Time again to take out my crystal ball (or magic eight-ball) and have a little fun predicting what will happen next year. These predictions are in no particular order (and please remember that these are predictions of what I think will happen, not necessarily what I want to happen; click here to see how I did with my 2017 Top 10 Predictions):

10 – The Mueller investigation will continue throughout the year, and might not even finish before the year is over. Trump will not be indicted, however it is possible that one of his sons, or his son-in-law will be. If that indeed happens, Trump will issue a pardon(s), setting up a messy confrontation with Democrats. In other words, the turmoil surrounding the Trump Administration and the Russia investigation will continue unabated.

9 – Despite making gains, the Democrats will fail to win the majority of seats in the House of Representatives, and Nancy Pelosi will be replaced as Minority Leader (this might actually not happen until early 2019 when the new Congress is seated, but its inevtibility will become apparent soon after the election). The Republicans will slightly increase their majority in the Senate. The map highly favors the Republicans (with more Democratic seats up), so even though the majority will increase, it will not seem like a victory because they will not win as many seats as they could have.

8 – The Republican party will continue to splinter, and the primary season will be very ugly with numerous in-party challenges. The Democrats will struglle internally as well, as the liberal wing (led by Warren and Sanders) will contiue to buck the rest of the party. This latter divide is another reason why the Democrats will be once again be the minority party in both Houses. No clear Democratic candidate for President will emerge, leaving both parties in dissaray at the end of the year. Political turmoil continues.

7 – If tax reform doesn’t pass by the end of this year (which it probably will but just had not when this was posted), it will pass early next year, but no major infrastructure or other significant legislation will pass in 2018, as election year gridlock will begin earlier than usual. The Republicans will cite Democratic obstructionism as their election cry while the Democrats will highlight the lack of Republican legislative successes. Get ready for a fun Fall!

6 – Despite rampant speculation at the end of the upcoming Supreme Court term, Justice Stevens will not retire. Short of an unexpected death, Trump will be denied another Supreme Court nomination next year.

5 – On the international scene, there will be elections in the U.K as the May government will fall as negotiations over Brexit stall and get contentious (this prediction was written before the recent set back when Parliament bucked May and legistated that it must okay any final plan). Merkel will put together a coalition and remain as Chancellor in Germany. There will little to no progress on Middle East peace and Assad will remain in power in Syria. Tension with Russia will continue, and I wouldn’t be surprised to see Russia get more involved in Venezuala, filling the void created by the current political vacuum.

4 – With ISIS lossing most of its land, there will continue to cause havok with lone wolf attacks across the globe; trucks/cars will continue to be the weapon of choice. While the odds of a second Arab Spring have increased with Trump’s decision to recognize Jerusalem as the capital of Israel, it will not happen and the protests will dwindle over time. The odds are good that Trump will pull out of the Iran nuclear agreement when its recertifaction comes due, further alienating the U.S. from its allies (following the withdrawal from the Paris Agreement and the declaration to move the U.S. embassy in Israel to Jerusalem).

3 – For financial services, the biggest threat to stability is the current Bitcoin mania. Nothing was able to derail the market in 2017 – not North Korea, terrorism or Trump’s tweets. I have little doubt that the Bitcoin bubble will burst, the real question is if it will cause any large scale sytematic reactions. At this point, I am going to say that it won’t and that as people realize the dangers of Bitcoin and perhaps calls for regulation increase, and become closer to reality, cool heads will prevail and realize that it is an isolated incident and not part of a larger problem with the financial system.

2 – Despite the political gridlock, given the positive trajectory of corporate profits, the market will continue to do well. However, there will be a correction of at least 10% at some point during the year, and while the major indices will end the year in positive territory, it will be single rather than double digit gains. Emerging and European markets will rise about the same as the U.S. markets. Technology will lag the overall market while financials will lead. There will only be 2 interest rate hikes – not 3.

1 – And turning to sports, the Olympics in South Korea will go off withoug a hitch, despite the worries over current tensions with North Korea. Clemson will win the NCAA football national championship, beating Oklahoma. The Patriots will beat the Vikings in the Super Bowl. (I know – I probably just jinxed them!) Duke will win the NCAA basketball championship, Tampa Bay will win the Stanley Cup, the Warriors will repeat as NBA champions and the NY Yankees will win the World Series.

As the year draws to a close, many of you are finishing your 2018 business plans, and many of these plans probably include at least one new hire. And for those of you not planning to add to your team in the near future, we all know that circumstances often change – and quickly.

