specifically for financial services:

3 – I do see a major deal being announced among the major wirehouses – Bank of America Merrill Lynch, UBS, Morgan Stanley and Wells Fargo. I’m not sure what it’s going to look like – perhaps a bank selling off its wealth management division – but something major is going to take place.

2 – I see continued consolidation in the asset management arena, with a number of major deals being announced. Firms will continue to find it hard to go it alone, and will benefit from the operational synergies of combining forces.

1 – RIAs will continue to make news by taking advisors from the wirehouses, but I think the wirehouses will hold their own and have a pretty decent year. The negative news about the brokerage arms of these institutions will continue to abate.

Those are my top ten – but as I am doing them – I realize that I have to add two more:

11 – While I don’t see major changes to Dodd/Frank, I do think the banks are going to be beat-up on by Elizabeth Warren in her new role on the Senate Banking Committee. Bashing banks seems to be in vogue, and perhaps if my other predictions of other major legislation getting bogged down come true, the Democrats might use the banks as their way to show how tough they are.

12 – Alabama will win the BCS Championship and the 49ers the Super Bowl. You can’t have predictions without sports, now can you?

If Your Clients Are Worried, You Should Be Too

Monday, December 17th, 2012

As we approach the new year, according to at least one poll, advisors and their clients aren’t on the same page. Clients are  more worried about the outlook for the economy in 2013 than their advisors are, with implication that advisors should put their optimism aside for a minute and concentrate on how they can address their client’s concerns.

First, the poll itself, which was conducted by SEI, a provider of fund processing and investment management outsourcing services. 86% of the 275 advisors polled felt that the economy will be better or the same in 2013 than it was in 2012. However, 73% of these advisors also said that their clients are apprehensive or fearful about the prospects for the year ahead. Less than 1% felt that their clients were optimistic about the year ahead.

Additionally, while 75% of the advisors polled said that they were better off than they were in 2012 as compared to four years ago, only 55% thought that their clients would share that opinion about themselves.  This second point is pretty scary if you think about it. If more advisors think that they are better off than their clients are, what does that say about how they have performed over the time period? If I felt that way about my clients, I would be very worried about losing many of them, wouldn’t you?

Many of these same advisors expressed concern over what is going on with the fiscal cliff and government dysfunction, which is somewhat at odds with their optimism for the economy. In any case, the most important implication for advisors is that regardless of your personal feelings for the outlook for the year ahead, it’s vital that you put these feelings aside and ask yourself  how you can reassure your clients about their concerns.

Hey, it’s great if you are optimistic about the coming year and beyond. But you and your clients will be best served if you can frame this optimism and explain it in such a way that it makes clients feel better and helps them feel more comfortable about their own financial futures. After all, that is what your job is. And only if clients feel better about their own outlook will they remain loyal to you. Remember – it should always be about them, not about you.

A Look Back At My 2012 Top 10 Predictions

Tuesday, December 11th, 2012

It’s time to look back at my predictions from a year ago and see how I did. All in all, a mixed bag of results. Next week, I’ll have my 2013 predictions. (Each predication is followed by comments in bold.)

10 – The Presidential election is the Republicans to lose. I retain this view even as the Republicans (led by the House) are self-destructing and opening the door for Obama. If the candidate is Romney, Huntsman or someone with similar moderate views that can attract independents AND there is no third-party candidate, then Obama is out. If, on the other hand, the candidate is Gingrich, Paul, Bachman or some other candidate who can not attract independents AND/OR a third-party candidate emerges, then we will have four more years of Obama. I know that that is a lot of “ifs,” but we are still early in the race. My money is on a Romney presidency starting in 2013. I was wrong on this one. The Republicans did pick a candidate that could have won, however, I think it’s fair to say that he didn’t run a very compelling campaign – he let his opponent define him from the beginning of the campaign. I think over time, Republicans will view this as one of their greatest disappointments ever – if was their election to lose, and they did.

9 – The Democrats will retain control of the Senate, although with a smaller majority, in part because like in 2008, the Republicans will put up some unelectable candidates (can anyone say Rhode Island?). The Republicans will retain the House of Representatives, which will look pretty much the same as it does now. Sorry Nancy. Pretty much right here except that the majority is a little larger in the Senate although that doesn’t make a whole lot of difference. Again, this was more the Republicans losing than the Democrats putting up a compelling case.

8 – The Supreme Court will uphold the legality of Obama’s Health Care plan, but this will make it an even more polarizing issue in the election (since the decision should come in the Spring). If a Republican is elected President, it will be continue as an even more contentious subject in 2013 and beyond, as the legislative branch will take the lead in repealing parts of the plan. I got this one right – but since Obama was reelected it won’t be as contentious next year as it would have been. There will be no repeal.

