Intellectual Capital

The Lifecycle: Understanding the Lifecycle of a Wealth Advisory Firm for a Better Family Experience

September 30th, 2014

At every stage of evolution for a wealth advisory organization there are tradeoffs relative to maintaining the alignment between client, employee and shareholder interests. As each organization grows, access to senior team members is reduced, and client intimacy and services coordination are diluted in favor of shareholder demands for scale and profit growth. Determining the appropriate wealth advisory relationship structure therefore requires an understanding of and respect for the evolutionary forces at work relative to your family’s priorities and wealth service needs. 

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Three Networking Hacks for Financial Advisors

September 24th, 2014

The ability to effectively meet new people – whether they be prospective clients or centers of influence – is a difficult yet indispensible aspect of running a wealth management firm.   The article below lists three relatively simplistic ways to become more effective with human behavior and group dynamics.  While not necessarily easy, they can provide some help at the margin in getting through to potential new contacts.

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What, Exactly, Is An Investor Supposed to Do?

September 22nd, 2014

The recent announcement from CalPERS that it was eliminating its hedge fund portfolio due to the cost and complexity of these portfolios is a seminal moment in alternative investing: if one of the largest investors in the world is exiting the traditional hedge fund world because it’s expensive and difficult to figure out, what is the Average Joe supposed to do?   Liquid alternatives, while still complex, provide lower costs and much better liquidity, leading to their impressive growth the past 5 years.  Better still, pragmatic investors combine these portfolios with defensive beta cores in a thoughtful investment programs that grow purchasing power over time with an eye towards limiting fees and taxes.  Raylor’s AlphaBlend portfolios combine our defensive global equity ETF portfolios with a liquid managed futures mutual fund to provide exactly that type of client experience.

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Financial Planning- Why Advisors Should Travel Abroad

September 17th, 2014

Long a source of enjoyment and personal development for us, Financial Planning provides additional reasons to for US-based wealth managers to travel abroad.  The ability to gain new perspective into other cultures, including an appreciation for their approaches to wealth and wealth management, can provide new insight into how best to serve your clients and manage your firm.

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Worries of a Bank-Loan-ETF Exodus Mount

May 21st, 2014

One of the concerns we have raised previously about the rapid expansion in the number of available ETFs has been that the newer products have, by necessity, strayed further from the initial reasons ETFs were created: to offer cheap, reliable and liquid access to well-defined industry benchmarks.  As the press focus attention on problems like the Bank-Loan ETF Exodus (see article), it becomes more apparent that the more “niche” the ETF, the greater the risk there will eventually be problems.  Lightly-traded financial markets are not necessarily great matches for the highly liquid ETF vehicle.  Our portfolio construction process takes issues like this into account, as we process down from the 1,500+ available ETFs into the 80+ that we consider for allocation.  Ultimately, we feel it in our clients’ best interest to avoid problems like these bank loan ETF liquidity challenges to the extent possible.

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Financial Planning: "How to Manage Concierge Services for HNW Clients"

April 2nd, 2014

“One challenge we frequently observe among wealth advisory firms is scope creep – the demand placed upon the advisor by the client for more diverse services, but without additional client fees.  Concierge-type services are one such area where we see the scope creep its way into the client-advisor dynamic.  This article describes several best practices for advisors to consider before undertaking concierge services for clients.”

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Investment News: "The perfect storm: Why alts make sense"

April 2nd, 2014

“Regardless of firm size and client size, an increasing amount of money is being allocated to non-traditional portfolios.  As stated eloquently in the article, “what might have once been a question of “if” is now a question of “when, where and how”.   

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Investment News: "Embrace, Don't Fear, The 'robo-adviser"

February 26th, 2014

One of two  recent articles that highlight how, despite the amount of change in the financial advice industry, some things never change:  investors are “constantly searching for a more valued relationship” and those “Advisors who understand what it takes to capture [their] attention…are the ones who will successfully attract and engage long-lasting relationships.”  

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Think Advisor: How the Up-and-Coming Wealthy Choose Advisors

February 26th, 2014

One of two  recent articles that highlight how, despite the amount of change in the financial advice industry, some things never change:  investors are “constantly searching for a more valued relationship” and those “Advisors who understand what it takes to capture [their] attention…are the ones who will successfully attract and engage long-lasting relationships.”    

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Private Wealth - What Is Active Listening?

