August 2024

We watch investment management industry trends to understand what others are doing and, hopefully, validate our approach. Also, we look for those with similar approaches to ours— hopefully, successful. And we look for innovative approaches to complex investing subjects. We have all three this quarter.

What’s the latest trend for wealth managers and asset managers? Cooperation. “Wealth and asset managers will focus on renewed growth triggered by strategic partnerships and M&A” (mergers and acquisitions). The article discusses this trend against a backdrop of previous trends: ESG investing, private equity investing and AI investing, each losing steam for reasons of “wokeness,” illiquidity, and too early to tell, respectively. The tying together of backroom operations of wealth and asset managers will aid in “capturing investors’ wallet share.” For simplicity, we’ll call wealth managers client-facing and asset managers product producers. “This transformation can involve a delicate balance. Tech-led mass market production (asset management) must be industrialized while trust-related private banking (wealth management) specialties must be preserved.”

In the first half of 2024, a handful of stocks with large weightings in the S&P 500 Index performed very well, leaving most of the rest of the index constituents underperforming. The S&P 500 Index returned 15.3%, with the seven largest names in the index returning about 31.5% collectively, accounting for 62% of the gains for the entire index, while the “other 493” returned an estimated 7.7 percent. The Invesco S&P 500 Equal Weight ETF (RSP), indicative of what the average S&P 500 stock has done, returned 5.0% year-to-date. The Russell 2000, an index of two thousand smaller-capitalization stocks, was up 5.2% through March, before falling 3.3% in the second quarter.

As we’ve discussed in the past, we are very focused on the sunsetting of existing tax provisions after 2025. The main areas getting the attention of advisors and their clients are “estate taxes, the deduction for qualified business income and federal brackets.”[1] Some of the planning techniques suggested involve “strategic or lump-sum gifts and life insurance held in trusts.” One adviser mentioned in the Financial Planning article lists “spousal lifetime access trusts, gifts, leveraged gifts, loans, family limited partnerships or family LLCs” as available “tools.” The applicability of any of these depends mostly on the specifics of an individual taxpayer’s situation. An election happens in three months, so many taxpayers may have to pick something, if needed.

With sadness, we announce the death of Nelson Jarvie Darling, Jr., 103, of Swampscott, Massachusetts, who died on June 18, 2024, at his home. Nelson once wrote, “There seems a lot to do and too little time to do it.” That intense engagement in all aspects of life seems to have been a theme. His eldest son, William H. Darling, Woodstock’s Chairman and CEO, recalls that when he mentioned he (Bill) was considering retiring from family-owned Woodstock Corporation and Agawam Trust, Nelson’s reply was, “You can’t retire when you’re taking care of other people.”