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New Wave of Active ETFs; Richard Thaler Rethinks Retirement: October Research—Slideshow

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In Research’s October cover story, “The New Wave of Active ETFs,” Contributing Editor Jane Wollman Rusoff reports that the fast-changing field of exchange-traded funds is heading for a new watershed: the rise of actively managed funds. She talks to enthusiasts of this prospect as well as skeptics who question how many clients need active ETFs.

Also in the issue, Gerald Burstyn examines the work of economist Richard Thaler in “How a Freethinking Economist Saved Your Retirement Portfolio.” Thaler, who will be honored at the upcoming RIIA conference, is using the insights of behavorial psychology to aid retirement income decision-making.

In “Fading Superpowers,” Global Economy columnist Alexei Bayer writes about some surprising similarities in the post-Cold War economic paths of his native Russia and his adopted country, the United States.

Click through the following slides to preview the October issue of Research.

The New Wave of Active ETFs

What’s been hyped for three years as the next big thing in the hot ETF market, actively managed ETFs, may soon actually spark major change, when Pimco launches an ETF version of its Total Return mutual fund.

The Pimco Total Return ETF is expected to be managed by famed bond manager Bill Gross. In addition, as Jane Wollman Rusoff elaborates in this cover story, more mutual fund providers are forecast to follow Pimco in introducing actively managed ETF versions.

Rusoff talks to advisors and ETF industry leaders about this prospect and the ETF field overall. Another new development she discusses: the rise of “private label” ETFs that let advisors open a whole new distribution channel.

How a Freethinking Economist Saved Your Retirement Portfolio

How do we save for retirement? Are we rational actors, putting aside the amount we need to live comfortable lives in our later years? Or do we act irrationally, failing to account for future needs by not saving enough now?

Gerald Burstyn discusses the work of Richard Thaler, a professor at the University of Chicago’s Booth School of Business, who along with other behavioral economists has influenced how we think about critical decisions about our hard-earned money. Thaler’s emphasis is on “nudging” people to make better decisions, an approach known as “libertarian paternalism.”

In early October at the 2011 Retirement Income Industry Association fall meeting in Boston, Research magazine is presenting Thaler with the 2011 Award for Achievement in Applied Retirement Research.

Fading Superpowers

After the Cold War’s end, one might have expected the United States to enjoy the fruits of victory as the world’s only superpower, and Russia to learn the democracy and free-market capitalism it had newly embraced. Instead, writes Global Economy columnist Alexei Bayer, “the two countries have followed a remarkably similar downward spiral.”

Rather than reforming and modernizing its industrial base, Bayer writes, Russia became increasingly addicted to revenues from its exports of natural resources. As for the U.S., it too has seen industrial decline, with our nation’s largest “export” turning out to be Treasury paper.

Russia may find itself with massive spare capacity after building pipelines to a Western Europe that’s grown wary of dependence on Russia. The U.S. for now remains a global safe haven but the trust of investors may prove vulnerable amid Washington’s political bickering over fiscal policy.

Where’s Your Compensation Heading?

Contributing Editor Ellen Uzelac looks at the shifting and unclear compensation landscape. Many financial advisors expect to see a spike in revenue in 2011 but continuing market volatility and uncertainty about regulation have put a chill on enthusiasm.

If there is any one distinctive characteristic about the current state of advisor compensation, it is that there are so many moving parts. The bottom line as Danny Sarch, president of Leitner Sarch Consultants in White Plains, N.Y., draws it: the potential for a cut in pay, particularly at the wirehouse level.

When financial advisors were asked to select the business model they believed would grow the most as a percentage of their total book over the next few years, 60 percent cited fee-based assets.

Ramping Up

As a certified financial planner back in 1990, Spenser Segal ran a retirement plan projection for a couple in their mid-50s who thought they had saved enough for their retirement dreams. They hadn’t, and now he was the first advisor they’d met. That meeting was a turning point in forming Segal’s desire to help more people than just a few hundred clients.

Today, as CEO and chairman of software and services company ActiFi, Segal is helping transform the way financial advice is delivered. Contributing Editor Ellen Uzelac profiles Segal and his efforts to make advisory practices more efficient, effective and scalable.

“Every day, I have conversations with advisors and I’ve gotten very good at being able to size up who thinks like a business owner and who thinks like a practitioner,” says Segal. His goal is to help those who want to operate as owners develop the greater and more lasting value that can arise from that.

It’s About Timing

Our Closing Bell columnist Bill Miller, who seeks out the whimsical in good times and bad, recalls that when he was training to be a financial advisor, he was taught the adage, “It’s not about timing the market; it’s about time in the market.”

Now, he suspects widespread loss of faith in buy-and-hold will inspire a new marketing approach, complete with glossy brochures, telling customers they need market timing, and he contemplates when that too will run its course.

Writes Miller: “As I get out my calculator and start running some numbers, I predict this cycle will end in December of 2012, coinciding with the end of the Mayan calendar.”


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