February 12th, 2014

In an ever-more commoditizing marketplace, the ability of a financial advisor to truly & deeply understand a client’s needs is of increasing importance.  Through the use of active listening, advisors can more readily spot the true areas of pain and need, and better communicate their unique ability to address these problems.”  

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ETF Trends - The Evolution of Bespoke ETF Portfolios

February 12th, 2014

In addition to the tremendous flow of new assets in ETFs broadly, a significant percentage of these flows have gone into ETF managed portfolios like Raylor’s Strategic Series.  Now with over $80B in assets (and an impressive 37% annual growth rate), these portfolios are increasingly becoming an investment solution for an increasing number of investors.  With over 8 years of live experience, Raylor is one of the longest-standing managers of ETF portfolios around.  To paraphrase the article, creating a thoughtful, strategic allocation across multiple asset classes and implementing in managed portfolios of ETFs can produce a better risk-adjusted return than traditional stockpicking.

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Markets Media - Liquid Alternatives Gather Steam

January 24th, 2014

A common observation since 2008 has been a significant increase in demand for (1) greater investment liquidity AND (2) greater choice in uncorrelated portfolios.  The rise of liquid alternatives is a natural outcome of these demands and this trend (no pun intended) will only accelerate over the next 3-5 years.

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A Comparison of CTA Indexes

November 14th, 2013

One of the key challenges faced by Financial Advisors considering a managed futures allocation for the first time is the lack of an industry consensus around one particular index or benchmark.  Stark Research has put together a comprehensive review of 11 primary indices, with basic information on who put them together, how they are constructed along with various advantages/disadvantages.  Our Xplor Global CTA Program uses the BTOP50 Index, as we feel it offers the fairest and most accurate representation of the performance a majority of CTA allocators actually receive.  Being investable and providing daily, mandatory reporting, it also limits negatives like survivorship and backfill bias.

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Specialist Advisors Get Twice as Many Assets, Study Finds

October 23rd, 2013

In our strategic consulting work with a variety of wealth advisors, we often counsel that they firms seek to find groups of people in which they have a heightened level of interest and expertise.  Cerulli points out that this approach leads to great outcomes; not only do these clients receive better, more customized service from the advisor, but these advisors generally have greater levels of assets.

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Lessons Learned in the ETF Graveyard

October 10th, 2013

The impressive growth of the ETF industry is not all milk and honey.  Many ETFs have fallen by the wayside despite much promise and great intentions.  In fact, over 330 ETFs that once traded no longer exist, with over 125 of those dying since the start of 2012.   This Darwinism allows the market to clear out weaker products and firms, generally resulting in better choices over time.  The challenge for the capital allocator, of course, is trying to figure out which of the current set of “living” ETFs will join their 330+ dead brethren over time.  At Raylor, our due diligence process eliminates over 90% of the current ETF  universe from consideration due to factors including size, tracking error, fees and liquidity.  This increases the odds that our portfolios will not have to host any ETF funerals any time soon.

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The Gathering Storm

September 12th, 2013

As Mark Hurley notes in summary, the economics of acquiring clients, especially as referrals from custodians, are going to change and likely going to do so very quickly.  For firms to succeed, they must create a process to  capitalize or risk stagnating.

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Advisors Not Up To Speed On ETF Liquidity And Trading Issues

August 13th, 2013

As the growth in ETF AUM continues unabated, financial advisors and their clients need to make sure they understand the various moving pieces related to ETFs.  This includes, as the article points out, how the “liquidity risk” of any particular ETF is multi-faceted.  Raylor’s ETF due diligence process takes into account not only the trading volume of the ETF itself, but of the underlying benchmark and related securities.  These can be key components which provide unanticipated value or risk and need to be taken fully into account.

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Burton G. Malkiel: You're Paying Too Much for Investment Help

May 27th, 2013

Burton Malkiel lays out in detail the difficulties active long-only managers face in providing value for their considerable cost. Ultimately, the benefits of the myriad developments and economies of scale gained by the industry over the past 30 years have not been passed on to or shared with the end investors. The tremendous rise in the use of ETFs by the retail class over the past 15 years is a reflection of this.  However, be mindful that rushing headlong into a cheap, passive-only approach opens investors up to other risks, including many of the behavioral finance foibles Malkiel himself has laid out previously.

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Nassim Taleb on the Anti-Fragile Portfolio and the Benefits of Taking Risks

May 14th, 2013

Former derivatives trader Nassim Taleb recently released his third book, focusing upon the “Antifragile”, an invented term that describes how volatility, in small amounts, can help the global financial system handle larger shocks of volatility at future times. This review highlights the book and Taleb’s broad views on investing, including and most important, having skin in the game.

