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Top Highlights from IMPACT 2019 Conference - Part Two

As we said in our first piece on the conference’s key learnings, Schwab’s IMPACT Conference is truly a wealth of knowledge for advisors and the RIA community. The level of keynote speakers, product innovation, panels and workshops really are unprecedented. Everywhere you look, there is something new to learn and the information offered covers a wide variety of planning topics.
However, for attendees, the blizzard of information can be a bit daunting to take in. Given the amount of material presented at IMPACT, you’re bound to miss something.

With that framework in mind, is continuing its coverage of IMPACT and providing a second update on some of the best advice from the conference. Once again, we’ve dug into the conference’s key learnings and pulled out some of the most important pieces of information for you and your practice.
Reading the following update can help fill in the gaps of what you missed at the conference.
Click here to read our first piece on the best advice from IMPACT 2019.

Current Trends in Investment Strategies

One of the top reasons why advisors and RIAs come to IMPACT is to get valuable information on portfolio strategy and construction. It’s here that a variety of keynote speakers and presenters make their cases for various asset classes, allocations and overall themes. This year was no different, with much of the focus being on alternative assets, investing in the current market environment and fixed income challenges.

Liquid alts and private equity have long been great diversifiers for high-net worth and institutional clients; however, these days, even regular Joes have the opportunity to invest in these asset classes. Boston Partners’ Paul Heathwood mentioned that advisors could gain an edge using long-short strategies given how overpriced certain nations/sectors of the market have become. Similarly, Bob Rice of Tangent Capital gave a presentation on using private equity to help generate better and smoother returns for a variety of clients. Thanks to traditional private equity funds, feeder funds, interval funds and auction funds, many investors now have the opportunity to add private equity to their portfolios.
At the same time, “value” stocks were high on the IMPACT agenda. Many strategy panels focused on the current shift away from high-growth/tech and into value stock sectors. Schwab’s Jeffrey Kleintop noted that shift in momentum from growth to value historically has coincided with inverted yield curves. With the curve still inverting in places, that shift should be able to keep going.
Finally, a big theme at IMPACT continued to be the challenges in generating income in the current environment. With interest rates falling, bonds once again are starting to not be able to pull their weight. Discussions over the end of the “60/40” portfolio and using bonds as a total return element were hotly debated.

The Value of Portfolio Diversification

Another common talking point at IMPACT continued to be the focus on diversification. Speakers highlighted the fact that many investors are wearing blinders because only certain sectors of the market have been performing well over the last decade. However, according to BNY Mellon’s Gautam Khanna, diversification is “critically important.” During his talk, Khanna, mentioned that there are “fewer shock absorbers in the economy” and investors need to be careful in asset allocation. Loading up on one asset class isn’t a good idea in any environment.

This point was echoed by Schwab’s Kleintop and James Peterson in various talks. Peterson cited World Bank data that pointed to the fact that the U.S. only accounts for about 44% of the world’s market cap. This provides plenty of outside opportunities for advisors/investors. Peterson noted that global diversification still works and helps reduce risk over time, saying that “Asset allocation arguably is the most important thing we do as investors.”
Additionally, many of the conference’s talks focused on rebalancing portfolios towards strategic allocation targets. After years of gains, many portfolios are probably out of whack, and while painful to sell winners, it’s the correct thing to do for clients.

Communicating Effectively

A big part of IMPACT continues to be practice management. And one area which remains a hotbed of debate is client communication.

From social media to text messaging, the way advisors talk to their clients these days is vastly different than previously. But Ryan Sullivan from Hartford Funds mentioned that no matter what, advisors still need to communicate effectively. Sullivan noted that “Being a fountain of knowledge is a good thing…being a fire hose of knowledge is not a good thing?” Sullivan’s tips included advisors keeping information fresh and concise, using appropriate humor to break barriers and focusing on the Four F’s – firsts, faults, failures and fears – to build trust.

M&A in RIA

Being an RIA is a business after all. So, IMPACT featured plenty of talk on the state of the advisory business. This included a hefty dose of M&A and buyout chatter.

The RIA industry now managed over $82.5 billion in assets that increased 16.7% over last year. This growth as well as many broker-dealers/wealth managers realizing the power of the model have contributed to more than $500 billion worth of deals in the sector. Schwab’s Bernie Clark highlighted the mega-deals of Goldman Sachs, Hightower and Dynasty Financial Partners as proof that the RIA model is attractive to outsiders. Especially considering RIAs feature organic growth rates nearly four times that of other advisory firms. This means that more M&A is on the way and some advisors may realize plenty of offers for their practices.

Hiring and Retaining Top Talent

Finally, getting that growth relies on hiring top talent. IMPACT featured several talks on growing a practice via talent acquisition and management. A common theme is that investment acumen isn’t the only requirement these days.

Today’s clients are not just looking for returns. A Schwab Advisor Services study and roundtable showed that “emotional intelligence” is now an essential skill. Schwab’s Lisa Salvi mentioned that firms need to mentor staff in order to have “difficult, often intimate conversations with clients and clients’ children about their lives.” The point is that it is not just numbers on a balance sheet or year-end statement; Salvi also provided advice that advisors should look beyond the traditional sectors of finance to find higher top talent.

The Bottom Line on IMPACT 2019

In the end, IMPACT 2019 lived up to its moniker as a top spot for advisors to gain valuable knowledge. The focus on diversification and use of alternatives was certainly a welcome reminder for advisors. Meanwhile, the communication information and topics stemming from the growth of the RIA model provided plenty of insight into growing a practice effectively. All in all, IMPACT was an informative and useful conference for advisors.

Check out our Schwab IMPACT 2019 Channel to catch all the highlights from the event.

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Nov 20, 2019