December 2021 - Page 25 of 29

December 5, 2021

Retaining Human Talent in Finance

Popular discussions surrounding “the rise of the robots” often manifest as hyperbolic sci-fi posturing, though it is unlikely that the Terminator prophecy will come to fruition any time soon. But that does not mean “robots” (or at least digitally automated processes) are not rising in our world. In fact, according to an August 2020 Deloitte/IMA survey, 51.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of finance leaders reported that automation would impact the way their organization worked in the coming five years.

And yet, despite fears of an AI takeover, the Bureau of Labor Statistics (BLS) reported almost 300,000 financial services job openings as of September 2021. Job openings in for positions that are not as easy to automate, such as accounting, bookkeeping, and auditing, are expected to rise over the next decade. With more job options available to them, employees, especially top talent, may become harder to retain. Given that more than half of workers in the US are currently considering a career change, there should be no illusions that the finance industry will be immune to such trends.

To retain top financial analysts and talent, employers must take care of their employees’ professional and personal needs. But they must also harness automation and digital processes not as a means to replace the need for human workers, but to help make their jobs simpler, more efficient, and more enjoyable.

Take care of your employees

It seems obvious, but if more employers took this call to action more seriously, the “Great Resignation” may not have become as widespread. In these challenging pandemic times and amid an increasingly challenging labor landscape, businesses now more than ever need to keep their fingers on the pulse of employee satisfaction – both professionally and personally.

Employees are saying this loud and clear, and it falls on the business leadership to listen. A recent corporate survey found that more than half of employees considered good benefits essential to their employment. However, only 31{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of those surveyed were satisfied with their current conditions. Even negative candidate experiences at the interview stage can have an impact on the perception of a company, and employee retention begins with satisfaction.

Meeting employee wellness needs can take many forms, from offering individualized benefits and tangible compensation to providing flexibility with options like hybrid working, which has taken off in the wake of the pandemic. COVID-19 has also brought a barrage of new and unique challenges, and accordingly, considerations like mental health promotion and childcare benefits are more pressing than ever.

On a professional level, taking care of employees can mean anything from prioritizing an engaged and continuous process of feedback to providing opportunities for workers to broaden and sharpen their skillsets. For example, supplementary educational courses can be a good way to imbue employees with a sense of self-determination, vision, and meaning. This kind of dynamic, initiative-taking approach to employee management can go a long way toward stopping employees from heading for the exits.

Simplify, simplify, simplify

Burnout is a further challenge, with 61{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of people experiencing this at some point in their career. Financial professionals are often especially overworked and overwhelmed, often at the hand of complex and slow paper-based workflows. Frustration with such inefficiencies could drive some workers to more “streamlined” positions that would reduce the symptoms of burnout. Here’s where it pays to try and simplify day-to-day processes in a way that benefits both employees and the company’s bottom line.

If CFOs simplified their operations accordingly, beginning with the hiring process itself, they would be more likely to hire and retain more satisfied and more productive employees. Indeed, Deloitte reports that employees who feel their talents are being utilized well are more likely to stay in their positions.

Figuring this out can’t be a one-way conversation: Engaging employees in improving organizational operations and structure is crucial. Those who are doing the work itself on a daily basis are very likely to have the keenest understanding of where improvements can be made, and asking for employee input will not only yield practical outcomes, but it also provide employees with a sense of inclusion and authenticity that in turn fosters greater loyalty.

Make technology work for you

Technology can help relieve the burden of overworked accountants and CFOs, but only if used and implemented with savvy. Workers who feel that technology is being implemented in ways specifically designed to help them will be happier with their ability to do their jobs, more likely to stay in their positions, and more resilient down the line to technologically driven changes. On the other hand, technological processes that are too complex can have the reverse effect, turning financial professionals away.

For employers navigating the post-pandemic needs of their workforces, it will also prove essential to use data, AI, and other technologies to glean in-depth insights into employee satisfaction and employment trends, both within their company as well as in the wider industry.

The age of tenured employment has given way to an era of “job-hopping,” raising the stakes for employers. As such, employers must pay attention now more than ever to the shifting dynamics of the workforce and react accordingly in order to preserve their top talent.