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Trend Following

April 29th, 2013

Written simply for investors unfamiliar with trend following (or managed futures more generally), Randall Mauro provides a high-level overview of the benefits of including non-correlating asset classes like managed futures to thoughtful portfolios. While we agree that trend following has certain advantages, strict adherence to just trend following strategies can provide sub-optimal performance over extended periods of time, as witnessed from 2010 – 2012. Our approach is to create competencies in non-trend disciplines (counter-trend, momentum, fundamental and intra-day) and then dynamically allocate among these strategies based upon portfolio-level risk-adjusted return expectations.

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Choosing an Actively Managed Fund: What Works & What Doesn't

April 2nd, 2013

Joe Tomlinson provides an overview of the benefits, challenges and inherent difficulties in choosing actively managed mutual funds, supported by several recent research papers highlighting the topic. We share many of his conclusions, including it is difficult to pick active managers consistently well but that there are roles in most investment programs where active managers can pay handsomely. Raylor’s approach is consistent: our Strategic Series of ETF portfolios seeks to provide a low-cost, defensive beta equity exposure and our Xplor managed futures portfolios adds value in an asset class where a thoughtful, active approach is crucial to success

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Tracking Error on the Rise

March 31st, 2013

As the author notes, it’s not just the expense ratio or trading volume that is important to note for ETF tracking error consideration; how closely the ETF actually tracks the underlying index is crucial. This aspect is one of the key factors Raylor takes into consideration in winnowing down from over 1,000 ETFs to 80 that we consider appropriate for allocation in our portfolios

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Adapting the Yale Model for Clients

March 26th, 2013

An interesting discussion on adapting Swenson’s Yale Endowment model for retail clients. As the author eloquently put it, “simple 60/40 allocations no longer function as they have in the past, style boxes are not investment strategies, and portfolios of global mush with hundreds of tiny positions have little chance of outperforming. Endowments build strategic positions and hold them for significant time periods, even sacrificing liquidity at times in exchange for returns. Individual investors and their advisors can make similar decisions to allocate among attractive strategies.”

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Why Investors Should Care About ETF Index Weightings

March 11th, 2013

One of our cornerstone investment beliefs is that traditional passive investing exposes investors to certain risks inherent to the nature of cap weighted, equal weighted and GDP/revenue/profit-weighted indexes. The design of the index you choose matters greatly. To overcome this bias, our Strategic Series create "risk weighted" portfolios based on a dynamic portfolio construction process that combines a set of indexes that is better structured for challenging (negative, volatile) markets, while maintaining diversification to participate well in strong markets. The lynchpin of our process combines ETFs based on taking extreme measurements of volatility and correlations to build what should be more robust portfolios.

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Planning 2023: 12 Trends to Watch

March 1st, 2013

As Yogi Berra famously observed, predictions are difficult, especially those about the future. So any article about events in 2023 is likely to be more guesswork than not, but several of the trends highlighted are important and likely to be so not only in 2023 but over the interim period as well.

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Vanguard weighs alternatives as way to woo advisers

January 27th, 2013

With $9 billion of annual inflows every year since 2009, alternative asset mutual funds are gathering significant assets and now they have attracted the attention of Vanguard, who is considering increasing its alternative capabilities. Vanguard’s traditionally successful modus operandi of indexing and low cost will be challenged with alternatives, as these investments are difficult to do on the cheap.

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How Much Hedge Fund Exposure Makes Sense?

January 2nd, 2013

By Daniel Eagan, AllianceBernstein Bernstein’s research suggests that a well-diversified allocation to hedge funds might improve portfolio returns, but their greatest benefit is the risk reduction that comes from their low correlation to stocks.

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ETF Education Website Launched

October 31st, 2012

14 ETF providers have banded together to create a common resource for investors and financial advisors to learn more about ETFs and their use. Although limited in scope, the site provides some solid fundamental knowledge about ETFs and we recommend it for those looking to learn more about these products.

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‘Future’ Part Crucial to Managed Futures

October 31st, 2012

Alternative investments provide diversification benefits, but be prepared to sit on them for a while.

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Use Alts to Solve Specific Problems

October 23rd, 2012

Sophisticated and naive investors alike are rushing into alternative investments as if they are the cod liver oil that will cure all the investment world’s ills. Most financial advisers who include alternatives in client portfolios do so because they are trying to solve some sort of investment problem. But all too often, they don’t even know what problem they are trying to solve.