The hiring process is complex, and more than just finding and hiring a qualified candidate; there are a lot of people that have the credentials and backgrounds to fill most positions.

BUT the key to success is finding a qualified candidate that matches your company culture. Finding the right fit – the first time – is what differentiates Your Hiring Partners (YHP) from the competition. Our pledge is to deliver highly qualified candidates that match your company culture.

Why hire YHP?

First, our process, which includes a proprietary grading system to save your company time and money and relieve your HR department/employees of the time, frustration and stress of combing through hundreds of resumes.

We offer a free consultation and begin each search with a mini 360 evaluation to collect details about your people and processes, as well as the specifics for the job that you are hiring for. We also offer on-boarding as part of our hiring processs, so that we can guide you with best practices to increase the odds of long-term success between you and your new employee.

Second, my partner Petey Parker and I have over 60 years of combined business and consulting experience, and cultivated deep networks of contacts which we leverage and use to supplement the other traditional search techniques that we utilize.

Finally, while finding the perfect hire is our primary business, we also offer the following add-on services to help you be the best that you can be:

• Perfmance Mangagement
• Leadership Consulting
• Succession Planning
• Crisis Management

For more details, please visit our website, or gives us a call – we would love to hear from you:

Andy Klausner (NY Office) – (617) 990-6894 – andy@akadvisorpartners.com

Petey Parker (Dallas Office) – (214) 908-2814 – petey@peteyparker.com

We conduct searches throughout the country, and I specialize in the financial services industry.

With the Department of Labor’s (DOL) new Fiduciary Rule set to begin in April, there is a debate brewing over whether the more traditional asset under management (AUM) based fees or retainers will win the day moving forward. Clearly, under the best interests rule for retirement, advisers will be moving away from charging commissions and gravitate toward fees. The question is, what is the fairest and most defensible way to charge clients?

Historically, and still today, an AUM-based fee is the most popular. Clients are charged a fee based on an annual percentage of their assets under management – often declining as asset levels increase. A big selling point to this type of fee has always been that it puts the advisor on the same side of the table as the client, with everyone having an incentive to see the assets grow.

Retainers, however, are starting to become more popular, and some industry experts are beginning to champion them as being fairer to clients, and easier to defend. Retainers are often determined by a client’s net worth and income. Advocates argue that there are fewer potential conflicts of interest with retainers, and that it will become increasingly more difficult to show that a recommendation is in the client’s best interest when the advisor’s fee will depend on whether it is acted upon or not.

For example, let’s say that a client asks an advisor whether or not they should roll over their 401(k) into an IRA managed by the advisor when they get a new job, or leave it at as is. Obviously, the advisor will not earn any compensation if the funds stay at the employer, so they are put in a position where they have to demonstrate that moving it is in the client’s best interest – easier said than done! There is no such conflict under a retainer agreement, however, as the advisor is agnostic where the assets are actually managed.

On the flip side, retainers might be hard to justify for client’s with fewer assets, as they would pay much more under a typical retainer relationship than they would under an asset-based fee.

The argument is just beginning, and will continue for the foreseeable future. One thing for sure is that asset based fees are not going away, as they do qualify for the “level-fee” exemption under the fiduciary rule as long as certain fiduciary disclosures are made.

It will be important for advisors to clearly articulate to clients and prospects what their fee is, how it is calculated and why they have chosen that particular method. Some advisors might choose to offer clients a choice. Regardless, going on the offensive and being proactive in discussing fees will become more important than ever. If you don’t discuss the issue thoroughly, you will be at risk of losing clients.

If your answer is yes, you’re probably not alone. In its most recent annual benchmarking study, InvestmentNews found that as advisory firms grow, business development (prospecting and marketing) becomes increasingly important for the most profitable firms – often times, as depicted below, at the same time that referrals take a lesser role.

Another conclusion reached by the study is that many firms begin by growing through referrals, but the most successful ones then master how to continue their grow through business development. But interestingly, the study also show that the most profitable firms at all stages of growth are those that rely less on referrals than their counterparts. Finally, the study showed that the top performing firms spend 50% more on their business development efforts than their peers.

This study is consistent with other studies that I have seen lately which show that high net worth individuals are becoming more reluctant to make referrals.

The bottom line lesson here is that reliance on referrals only – while maybe an acceptable practice in the past – is becoming increasingly difficult. It’s 2017 business planning time – consider taking the time to clearly define your target markets, make any necessary adjustments to them and develop a marketing plan that focuses on more proactive client acquisition.