This is hardly the first major challenge to confront the industry in recent years. The 2008 crash shook the world of finance, and the recent shocks that have come about due to the pandemic also have the potential to radically reshape the industry. Cultural shakeups are likely to continue, and businesses must develop thoughtful talent recruitment and retention strategies now if they want to mitigate their impact on their workforce.

The good news is that employees are also aware of, and even catalyzing, these changes. Employees are feeling a heightened sense of responsibility in working with employers to meet their needs. Out of this moment’s challenges comes a rare opportunity to leap to the forefront of the financial industry.

Written by Didi Gurfinkel.

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December 5, 2021

Meta Nears Bear Market After $224 Billion Value Wipeout

(Bloomberg) — Facebook parent Meta Platforms Inc. dropped on Friday, bringing its shares closer to a bear market after months of volatility triggered by a whistle-blower’s revelations and disappointing quarterly results.

We Wouldn’t Be Too Quick To Buy The Williams Companies, Inc. (NYSE:WMB) Before It Goes Ex-Dividend

It looks like The Williams Companies, Inc. (NYSE:WMB) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Williams Companies’ shares on or after the 9th of December will not receive the dividend, which will be paid on the 27th of December.

The company’s upcoming dividend is US$0.41 a share, following on from the last 12 months, when the company distributed a total of US$1.64 per share to shareholders. Last year’s total dividend payments show that Williams Companies has a trailing yield of 6.0{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} on the current share price of $27.11. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Williams Companies has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Williams Companies

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Williams Companies distributed an unsustainably high 196{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 75{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of its free cash flow as dividends, within the usual range for most companies.

It’s good to see that while Williams Companies’s dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we’d be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it’s a relief to see Williams Companies earnings per share are up 4.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} per annum over the last five years.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Williams Companies has lifted its dividend by approximately 13{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} a year on average. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Should investors buy Williams Companies for the upcoming dividend? Earnings per share have not grown all that much, and the company is paying out an uncomfortably high percentage of its income. Fortunately it paid out a lower percentage of its cash flow. With the way things are shaping up from a dividend perspective, we’d be inclined to steer clear of Williams Companies.

So if you’re still interested in Williams Companies despite it’s poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 2 warning signs for Williams Companies and you should be aware of them before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} yield and an upcoming dividend.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

December 4, 2021

2 big market risks for 2022, according to Bank of America

Markets should be wary of high inflation and the potential spread of new COVID variants in 2022, a new Bank of America (BAC) report warns.

“Future COVID waves are the biggest downside risk,” the report noted. “On the upside, the supply-side wakes up to meet the gains in demand.”

Authored by several Bank of America Global Research economists, the report mainly focuses on the various threats to the global economy in 2022 and beyond.

Among these economic risks are high inflation rates, the spread of variants like the recent Omicron strain, climate change, and supply constraints.

The emergence of the Omicron variant in November left its mark on markets at the end of last month, with the Dow Jones falling over 1500 points the week following Thanksgiving.

Earlier this month, World Health Organization chief scientist Soumya Swaminathan spoke at the Reuters NEXT Conference where she emphasized the variant’s high transmissibility and noted that it could one day become the dominant COVID strain around the world.

The report found that the unprecedented fiscal stimulus enacted by the federal government to counter COVID-related economic issues should ensure that “the U.S. will resume its role as an engine of global growth, while China will be a reluctant laggard.”

China-US relations were a cause for concern for the global economy as well, the authors wrote in the report. “There is also considerable uncertainty about how relations between China and the West will develop. A rapid unravelling of economic interlinkages could trigger a global recession.”

Even if the new COVID variants which emerge in the next year are controlled to the utmost extent, inflation concerns still might make for a murky future for US economic growth.

Trader John Romolo works on the floor of the New York Stock Exchange, Thursday, Dec. 2, 2021. Stocks are opening mostly higher on Wall Street Thursday as investors continue to monitor the spread of the new coronavirus variant as well as measures that the U.S. and other governments are taking to restrain it. (AP Photo/Richard Drew)

A ranking from the report of 10 different currencies from around the world found that the U.S. had the highest inflation score, at 46. It was followed by the New Zealand dollar, at 38, and the Great Britain Pound, at 37.

