When Merrill advisors recommend a certain type of alternative or traditional investment to clients, Nancy Fahmy is there to help make sure they can get it.
Fahmy, the head of the investment solutions group at Merrill and Bank of America Private Bank, manages a team of specialists with expertise in everything from alternatives like private credit and equity to traditional capital markets, retirement products and services for
To that end, Fahmy works closely with the firm's Chief Investment Office for guidance on what investors should consider having in their portfolios in light of current market conditions.
"And then my team is really charged with the actual investment," Fahmy said. "So, the creation of all the solutions that the advisors and clients are utilizing and delivering the advice and guidance through the specialists on portfolio construction, on the variety of solutions and how they fit within the client's portfolio in order to meet their goals and objectives."
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It's a job that has Fahmy and her team working with roughly $4.6 trillion in assets investors have entrusted to Merrill, the private bank and accounts offered through its Merrill Edge brokerage service and similar businesses. Fahmy said her career path at Merrill started 18 years ago, when she joined the firm's global markets business.
She moved to wealth management in 2008 and ran the alternative investments unit for a few years before also taking on responsibilities for capital markets. Fahmy moved into her current position about two years ago. She recently sat down with Financial Planning to discuss her role in helping Merrill and Bank of America Private Bank provide access to alternatives and other investing strategies.
This interview has been lightly edited for clarity and brevity.
Financial Planning: What's your general approach to alternative investments? How do you go about discerning which alternatives might be a good fit for particular clients?
Nancy Fahmy: We're open architecture. We source what we think are the best third-party asset managers in the alternative space, across private markets, including private credit, hedge funds. And private equity infrastructure, obviously, is a very hot area right now.
We've got over 100 solutions available right now to our clients. And the clients that we serve are really across the wealth spectrum — if you think about consumer investments, all the way up to the private bank.
So we've been a huge advocate of
FP: What about portfolio construction? Is there a certain percentage of portfolios that you think should be invested in alternatives?
NF: Our guidance from our CIO really helps all of our clients to think about allocating to alternatives based on their liquidity needs and their risk tolerance. So we give specific guidance on how much they should allocate to alts.
With moderate clients, we're recommending they hold approximately 25% in alternatives. And we think that most clients should have alternatives as a core part of their portfolio. Our alternative investment specialists really work closely with our advisors to make sure that they're leveraging that guidance and really thinking about: How do we match that against what's on our platform in order to construct a portfolio that's appropriate for that particular client? And we do things like custom proposals for our high net worth clients to really think about how they should be allocating to alts going forward.
Our clients' holdings and alternatives have really probably tripled in the last five years. We've got record advisor adoption in alternative investments. And every single year, we probably offer about 50 or so new solutions in addition to what is already on the platform. Clients have been demanding access to alternatives. And I would say we're also innovating on the ultrahigh net worth side, thinking about tax-managed solutions in particular for those types of clients.
FP: What do you see as the main benefit to alternatives? Is it diversification? Is it a higher return potential?
NF: It's all of the above. We advocate for clients to have a
I think holding a single investment in either private equity or a hedge fund or infrastructure or private credit is not representative of how we want clients to invest. Just like in traditional investments, we want clients to be well diversified.
You know, when you invest in private credit, you get one thing: You get current yield. You get inflation protection.
When you invest in hedge funds, you get a whole another set of things, right? You can dampen volatility in your portfolio. You can also achieve alpha [gains exceeding those reflected in a benchmark market index].
And then private equity is not all the same. I think you've got to really think about diversification even within private equity, and how you actually own alternatives. So I think that's the biggest thing that we talk about with our advisors and clients.
I think advisors, at this point, understand the why — why clients should own alternative investments. We have given them specific guidance on how to allocate to alts. And I think that's really important to say, that if your client is looking to achieve 'X,' here's what we would recommend based on their net worth and their eligibility to access certain solutions.
It's incredibly important to understand the client's goals and to construct the portfolio to make sure we meet the client's needs. And just like with traditional investments, you wouldn't do that with a single type of solution.
FP: How do you mitigate
NF: I would say we are highly selective. We've got a highly curated alternatives platform.
Everything we do goes through a very rigorous due diligence process. And in that process, we look at the risks, we look at how they invest, we look at their performance, historical performance, relative to their peers. We look at a whole host of those things to make sure that we onboard the right type of solutions for our clients. And that's why our clients rely on us.
FP: What are some of the current big priorities of the investment solutions group?
NF: We've got a keen focus on continuing to expand our ultrahigh net worth client solutions by really expanding the tailored product set that we have available to them. So we're expanding in the alternative investment space for the ultrahigh net worth arena. We're also doing that on the capital market side.
And we just announced earlier this year an
The second is continuing to expand our alts business and provide more access to a broader set of clients across the wealth spectrum. We're really thinking about solutions that make it easier to implement alternatives.
And then I would say tax-managed solutions is the third area in the alt space that we're expanding. And then the last is really personalization, so making sure that every single client that comes in has a personalized plan, and that we invest according to their personalized plan.
FP: What are you doing with tax planning?
NF: We've experienced a significant jump in client demand for tax overlay. It's something that we believe clients shouldn't just do at the end of the year. It should be something that they do throughout the year. So we've got dynamic tax-loss harvesting and quarterly tax-loss harvesting that clients can elect to be part of.
And then last year, we made available a playback to show clients how we're doing for them. And that has been extremely well received as well.
FP: Many investors are still holding a lot of money in cash. Obviously it's impossible to predict what will happen with interest rates now. But what are you encouraging clients to think about with their cash?
NF: There's a piece that our Chief Investment Office
Our specialists are out there with our advisors guiding them on putting cash to work. So we've got a tremendous campaign that we're working with advisors on, Outlook 2025, to really talk to them about what we think is going to happen in the markets and how advisors should actually think about investing for clients' portfolios. And that includes guidance around putting cash to work.
We are working side by side with advisors to have them think about how they should put the cash to work and what the appropriate way to do that. So things like multi-asset models, as well as
Rather than an advisor doing it on desktop, we're doing it within our Chief Investment Office, which really provides capacity and scale to our advisors. And then, tax-managed and direct-indexing strategies and fixed income SMAs have also been areas of opportunity for cash.
The last thing I would say is that, along with the rest of The Street, is that our Chief Investment Office is really keeping an eye on the Fed. And we're guiding clients accordingly.
