Wirehouse Insights: Wells Fargo

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  • 06 mins 57 secs
Financial advice is becoming increasingly more valuable with the democratization of investing, says Joseph W. Montgomery, CFP®, AIF®, Managing Director-Investments at The Optimal Service Group of Wells Fargo Advisors. He also looks at active management, the broad scope of “paid to wait assets,” and how fluctuations in interest rates have impacted people’s interest in asset allocation.
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Speaker 0: Hello and welcome to Warehouse Insights. The value of the financial advisor seems to be rising with the democratization of investing. Says Joe Montgomery, he's managing director, investments at the Optimal Service group of Wells Fargo advisors. And he joins us now with more, Joe Great to have you back with us.

Speaker 1: Wonderful to be with you.

Speaker 0: So, first off Joe, why do you think that we're seeing an increase in demand for financial advice and advisors?

Speaker 1: Well, I think people have found that there's some real value in active management and they've written through the last couple of years. Um They probably have an opinion about that at least. Uh you had the 60 40 seemed to be an easy way to go for decades uh as interest rates declined. Uh That was problematic. You get a year like last year when neither stocks nor bonds worked. That's a problem for people.

Speaker 1: Uh You now have an interesting situation where you're getting paid on that 40% traditionally that you weren't a year ago.

Speaker 1: And people have also awakened to the idea that there are other options available beyond their traditional stocks and bonds that they grew up with

Speaker 0: and how have the fluctuations in interest rates impacted people's interest and asset allocation?

Speaker 1: I think they, that's a great question because they were forced to look for options when they couldn't get it from fixed income. They traditionally what they were traditionally getting.

Speaker 1: Um That's, I think expanded the whole mix and what a lot of people call credit strategies, which are really anything related to yield. Uh That could be dividend paying stocks, that could be, um, bank loans, uh, you know, across the spectrum of things that generate return, that could be certain kinds of interval funds such as the non traded res. Um, all those things people have been looking at, it makes for complexity.

Speaker 1: Um, that actually, um, makes the value, I think of financial advice go up

Speaker 0: and, uh, to quote Mark Twain here, history doesn't repeat, but it often rhymes. How is that playing out? Is, are we seeing that again as people look at fixed income and alternatives as paid to weight assets?

Speaker 1: Yeah, it's amazing how, uh, smart Samuel Clemens actually was, right. I don't know if he was focused on stocks and bonds, but he was right. Uh, if you look at what was occurring in the early eighties

Speaker 1: and, uh, you have to bear in mind that, uh, other than old geezers like me that are, you know, been around since then, uh, most people had not seen a period when rates were high higher and, uh, while at that time, we were looking at double digits um and in some cases, high double digits um uh pretty, pretty impressive numbers.

Speaker 1: Uh But now you're back to where you have a return on those assets. And um it turns out that it's very similar to those periods where it was important to look around, figure out what the right credits are and participate in all of those asset classes, be they fixed income or equity?

Speaker 0: Could you elaborate a little bit on the broad scope of paid to wave? I mean, you mentioned interval funds earlier, but what else are we looking at here?

Speaker 1: Yeah, paid to wait is an interesting concept which uh I'll confess, uh is a good fallback position when you can't predict what's gonna happen. And as you and I both well know, nobody can really predict what's gonna happen. So in some way, we all need to be thinking about paid to wait. So a good example in August November period, you were getting roughly zero on short money

Speaker 1: and where we are today, you're looking at, let's say 4.5, 4.8.

Speaker 1: Uh which is very interesting that you're getting paid something to wait. And if you think they're in difficult times, like last year, if somebody had told you, you can get

Speaker 1: what, four or 5% and we'll figure it out later, there's a lot of people that would have taken that. And so that's, um that's an environment we're in. I think we should take um uh take our clients through the process,

Speaker 1: excuse me and take them through the process and look at what those options are. Uh It's a broad spectrum, there are a lot of choices out there. C Ds that once again become popular. That is definitely a um a different atmosphere than we've had before,

Speaker 1: at least back to the eighties.

Speaker 0: Very, very different atmosphere. Indeed. And I mean, you mentioned those high yields that people are getting just to simply sit in cash. Uh You compare those to mortgage rates that people were getting, you know, two years ago and you're being paid to not pay off your mortgage essentially. It's, it's wild.

Speaker 1: Yeah, and that is an interesting relationship. It's, that's a great point and uh this is actually affecting the liability side of, of the balance sheet.

Speaker 0: Well, Joe, anything else that you're seeing right now that you'd like to highlight?

Speaker 1: Well, you mentioned the democratization of investing and I think, you know, I I mentioned some of the tools but it's important for people to pay attention advisers and individuals to look across the spectrum at what's coming out. Uh That's something I enjoy doing. I think a lot of people out there uh likewise do. But uh you know, they're, they're constantly creating new opportunities and you got to sort of

Speaker 1: uh sh uh sift through those if you will uh much like painting for gold you got to move a lot of dirt and a lot of water to fund and the quality. But it is giving us an opportunity in those spaces. Uh long short funds, uh those interval funds I mentioned uh even option writing, there's a, there's a lot of tools that have traditionally been around, but people are returning to them uh as additional choices.

Speaker 0: Well, Joe, always great to have you. Thanks for joining us, great to be with you

Speaker 0: and thank you for watching. Once again, that was Joe Montgomery with the optimal service group of Wells Fargo advisors. I'm Jenna Dagenhart with asset TV.

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