“It’s been a bit nerve wracking to watch the recent very strong inflation readings,” the report noted. “In the summer, most of the increase was driven by spikes in specific sectors, but in the last few months the pressure has moved into the middle of the inflation distribution … Relative to a year ago, we have raised our global CPI inflation forecast for this year from 2.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to 3.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} and for next year from 2.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to 3.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.”

Overall, inflation should cool, even in the U.S. The CPI was 6.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in October, continuing the rampant inflation not seen domestically in decades. Although this rate of inflation may subside slightly, Bank of America Global Research cautioned that inflation may still be a significant issue for the economy in the short run. BofA’s Chief US Economist Michelle Meyer and VP Alexander Lin wrote that three rate hikes in 2022 were very possible, looking forward.

“Inflation will cool from the current highs but remain well above target, leaving the Fed to move into action,” the report predicted. “While 2021 was a story of excess demand and a dearth of supply, we think 2022 will be one of rebalancing, albeit only gradually. This should take some of the heat off of inflation but not quickly enough, leaving the Fed to hike three times starting in June and continuing on a quarterly cadence.”

Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.

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December 4, 2021

Today’s Live Business News: Jobs Report, Inflation and Stocks

The United States faces a default sometime between Dec. 21 and Jan. 28 if Congress does not act to raise or suspend the debt ceiling, a Washington think tank warned on Friday.

The projection from the think tank, the Bipartisan Policy Center, was a narrower window than it provided last month, and the nonpartisan group suggested that the actual deadline, or X-date, could be toward the earlier end of that range.

Democrats and Republicans appear to have tempered their tone around raising the debt limit this time around. While lawmakers have not settled on a path to lifting the borrowing cap, they are exploring a series of ways to raise it, including some that could ultimately hand more power to the White House to avoid the kind of standoffs that have routinely crippled Washington.

Republicans continue to publicly insist that Democrats must act alone to address the issue, while Democrats have countered that raising the borrowing cap is a shared responsibility given that both political parties have incurred big debts over the last several years.

“Those who believe the debt limit can safely be pushed to the back of the December legislative pileup are misinformed,” said Shai Akabas, the director of economic policy at the Bipartisan Policy Center. “Congress would be flirting with financial disaster if it leaves for the holiday recess without addressing the debt limit.”

Treasury Secretary Janet L. Yellen warned lawmakers in November that the United States could be unable to pay its bills soon after Dec. 15. During testimony before the Senate Banking Committee this week, she underscored the urgency of the matter.

“I cannot overstate how critical it is that Congress address this issue,” Ms. Yellen said. “America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery.”

In September, Ms. Yellen called for the debt limit to be eliminated, explaining that it had become a destructive policy that posed unnecessary risks to the economy. After approaching the first default in American history, Congress in October raised the statutory debt limit by $480 billion, an amount the Treasury Department estimated would allow the government to continue borrowing through early December.

Congressional leaders have been quietly discussing ways to address the debt ceiling, after Republicans warned that they would not help Democrats clear the 60-vote threshold needed to break a Republican filibuster against legislation to raise the borrowing cap.

Senators Chuck Schumer of New York, the majority leader, and Mitch McConnell of Kentucky, the minority leader, have spoken repeatedly in recent weeks about the issue, but they have remained tight-lipped in public about a possible solution.

The debate has been further complicated by former President Donald J. Trump and his continued influence over the Republican Party. He has repeatedly railed at Mr. McConnell and the other Republican senators who backed a procedural vote in October that cleared the way for Democrats to raise the debt limit.

But Mr. McConnell, while pushing for Democrats to raise the borrowing cap without help from his conference, pledged this week that a default would be avoided.

Credit…Al Drago for The New York Times

“Let me assure everyone the government will not default, as it never has,” Mr. McConnell said on Tuesday. Pressed further, he added, “We’re having useful discussions about the way forward.”

