Michael Joyce, Agili President
Michael Joyce was recently featured in Virginia Business’s wealth management issue. In the article, he discusses this year’s economy as well as future trends.
Virginia Business subscribers can read the article here.We share highlights from the Virginia Business article below in italics:
Inflation Skeptics
When it comes to those suggesting a recession is on the horizon, Michael Joyce, president of Richmond-based independent fiduciary firm Agili, says he’s been a skeptic for the past two years.
“Inflation is slowly retreating. Supply chain issues have largely been resolved and that is bringing down goods inflation,” Joyce says. “Indeed, many who had predicted an imminent recession have now thrown in the towel and are predicting a ‘soft landing.’”
….
Potential Economic Headwinds
Nevertheless, wealth management clients and consumers overall have some potential economic headwinds to navigate, Joyce says.
Pent-up goods-and-services demand from the pandemic could begin to wane, he says, adding that higher interest rates are already impacting consumers with variable rate debts such as credit cards. Borrowers with low fixed-rate debts are starting to see some debts mature and are facing higher rates to refinance, Joyce says.
“We do expect to start to see more credit stress,” he says. “While defaults are still not far off all-time lows, we do expect these to start to increase — albeit not to worrisome levels.”
….
Long-term Optimism
Joyce is pleased with available yields in short-term bonds, including very short-term 4-week to 3-month Treasury bills. “There’s very little risk to those investments,” he says. “It is important to remember that most financial goals are long-term. For the most part, we are not investing for a 6- to 12-month time horizon. And it pays to be optimistic over the long term.”
….
Renewed Interest in Alternate Investments
Joyce says clients not wanting to rely as much on the stock market and fixed-income investments are showing renewed interest in nontraditional investments such as private credit and private real estate — investments that are illiquid but have the potential for premium returns.
“These investments require a lot of research and specialized knowledge,” Joyce says. “These are not investments that you can look up in The Wall Street Journal or Yahoo Finance. You have to work hard to do your due diligence on their outlook, and make sure your clients understand the potential opportunities and the potential drawbacks of the investment.”
….
Wealth Management Mergers
Similarly, just like their clients, as baby boomer wealth advisers age out of working, the industry is seeing an uptick in mergers and acquisitions, also driven by firms seeking opportunities for greater efficiencies by combining assets with larger groups.
“I’ve been in the industry for 40 years,” Joyce says. “This is an aging industry, and everyone’s thinking about a succession plan.”
The wealth management industry, he says, is a fragmented one in which companies tend to have good cash flow, and “this has attracted a lot of private equity-backed funds looking to consolidate.”
….
One of the most common reasons a registered investment adviser (RIA) firm would agree to a merger or to be acquired, Joyce says, would be if the offer was 1 plus 1 equaling more than 2 — a deal too good to pass up, in other words. However, the most common reasons why an RIA firm would not agree to a merger or to be acquired include the freedom for the firm’s principals/owners to be their own bosses.
“You see many deal structures that are not ‘seller-friendly,’ that put too much risk on the seller,” Joyce says. “There’s also an advantage for an RIA firm to tell prospects that you are an independent firm.”
Also, in a time when many industries are grappling with staffing shortages, he adds, “a lot of acquisitions are done so the buyer can acquire talent.”