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SMA Managers of the Year; Building a Business With Talent: April Investment Advisor—Slideshow

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The dividend story has been retold many times, but just because we’ve heard it before doesn’t make it a bad tale. In fact, the winners of the 2012 SMA Managers of the Year have used dividends to great success. This year’s winners tell their success stories to Editor in Chief John Sullivan in the April issue of Investment Advisor.

The industry’s shortage of young talent is another story we’ve heard a lot about, but Eliza De Pardo and Dan Inveen of FA Insight apply their typical analytic take on the problem in the third installment of the People and Pay series.

The India story once was one of high growth potential, an impressive GDP rate and enormous investment opportunity, but today investors are cautious and particular about where they put their money. Savita Iyer-Ahrestani’s feature ponders what happened and what’s next in India.

Calm, Cool and Confident, April 2012, Investment AdvisorCalm, Cool and Confident

The one thing seen among all of this year’s SMA Manager of the Year winners?

“Dividend yield,” says Gib Watson, Prima Capital’s president and CEO, which probably doesn’t come as a surprise, given the desperate search for income in this slow-growth world.

This is the eighth year Investment Advisor has teamed with the Denver-based research firm to announce the best SMA managers in multiple categories. Prima looks for repeatable and sustainable processes in the products and managers they choose. Winners must have at least $200 million in assets and have tenured management of at least three years. There are 13 factors that the analysts consider, including performance, firm, people, process, style, customer service, tax efficiency and composite.

This year, the field of talent was so strong, multiple winners were chosen in some categories. John Sullivan sits down with the winners to get the secrets to their success.

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Building a Talent Hothouse, April 2012, Investment AdvisorBuilding a Talent Hothouse

With just two associate advisors available to replace every three lead advisors, creeping compensation costs for advisory positions, and woefully low levels of succession planning, the demand for top talent is outstripping supply. Combined with a dramatic experience gap separating today’s most senior lead advisors from other advisory firm positions, the 2011 FA Insight People and Pay survey provides strong justification for enhanced development of homegrown talent.

The industry’s talent shortage is an old phenomenon that is re-emerging as a central issue. As independent advisory firms recover from the 2008–2009 security market downturn, ensuring a steady supply of qualified labor is once again a critical factor for business sustainability. The good news for advisory firms is that a solution is close at hand, but with one key proviso: Firms must create an environment where talented people can flourish. Eliza De Pardo and Dan Inveen break down the results of their survey in the third installment of this series.

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Reconsidering Reverse Mortgages, April 2012, Investment AdvisorReconsidering Reverse Mortgages

Times were tough for Dorothy Ariail back in 1977 when she became a young widow with three children. A schoolteacher on a tight budget, she put her children through college using a line of credit on her house in Charleston, S.C. Now she is an 80-year-old semi-retired grandmother with two sons and a daughter who are college-educated professionals—and she’s still using real estate to manage her finances.

Mrs. Ariail owns several houses inherited over the years, and she has taken out a reverse mortgage on one of them. Her loan, a home equity conversion mortgage (HECM), is insured by the federal government and serviced by Generation Mortgage Co.

While Dorothy Ariail is happy with her reverse mortgage, the product is often seen as an overpriced retirement income vehicle of last resort for distressed seniors. In fact, advisors typically avoid recommending them to their clients, and following Wells Fargo’s and Bank of America’s exit from the reverse mortgage market in 2011 due to worries about rising defaults, the product has come under an even greater cloud of suspicion. Joyce Hanson explains some concerns and benefits associated with reverse mortgages.

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Six Long-Term Care Lessons, April 2012, Investment AdvisorSix Long-Term Care Lessons

A survey recently released by John Hancock provides insights on a key area that financial advisors should try to address more directly: the failure of most people to prepare for the financial risk associated with the need for long-term care. Such guidance is necessary because it is clear that the financial strategies being used by many people entering retirement make it likely that many of them will end their lives in circumstances that they never anticipated or intended.

The conundrum that advisors face is that many clients have an “approach avoidance” reaction to this issue. While clients know that making sure they will be able to afford good care is important, they cannot seem to bring themselves to address the issue.

The possibility of long-term care costs financially wiping out unprepared clients is not minimal. If costs increase at 4% a year (most expect nursing home costs to rise faster than general inflation), the average cost will be $164,300 a year in 20 years. With this level of risk and cost, the necessity of planning is clear. Mathew Greenwald explains how advisors can serve their clients well with long-term care.

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India at the Crossroads, April 2012, Investment AdvisorIndia at the Crossroads

Beyond the exoticism and mystique that has always been associated with India lies one of the greatest emerging market growth stories of recent times, one to which, until fairly recently, it seemed there could be no end.

But then one day, the glowing narratives that had toasted India’s high growth potential and its impressive GDP rate, the stories that had exalted the enormous investment opportunity India offered, changed. Rather than marvel at India, commentators and observers began to question the sustainability of its growth, particularly when placed against a backdrop of soaring inflation and a serious fiscal deficit.

More and more foreign investors have been taking their money out of India, seeing better opportunity in other emerging markets or even elsewhere in the world. The dramatic fall in foreign investment meant that India became one of the worst performing emerging stock markets in 2011. Savita Iyer-Ahrestani dissects the factors that keep investors out of India and what the country is doing to attract more foreign investment.

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Tech Eminence, April 2012, Investment AdvisorTech Eminence

As educational editor of the 2012 TechLeaders Conference on March 19–21 in Irving, Texas, Beacon Strategies LLC is contributing to the conference’s goal of developing thought leadership that can be shared by broker-dealers of all sizes.

To that end, we designed and conducted the TechLeaders Survey to evaluate the current state of broker-dealers’ initiatives, priorities and vendor relationships. A survey questionnaire was sent to senior executives at a majority of U.S. broker-dealers with 25 or more investment professionals. The survey includes responses received from more than 80% of the major independent and insurance broker-dealers.

It included 30 questions in the following areas: 1) technology preferences; 2) technology vendors used; 3) social media usage and trends; 4) completed or planned technology initiatives; 5) technology budget and staff. Chip Kispert, Marshall Levin and Peter Montoya share the results of the survey.

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