A CFA favors longevity annuities

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Longevity annuities may make sense in the eyes of at least one CFA charterholder.

“…individuals can have their cake and eat it too. They can buy longevity insurance for about 5–10 percent of their assets while investing and decumulating the remaining 90–95 percent!” according to a Canadian charterholder’s letter in the July-August issue of CFA Magazine (subscription required).

I’ve written previously about annuities. It fascinates me that they’re becoming more respectable.

What Jason Zweig does right–and wrong–in his inaugural column

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“Stop Worrying, and Learn to Love the Bear.”

I love the title of Jason Zweig’s inaugural “The Intelligent Investor” column for The Wall Street Journal. With this title, Zweig follows advice I give to writers of investment commentary. He takes something that’s viewed as negative and finds the positive side. That’s a great way to grab your reader’s attention.

Zweig says, “…if you are still in your saving and investing years, a bear market is a gift from the financial gods — and the longer it lasts, the better off you will be. Instead of running from the bear, you should embrace him.” So that’s his thesis. 

But Zweig falls short in explaining how the bear market will help investors, other than offering the opportunity to buy good stocks cheaply. He gives the example of how the last long bear market—1969-1982—set the stage for stocks to return 18.5% a year for the 18 years following the bear market’s end.

Let’s assume—and it’s a big assumption—that scenario will repeat. Then, sure, folks who are just starting their saving and investing would end up better off. But what about those who are in the midst of their saving and investing? Will they ever make up their losses?

"Should you use quotes like PIMCO’s Bill Gross?"

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If you don’t subscribe to my e-newsletter, you missed “Should you use quotes like PIMCO’s Bill Gross?” 

This article appeared exclusively in my e-newsletter and provided advice on how to use one of Gross’ investment commentary techniques.

Useful quarter-end fact from The Wall Street Journal

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Here is a useful tidbit for your quarterly investment commentary from the June 28-29 issue of The Wall Street Journal:

  • Bear markets average 14 months and recover within a year of their bottom, according to Sam Stovall of S&P in “What to Do to Survive This Market”

The 14-month average is also cited in “Dow Hits Bear-Market Territory, Signaling Woe for Economy,” but attributed to Ned Davis Research. It’s accompanied by a graph showing the healthy gains the Dow has earned in the year following each bear market’s end since the 1960s.

Time to invest in frontier market stocks

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“If you remember China 20 years ago, you get a sense of the potential for frontier markets today.” 

This quote from Larry Speidell, chief investment officer of Frontier Market Asset Management, kicks off my article on “Time to invest in frontier market stocks?” in Advisor Perspectives.

Are YOU ready to invest in frontier market stocks? Leave your comments here. 

"Tool: Google Trends"

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Google Trends will help you figure out which of your key words are searched most frequently.

Learn more in “Tool: Google Trends” on Erik Sherman’s Writer Biz blog.

2008 World Wealth Report out from Merrill Lynch and Cap Gemini

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The 2008 edition of the annual World Wealth Report is now available.

If you’re evaluating your firm’s business strategy, the report’s “Spotlight: Wealth Management Firms Adapt to Meet Unique Needs of Growth Markets” will interest you.

The changing world of mutual fund distribution

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Mutual fund distribution sure has changed since my days as a staff reporter for Dalbar’s Mutual Fund Market News (now Money Management Executive) back in the 1990s.

Darlene DeRemer‘s presentation on “U.S. Retail Distribution Trends” at the NICSA General Membership Meeting on June 23 drove home that point.

Here are some of the key changes impacting asset managers that I heard in the presentation by DeRemer, partner and head of the advisory practice at Grail Partners LLC:

  • Financial intermediaries–especially fee-based intermediaries–are more important than ever with the rise of wrap programs, defined contribution platforms, and variable annuity and subadvisory platforms.
  • It’s harder to know the ultimate client because of omnibus accounting
  • Fees are under pressure, yet revenue-sharing is costing 45 basis points or more
    • Distribution costs are coming out of fund sponsors’ profits, rather than simply out of the fund expense ratio
    • There are new, lower cost share classes, such as W or P shares for wrap or platform shares with about 10 basis points of 12b-1 fees
  • Fund selection at broker/dealers is shifting from individual reps to the firms’ fund selection units (see my other June 24, 2008 post for more on B/Ds’ fund selection)

Shifting emphasis at mutual fund distributors

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The rising importance of fund selection units at broker/dealers (B/Ds) was reflected in the June 23 NICSA General Membership Meeting‘s panel on “The Distribution Road Ahead and Back,” chaired by Marty Griffin, director of sales operations for Pioneer Funds Distributor.

Mutual fund distributors are ramping up their efforts to satisfy those units. For example, two-and-a-half years ago MFS Fund Distributors set up an Advisory Resources Group that’s dedicated to servicing analyst teams performing due diligence at B/Ds, said Jim Jessee, president, MFS Fund Distributors. Jessee said, it used to be that reps had the most point-of-sale influence. But now, increasingly, that role is offloaded to the analytic group in the home office.

Eaton Vance is taking an approach similar to that of MFS, said Matt Witkos, president, Eaton Vance Distributors. Those B/D analyst teams are increasing in influence, he added.

Even smaller firms like Pax World Management Corp. are feeling the change. There’s more of a need for communication through the home office, said Keith Bernard, senior vice president.

These mutual fund distribution executives’ employee requirements are changing, too. Analytical skills are more important than 10 years ago. Jessee is hiring more people with the CIMA or CFP credential. He has even hired a couple with the CFA credential, “though I’m not sure how many have the stamina to tackle that one.”

One millionth CFA exam

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The CFA Institute has administered its one millionth CFA exam, according to a recent email from its president. About 119,000 registered to take the exam on June 7.

The CFA Institute’s reach sure has expanded since I took the exam. My CFA candidate number is under 12,000.