7 – The stock markets will end slightly up for the year, helped by a year-end relief rally after the election. Volatility should be relatively low, as many investors will stay on the sidelines because of all of the political uncertainty. Another “lost” year like this one. It will remain a stock pickers market – driven largely by earnings in the few sectors of the economy that will do well. Pretty close here – although the year-end rally has been held in check by the fiscal cliff discussions. It has definitely been a stock pickers market though.

6 – The U.S. economy will not go into recession, though following continuing turmoil in Europe, will get dangerously close. Unemployment will dip somewhat then increase again to about 9% at election time because there will be no significant job bills enacted and political gridlock will dampen demand. Housing will remain in the dumps. The positive economic news of the past month is deceiving. Kinda right, kinda wrong. No recession in the US, but problems do remain in Europe. Unemployment has not gone back up – but it hasn’t gone way down either. Housing, however, has made a good recovery, which bodes well for the future.

5 – Europe will go into recession (maybe not all countries but as a whole). There will have to be a number of emergency summits once again, as everyone realizes that the actions enacted in 2011 were only band-aid measures and that real problems remain. The divergence between the stronger Northern European countries and weaker Southern European ones will continue. Many of the European countries have gone back into recession, and Euro problems are far from being solved. 

4 – The Euro will survive 2012 – barely – and I imagine a year from now the outlook for its continuation past 2012 will be very bleak. Back to those summits for a second – hopefully there won’t be 8 or 9 like there were this year! The Euro did survive. I’m not sure how many summits there actually were, but it does seem like there were fewer than last year.

3 – The Occupy movements will continue sporadically throughout the year as economic conditions stagnate. I don’t think they will pick-up significantly, however, and absent the emergence of any real leadership – to voice a unified concern or theme in a cohesive manner – the November elections might signal their end. I was on target here – the Occupy movement has pretty much disappeared from public view. I do have to say, however, if you walk in front of the Trinity Church, by Broadway and Wall Streets, there are still people there. However, the only reason I know that is because I was there recently – it has faded from media interest.

As for the financial services industry:

2 – At least one major brokerage firm will be sold or spun off by its bank-parent (this excludes Morgan Keegan; in this case, if MK is not sold by the end of the first quarter, I predict that Regions Financial itself will be gobbled up by a larger bank). The bank/brokerage marriages have in large part not worked, so 2012 could be the beginning of the end for many of these relationships. Hint – ML. I am a little early on this one – didn’t happen in 2012, but… On Morgan Keegan, the sale to Raymond James was a good strategic fit, but the jury is still out if Regions survives.

1 – The wirehouses will continue to lose advisors to the independent, RIA and semi-independent channels. The attractiveness of working for one of the big four is just not what it used to be – both from a reputational point of view as well as an ease of doing business one. The wirehouses aren’t going to disappear though – just continue to become less dominant. I was right on target here. The RIA space did continue to grow – but as I have said many times, the wirehouses aren’t going anywhere.

2012 was an interesting year from both political and economic prospectives. Can’t wait to see what 2013 holds.


AK In The News: UBS, Wells Fargo Best Positioned For 2013

Friday, December 7th, 2012

I was asked to comment on a survey in today’s FundFire (a Financial Times Service) about which of four wirehouses – Bank of America Merrill Lynch, Morgan Stanley Wealth Management, UBS Wealth Management America and Wells Fargo Advisors – is best positioned for 2013.

First, the poll results. Interestingly, respondents were pretty equally split in their predictions – with 26% for UBS and Wells Fargo and 24% for each of the other two. (UBS actually had four more votes than Wells Fargo even though the percentages are the same.) This is much different than the results a year ago, where Morgan Stanley garnered the support of 46% of respondents and UBS only 16%. Unquestionably, the general feeling is that UBS has recovered from a lot of the negative press that has hounded it for the past few years.

UBS may also have gained from reports that ranked its advisors as the most productive of the wirehouses in recently released third quarter data ( Wells Fargo was not included in this study). Additionally, dropping the Smith Barney might have hurt the results for Morgan Stanley, as many of the old Smith Barney advisors were not happy with this change and they may have participated in this survey and voted against their own firm.

Overall, however, the results reflect my general feeling that entering 2013, all of the wirehouses are pretty much on equal footing. A lot of the negative press that has hounded them since 2008 has abated (although that could have been a by-product of all of the press that was concentrated on the election). A potential negative facing all of them next year is Elizabeth Warren’s apparent appointment to the Senate Banking Committee. She will be a pain for all of the banks.

From the article: “Andy Klausner, founder and principal of AK Advisory Partners, agrees with the 27% of FundFire readers who say that Wells Fargo is best positioned. “I don’t see a clear-cut winner right now based on relative strengths, but almost by process of elimination, Wells Fargo has had the least amount of negative press surrounding them, and they have done well in the recruiting wars, so I would have to give them a slight edge over the others,” he explains.”