Don’t stop asking for referrals; just stop counting on them.

Time again to take out my crystal ball and have a little fun guessing what will happen next year. Here we go – these predictions are in no particular order (and please remember that these are predictions of what I think will happen, not necessarily what I want to happen!):

10 – Hillary Clinton will be elected to be the next President of the United States, beating Republican nominee Marco Rubio. She will be able to withstand the continued scrutiny over her e-mails, and despite the fact that many people will not be excited voting for her, the Republicans will have alienated too much of the electorate with their emphasis on social issues and overturning Obamacare. (Trump will not run as a third party candidate. At some point, he will get frustrated and quit, and justify it by saying he can make more money in the private sector!)

9 – The Republicans will retain a majority in the House of Representatives, but the Democrats will retake the Senate, though fall far short of the 60 seats needed to enjoy a super majority. The result will be more gridlock, but that is a 2017 issue.

8 – President Obama will continue to go around the Congress with a number of Executive Orders, but the Supreme Court will uphold the illegality of his Order on immigration. He will also not be able to successfully close Guantanamo Bay before his term in office is over.

7 – ISIS will continue to wreak havoc in the Middle East and the world, despite increased bombing by the U.S. and its allies, and the U.S. will get drawn further into the battle. ISIS may lose land, but their global influence will increase, as will terrorist activities outside of the Middle East, including here in the U.S. There will be no leadership change in Syria.

6 – Russia’s global influence will continue to grow, as Putin aggressively props up the Assad regime and works to counteract the U.S. and its allies in the fight against ISIS. Tensions with NATO and Turkey in particular will increase, but Putin will stop short of provoking any military confrontations.

5 – The U.S. economy will continue to grow at a modest rate – in the 2% to 3% range, and inflation will remain tame. This modest growth will allow the Fed to tighten 3 times, but these will be small 0.25% increases and the Feds’s overall stance will remain dovish.

4 – The continued strength of the U.S. dollar (as European and Asian Central banks remain accommodative in their monetary policies), and the continued weakness in the price of oil, aided by new supply from Iran coming on the market, will continue to hurt profits of U.S. companies and will put a cap on the stock market. The market will be down 2% – 3% for the year.

For the financial services industry:

3 – ETFs will continue to come under increased scrutiny, following a tough 2015. Because we will be in a flat market, active management and stock picking will outperform, and I would not be surprised to see another ETF-induced selling panic, followed by a lot of negative press over the growing influence of ETFs.

2 – Consolidation in the asset management industry, which was slow throughout most of 2015 before picking up at the end of the year, will continue and actually accelerate. There may also be a few large deals among the B/Ds as overall industry consolidation increases in the face of a second straight tough year in the stock market.

1 – And of course, some sports predictions: The Rio Olympics will be plagued by problems, in part a result of the political and economic turmoil plaguing the Brazilians. It will go down as the most poorly run and executed olympics in history. The Patriots will make it two in a row, overcoming all of their injuries and beating the Cardinals in the Super Bowl. Golden State will easily repeat as the champions of the NBA, and Alabama will beat Oklahoma for the college football national championship.

I will unveil my Top 10 Predictions for 2016 next week, but for now, lets see how I did this year. Original text is following by my comments in bold.

10 – Hillary Clinton will announce her candidacy for the Presidency at long last. I am still not convinced that she really wants to run, but at this point I think the momentum is taking on a life of its own. However, I think she will be challenged by someone from the left of the party and her path to the nomination will not be easy as people thought a few short months ago. She will have to come-up with some new fresh ideas, and improve the effectiveness of her campaigning significantly. Partially right on this one. Hillary is indeed running, and she is being challenged from the left (see next paragraph). She does look energized recently, but she will need to come up with some new ideas to improve her image and prevent her from being cast as more of the same.

Last week, I would have said that the challenge from the left would not have come from Elizabeth Warren. Now I am not so sure. Since I can’t stay on the fence, I predict that Elizabeth Warren will indeed eventually challenge Hillary. However, your politics aside, she has one glaring strike against her – she will be compared to Obama – a Senator with less than one term under her belt. Another candidate may emerge as well. I was wrong on Warren, but another surprising candidate did emerge in Bernie Sanders. Obama remains a problem for Clinton – especially on her role in his foreign policy.