Cut out of both the $1.9 trillion coronavirus relief package that passed in March and the $2.2 trillion climate, tax and spending plan that Democrats are trying to push through the Senate, Republicans have refused to help Democrats accommodate debt incurred by both parties. They have taken that position even though leaders of both parties signed off on the spending that helped the debt balloon.

Democrats, in turn, have balked at a Republican demand to use a fast-track process known as budget reconciliation to raise the debt limit without Republican votes. Democrats used the process to pass the coronavirus relief package and they are using it again for the climate, tax and spending plan, but they have argued that Republicans should help keep the government from defaulting.

Aides in both parties, while cautioning that a solution has not been agreed to, noted that party leaders had so far refrained from publicly trading blame over the issue.

As a way of navigating around the impasse, some officials have discussed the possibility of handing the authority of raising the debt limit to the administration, while granting Congress the ability to disapprove the decision with just a simple majority.

Some lawmakers, however, may be unwilling to hand that power to the White House or lose a cudgel often used by the minority party to exert pressure, particularly while 60 votes are needed to end a filibuster in the Senate.

Other officials have floated attaching legislation raising the debt limit to the sprawling annual defense policy bill, which is the last major must-pass piece of legislation that lawmakers plan to approve in December.

But it is unclear whether such a plan would be successful: Attaching a debt ceiling increase could jeopardize the Republican votes needed to counter the bloc of liberal Democrats who typically oppose the defense bill in protest of military spending. Representative Kevin McCarthy, Republican of California and the minority leader, warned on Friday that such a maneuver could tank passage of the entire package.

The Bipartisan Policy Center said that there was additional uncertainty surrounding the debt limit this year because of the pandemic and the various economic relief programs that are still ongoing.

Dec. 15 is a particularly important date because the Treasury Department is required to make a $118 billion payment to the Highway Trust Fund. If corporate tax receipts that are due that day come in weak, Treasury could face a cash crunch and the United States could be unable to meet all of its obligations, such as paying out Social Security and funding military paychecks.

The Congressional Budget Office said this week that it expected that Treasury might run out of cash by the end of December if Congress failed to act. The budget office suggested, however, that Treasury might be able to defer some Highway Trust Fund payments that were mandated in the recently passed infrastructure law, potentially staving off a default until sometime in January.

Along with its updated projection, the Bipartisan Policy Center unveiled a new proposal for dealing with the debt limit, although it is unlikely to help lawmakers this time around.

The proposal, which is being introduced by Representatives Jodey C. Arrington, Republican of Texas, and Scott Peters, Democrat of California, would establish a process giving the president authority to suspend the debt limit through the following fiscal year as long as Congress does not pass a resolution blocking the move within 30 days. The president would then have to offer a debt reduction proposal for Congress to consider separately.

December 4, 2021

The Modernization of Estate Planning

The wealth management industry is in the midst of a technological transformation as firms look toward technology to address challenges with profit growth, changing demographics and operational efficiency.

This phenomenon is particularly noticeable in estate planning, an area long overdue for disruption that currently requires wealth managers to spend resources educating financial advisors, hiring in-house estate planning specialists, and manually converting dense documents into client presentations. Requiring this level of investment has caused many firms to reserve estate planning advice for their wealthiest clients, those who can benefit from a wider range of estate planning strategies and whose AUM justifies the costs. Yet this creates a perception that estate planning is only for the rich, despite the multitude of benefits it can provide to clients of any wealth level.

Wealthtech firms are flipping the narrative by developing solutions that democratize estate planning through artificial intelligence, design thinking and automation. Wealth managers who leverage this disruptive technology will make estate planning more accessible to a wider client base, improve the ability of financial advisors to differentiate themselves and drive future growth.

The Current State of Estate Planning

Estate planning plays an important role within wealth management by providing an additional tool financial advisors can use to add value and build stickier client relationships. For clients, having a thoughtful estate plan in place provides many benefits including peace of mind, asset protection, and preparing future generations to inherit wealth. However, the process of providing estate planning advice is cumbersome and time-consuming.

