Baird Grabs 7 Wells Fargo Advisors With $1.9B

Baird said early Tuesday that it added seven veteran financial advisors in Houston, all of whom are legacy A.G. Edwards & Sons advisors recently with Wells Fargo Advisors (WFC). The advisors have more than $1.9 billion in client assets and focus on retirement planning for executives in the energy business.

To enhance its support of such retirement work, the employee-owned broker-dealer also announced that it rolled out Baird Retirement Management, a program to help advisors nationwide boost their retirement planning and investment consulting services.

“Baird reminds legacy A.G. Edwards advisors of many of the characteristics of what they loved about A. G. Edwards,” before it became part of Wachovia and Wells Fargo, said Jarrett Kovics (left), director of the Texas market for Baird Private Wealth Management, which now includes about 715 advisors and more than $80 billion in assets, in an interview with AdvisorOne.

“They have a strong memory of what they felt was most important” in the culture of their firm, explained Kovics, who joined Baird from Morgan Stanley Smith Barney (MS) in 2010. “We are different from A.G. Edwards, but the cultural similarities get [advisors] to the table … and it becomes a really good fit for them and the quality of their work.”

Joining Baird in Houston are Richard Ashcroft and Darrell Pesek of the Ashcroft Pesek Group; Greg Evans, Stephen Allain and Jarred Crumley of the Evans-Allain-Crumley Group; John Barnfield; and William Barrow.  They will work out of Baird’s second office in Houston, which is located in the Memorial City district, where many energy firms are based. “You can’t find real estate there, since there’s been so much expansion and growth,” Kovics said.

In April, Baird recruited a team of seven employee advisors with about $770 million in client assets from Wells Fargo in Houston. It also opened its second office then and hired former UBS (UBS) branch manager John S. Hantak to lead the new location, which also caters to high-net-worth energy professionals and their retirement needs.

“Baird Retirement Management, which we’ve been working on for a while, could support  teams of financial advisors with a retirement focus on technology companies in Silicon Valley or steel companies in Upstate New York,” Kovics said. “The resources emphasize marketing and other materials specific to retirement planning … it’s another attractive selling point for Baird.”

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Check out Baird Expands Recruiting of Trainees, Advisors.

3 Reasons Why You Need Inflation Protection Now

All this talk from A. Gary Shilling and others about the coming danger of deflation? Bleh.

That’s the message delivered in a recent whitepaper from Seth Masters.

The chief investment officer of Bernstein Global Wealth Management says deflation, that “persistent drop in the value of assets,” is unlikely any time soon.

Even if it does, Masters notes that investors already protect themselves from deflation through their bond purchases.

Rather inflation, although dire warnings of which have yet to materialize, is still the threat, Masters argues, and even modest amounts of inflation can be harmful—in some ways, even more so than deflation.  

“Inflation-protected assets will always have a place in investor’s portfolios because of heightened uncertainty, the availability of better inflation hedges and reasonable costs for inflation protection,” he writes. “While rare, inflationary periods are notoriously difficult to predict. History shows that major bouts of inflation often strike suddenly and without warning, which is what makes inflation particularly dangerous.”

He sees three key reasons why an allocation to inflation protection is even more compelling today: heightened uncertainty, the availability of better inflation hedges, and reasonable costs for inflation protection.

1). More Uncertainty — “Even in the best of times, there’s no reliable forecast of the future path of inflation,” he writes. “Today, however, uncertainty about economic policy and its impact on the price level have become especially high, mainly because no one can confidently predict exactly what will happen as the enormous monetary expansion since the global financial crisis is ultimately unwound.”

On the one hand, some view inflation as inevitable, given the pervasive climate of supportive monetary policy across developed economies, Masters notes. On the other hand, mixed economic data have kept the specter of deflation alive.

“Given the experimental and opportunistic nature of central bank policy measures, economists’ outlook for the breadth of possible inflation outcomes is highly divergent today. This heightens the risk of surprises, and makes inflation protection all the more vital.”

2). Better Hedges — Fortunately, better inflation hedges are available today than existed in past inflationary periods, he explains.

“From a portfolio construction standpoint, inflation hedges can be divided into two categories that complement a traditional portfolio: real bonds that protect risk-mitigating assets such as traditional bonds, and real assets that protect return-seeking assets such as stocks.”

Inflation-linked bonds such as Treasury Inflation-Protected Securities (TIPS) can provide very effective inflation protection for the bond portion of the asset mix. For taxable accounts, he also recommends a muni inflation strategy that layers inflation protection onto a municipal bond portfolio.

“Real assets, such as commodity futures, natural resource stocks, and inflation-sensitive REITs, generate cash flows tightly linked to important components of the overall price level. Shares in mining and other natural resource stocks, as well as some real estate companies, can also benefit from rising prices. Note that most individual real assets are quite volatile, and so it makes sense to diversify a real asset portfolio across a wide range of inflation-sensitive investments. We also see real assets as a good investment.”

3). Reasonable Costs — Reasonable costs represent the final rationale for adopting proactive inflation protection today, Masters concludes. TIPS are fairly priced, with a breakeven rate—or the difference in yield between inflation-protected securities and nominal bonds of the same maturity—of less than 2% for 10-year maturities.

“That’s not much of a premium to purchase inflation protection, especially compared to a high of 2.6% last fall when the Fed’s third round of quantitative easing was announced. Real assets are also sensibly priced relative to their fundamentals.”