9 – Sticking with politics, but turning to the Republicans, I am surprised that Jeb has set-up an exploratory committee, but I would still not be surprised if he doesn’t actually run. As for the other Republicans, Christie will give it a shot, but he has an awful lot of baggage that will haunt him. Luckily, since the election is not next year, I don’t have to make the prediction of who will win yet. Bush did in fact run, but I’m not so sure at this point that he is glad that he did. Christie is giving it a go, but still weighed down by Bridgegate. Who could have predicted Trump and Carson?

8 – Political gridlock will continue in Congress to some extent, but I do believe that the Republicans will try for lots of small victories along the way as opposed to going for major pieces of legislation. The President has signaled a desire to fight since the mid-term elections, so I think the atmosphere will be bitter. But if the Republicans have any hope of winning back the White House they have to show that they can govern better than the last Congress. There is still gridlock, and the President’s use of Executive Orders has made relations with Congress rocky at best. There were some small legislative victories – but not enough to turn around public opinion on either Congress or the President.

7 – The President will actually continue to work better with the Republicans than the liberal wing of his own party. Bill Clinton faced similar changes and was able to rescue the last two years of his Presidency. However, I still think that given the President’s penchant for executive orders, these will all be minor victories as well and his status as a lame duck will be solidified in short order. The left has been disappointed by Obama until recently, but he has been making attempts to please them lately (on climate issues for example). He hasn’t worked especially well with the Republicans this year either as mentioned above. He is pretty much going it alone. 

6 – The economy will continue to chug along with moderate growth, nothing spectacular but nothing terrible. The U.S. economy will continue to outperform the rest of the world. Europe will fall into a very short and shallow recession, and I think Japan will rebound now that the elections are behind them. Watch out for problems in the developing economies, in large part due to the drop in oil prices that we have seen. This prediction was pretty accurate, although the Japanese economy has been slowing. The U.S. economy continues to muddle through.

5 – The biggest wildcard for the year is Russia – where the economic situation is deteriorating rapidly and sanctions are having a very major impact. The Ruble is in free fall, and the drop in oil prices is having a significant and negative impact. Continued turmoil in Russia could have a huge boil over effect in not only the rest of Europe, but the rest of the world as well. No one really knows how Putin will react and if these economic woes will make him more bellicose. But if any one thing can send the worlds markets and economies into chaos, it is Russia. Developments are worth keeping a close eye on. Russia was a wild card, but for different reasons than I thought. Putin is showing his military might and, especially in the Middle East, is filling voids left by Obama’s less-than-clear foreign policy. Forbes names him the most powerful person in the World (Obama was third). Enough said.

4 – The Fed will raise interest rates by July of next year, but I think that they will do so in a measured way an more slowly than many currently believe – in part because of economic weakness around the world. Inflation remains under control, with the only thing that can really throw us a curve here is if wage growth picks up significantly (which I don’t see happening). The market will react negatively when rates do go up, but will rebound and regain all of the initial losses within six months (as is usually the case after Fed interest rate hikes). OK – not July – insert December. But the trajectory of increases will be measured and inflation is still under control. Hey, who can really guess what this Fed is going to do?

3 – The stock market will have a below average year – and may in fact end down a little bit. There will probably be at least one 10% – 20% correction, either before or right after the interest rate increase. But corporate profits are still strong, and other economic positives will act as a floor on the market. But I see now compelling reason for a lot of upside in 2015. Pretty on target here – it hasn’t been a great year, we may end up down and there was a correction in the Fall. Only thing I missed here was strong corporate profits – as those have been weakening.

For financial services specifically:

2 – Pundits will continue to focus on the growth of the RIA and independent channels, at the expense of the wirehouses and other traditional broker/dealers. But I see the continuation of the rebounds that the wirehouses have seen, and I think they will once again hold their own. There may be a few large mergers among the larger RIAs and perhaps one or two among the regional brokerage firms. There wasn’t a lot of merger activity – and I think all of the channels held their own during the year. All in all, a pretty uneventful year.

1 – The aforementioned Elizabeth Warren will continue to be a thorn in the side of banks and other financial services companies, and she will continue to fight anything or anyone that has a connection to Wall Street. While this may propel her into a run for President, I don’t see her having much impact on legislation, especially since the Republicans now control both houses of Congress. Warren is still a popular figure on the left, and she is still the enemy of Wall Street. She has definitely had more of an effect in turning Hillary to the left than in impacting legislation.

Finally, a little sports. I see Alabama over Oregon in the National Championship Game and the Patriots over the Seahawks in the Super Bowl. One out of two is not too bad here. Glad I got the Pats right!

Feel free to share your own thoughts!