Don’t call it an active comeback
Financial Planning
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PORTFOLIO MANAGEMENT: Passive mutual and exchange-traded funds will top their active counterparts by early next year, but the full picture of the investing marketplace displays much more subtlety, a new study said.
After amassing 49% of the total assets in ETFs and mutual funds in the second quarter, the passive products' holdings will jump those of their actively managed peers "at some point in late 2023 or early 2024,'' according to a report earlier this month by research and consulting firm Cerulli Associates. Over roughly the past 10 years, the passive vehicles have drawn 1 to 3 percentage points of market share annually from active mutual funds and ETFs. The ongoing shift is driving down fees, altering the investing landscape permanently in the process.
None of that means that active management will go the way of the VCR, according to Cerulli.
ARTIFICIAL INTELLIGENCE: When we look back at the history books, 2023 may go down as the year of AI.
Artificial intelligence came into the year red hot by riding the momentum of ChatGPT's public release in late 2022 and never broke its stride. As a result, it was impossible for anyone even remotely interested in financial services technology to avoid it over the past 12 months.
But what conversations among industry insiders, regulators, veteran advisors and others revealed is that we're just getting started. AI is poised for a major next act, and the decisions made in 2023 will provide the framework for the technology to grow into the future.
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See how the Financial Planning team has covered artificial intelligence's breakout year, and what it means for AI in 2024.
MONETARY POLICY:?For almost two years, the bad news for investors has been the relentless rise in interest rates. Since March 2022, the Federal Reserve has raised rates 11 times to wrestle inflation down to a manageable level. The policy has largely worked, but it's also increased borrowing costs for businesses and triggered repeated dives in the stock market.
Then, this week, a glimmer of light emerged at the end of the monetary tunnel: On Wednesday, the Fed announced not only that it was holding rates steady for now, but that it would probably cut them three times in 2024.
Clearly, to many investors, the announcement was extremely good news. It not only raised hopes for stocks and profits in 2024, but signaled that the Fed thinks inflation is now largely under control — and we got here without tipping into a recession.
What does this mean for financial advisors? Many clients will likely be overjoyed by these developments. Could their excitement cause bad decisions? What challenges do hopes of a soft landing pose for wealth managers?