A financial advisor must work with a client’s estate planning attorney to develop an estate plan, review the details with the client, and implement the agreed upon strategies. Once this is complete, ongoing monitoring and reporting are required to ensure that the plan continues to align with a client’s circumstances. Over time, these plans may be challenged by difficult family dynamics, a shifting regulatory environment, or increased wealth. Financial advisors are required to stay ahead of these changes and understand their potential effects on the plan. This process requires a significant upfront and continuous investment of time by financial advisors.

Estate Planning Disruption

Innovation opens the door for the democratization of estate planning. Wealth managers who previously reserved estate planning for their wealthiest clients can use artificial intelligence and automation to begin engaging the mass affluent client segment to capture the millionaires of tomorrow. For example, a wealth manager might add an estate planning page to their client portal that allows clients to upload estate planning documents and receive automated analysis. A client that uploads their estate planning documents would consent to sharing this data with the wealth manager to enhance the level of advice they can receive. The client can then opt to meet with a financial advisor to discuss their plan or a financial advisor can proactively reach out to set up a meeting. This service would add value for clients while also providing data wealth managers can use better understand their client base.

Estate planning technology can also improve goals-based advice by allowing advisors to provide visualizations that illustrate the alignment of an estate plan with a client’s goals. For example, a client may have a goal of gifting $1 million to their child at the end of their lifetime. Traditional goals-based wealth management technology may estimate that $500,000 invested in an equity portfolio today will allow the client to achieve this goal given their life expectancy. While the result of this analysis is financially intuitive, it fails to account for the structure of a client’s estate plan.

Today, financial advisors are required to revisit the estate planning documents to ensure the plan aligns with this financial goal. Alternatively, overlaying estate planning technology would allow the financial advisor to automatically see that the estate plan needs to be updated. This would improve their initial recommendation by suggesting that the client opens a trust to more effectively increase the probability and magnitude of wealth that can be transferred in a tax-efficient manner. By leveraging estate planning technology, financial advisors will be able to provide more holistic advice to their clients in real time.

Estate planning technology also creates opportunities to engage future generations. Estate planning attorneys recommend that clients open communication about their estate plan to prepare heirs to receive an inheritance. However, many clients may be hesitant to share the full extent of their estate plan with their children and grandchildren. Digital estate planning platforms can enable customized views of an estate plan with options to limit the information shared with heirs. This will allow financial advisors to engage future generations in estate planning discussions in a way that aligns with their clients’ wishes. These discussions provide a setting for financial advisors to build rapport with future generations and improve the ability of wealth managers to retain assets during wealth transfer events.

As much as $68 trillion in wealth will be passed down to Millennial and Gen X inheritors in the U.S. over the next 25 years. Disruptive estate planning technology will make it easier for financial advisors to prepare clients for this upcoming wealth transfer.

Vanilla, a Wealthtech startup disrupting the estate planning space, is leading the charge by creating a platform with automated estate reports, intuitive visualizations, and attorney support for financial advisors. Their technology saves financial advisors time, automates the monitoring of a client’s estate plan, and provides an accessible digital representation of the plan.

FP Alpha, another technology company focused on enabling financial advisors, has developed artificial intelligence that can interpret estate planning documents and generate plan analysis instantly. Advisors and clients can upload existing estate planning documents to generate key insights and quickly identify areas for improvement within the plan. Depending on the complexity of the estate plan, this technology could save financial advisors hours of parsing through trust and estate documents to piece together an understanding of their clients’ plans. Wealth managers who leverage this technology will increase the capacity of their financial advisors to serve more clients, while also enabling them to provide better advice.

As wealth managers prepare for an immense transition of wealth to Millennial and Gen X inheritors, effective digital strategy has become increasingly important. Currently, the estate planning practice within wealth management is a highly manual and time-intensive service offering where digitization has lagged. New technologies are disrupting estate planning through artificial intelligence, enhanced visualization of estate plans, and automated reporting. This technology will make estate planning services more accessible to the mass affluent client segment, which provides a unique opportunity for wealth managers to engage previously underserved clients who are the future of their industry.

Matthew Berkowitz is managing principal, U.S. wealth & asset management strategy practice lead, and Eden Afriat is a Senior Consultant, both at Capco.