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The Diversity in Styles Often Makes it Hard to Identify the Sources of Risk

October 16th, 2012

EDHEC talks to James Skeggs, Global Co-Head of the Alternative Investment Solutions Advisory Group within Newedge’s Prime Clearing Services, about a new study from the Newedge research chair on advanced modelling for alternative investments, entitled “Robust Assessment of Hedge Fund Performance through Nonparametric Discounting,” the convergence between mainstream and alternative money management, and the value of academic research for the hedge fund industry.

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Time To Wake Up – Days Of Abundant Resources And Falling Prices Are Over Forever: Part I

September 25th, 2012

“Accelerated demand from developing countries, especially China, has caused an unprecedented shift in the price structure of resources: after 100 hundred years or more of price declines, they are now rising, and in the last eight years have undone, remarkably, the effects of the last 100-year decline!” From Jeremy Grantham of GMO.

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Are Alternatives Becoming the Next Traditional Assets?

September 25th, 2012

By the end of last year, assets under management in global alternative investments hit $6.5 trillion, having grown seven times faster than traditional asset classes over the previous five years. This is according to a new McKinsey & Co. study that predicts this growth represents only the beginning of a new wave of assets moving into alternatives.

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Pros and Cons of Actively Managed ETFs

August 20th, 2012

Overall, the choice of using an active ETF versus a passive ETF is up to an investor. The same benefits that pertain to regular index ETFs all apply to actively managed ETFs, so the question is not about either/or, it just depends on what strategically fits into an individual’s portfolio.

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Vanguard Founder Bogle Tempers Criticism of ETFs

August 15th, 2012

Vanguard Group founder John Bogle isn’t known for pulling punches, especially when he’s looking out for the best interests of individual investors.

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ETF Managed Portfolios: The Next Big Thing?

February 23rd, 2012

Morningstar recently released analysis indicating that separate ETF managed portfolios like Raylor’s Strategic Series, are gathering attention and assets in an accelerating manner. We are fortunate to be one of the few managers with a live tenure of 5+ years managed portfolios of ETFs. It is an area where investors and their financial advisors increasingly are accessing liquid, transparent ETFs but have a thoughtful overlay put on top. We look forward to continued growth for the industry.

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Yale’s Swensen Says Index Funds Best Plan For Most Investors

February 6th, 2012

“Investors of all stripes can be challenged by trying to pick the “best” managers”. There is a great deal of research which suggests that sticking to a low-cost, passive approach provides most investors the greatest chance of success. Even experts in alternative investments like Yale’s David Swensen strongly recommend a 100% passive approach unless the investor has access to “incredibly high-qualified professionals”. Raylor’s Strategic Portfolios were built with this reality in mind, as we seek to take fully advantage of the benefits of passive investing: low cost, transparency, liquidity and discipline.

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ETF Popularity Grows Among Wealthier Investors

October 18th, 2011

Given the market volatility over the past 5 years, it is unsurprising that wealthier investors and their advisors are seeking better ways to squeeze out gains and grow purchasing power. ETFs, with their cost, liquidity, transparency and taxation advantages, can be a tremendous vehicle to achieve this goal. Allocations to ETFs have increased dramatically over 3 years, in some cases more than doubling. The story, as always, is that while ETFs are a great tool, ultimately it is how the advisor and client choose to allocate to ETFs that determines success.

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Wealthy Investors Let Emotions Rule, Survey Says

June 14th, 2011

Rich, poor or somewhere in between, we are all vulnerable to emotion and its impact upon our investment success. Greg Davies points out that “the existence of systematic tools” can help overcome behavioral biases. Raylor’s thoughtful investment philosophy and process was built precisely to be a systematic tool advisors and clients can use as a core part of a well-constructed investment program.

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Simplify with ETFs, But First Know What Clients Want

April 18th, 2011

The key take-away from this blog entry by Lee Conrad is “I suspect that a lot of clients want simplicity first and foremost in their financial lives” – an approach that we take to heart and keep at the core of our investment philosophy.

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ETFs Warrant Caution

February 23rd, 2011

By John Hintze, (US Banker) – December 30, 2010

Exchange-traded funds have made for some ugly headlines. They played an integral role in the May 6 flash crash, and more recently a controversy erupted over whether prices could crash on heavily shorted ETFs. Though many consider those fears unfounded, these increasingly popular investments nonetheless pose risks, and financial advisers should be cautious.

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