(New York)

Merrill Lynch is giving its herd of advisors a break on their incentive compensation. Brokers at Merrill have a piece of incentive compensation which gives them a bonus if at least 30% of clients use three specific services. But instead of making the cut off for meeting those quotas July of this year, they have extended it to January 2021, giving brokers an extra 6 months to meet those goals. Merrill Lynch says that the change will allow advisors to focus on best serving clients in this volatile period.

FINSUM: Even with the six-month extension, given the market volatility, it will likely be difficult to cross-sell clients into new products.

(New York)

Yes, the market had an unbelievable day yesterday. It was so good in fact, that it reminds one of all the things bad about the current situation—markets don’t rise 11% unless there is a huge crisis going on. At the time of writing, markets are pretty flat today, but tomorrow could be a doozy. US weekly jobless clams get released tomorrow morning and will be one of the first tangible signs of how the economy is trending under the coronavirus lockdown.

FINSUM: Many analysts are saying we might hit 30% unemployment, depending on how long this general virus lockdown lasts. Tomorrow could be the first sign of things to come and markets may react sharply.

(New York)

Many people who are thinking about annuities don’t realize that many of them are sellable products—they don’t necessarily have to be held forever (even if that is often the best strategy). So which annuities are sellable and which aren’t? In general, SPIAs (single premium immediate annuities), DIAs (deferred income annuities), and QLACs (qualified longevity annuity contracts) are not sellable; VAs (variable annuities), FIAs (fixed index annuities), and MYGA (multi-year guarantee annuities) are usually sellable. Each of those latter products have surrender charge time periods in them, so it may cost something, but it does mean money is not locked in them forever.

FINSUM: Since selling would usually not be the best idea, this is more of a peace of mind factor than anything else, in our opinion.

(New York)

Many RIAs across the country are worried right now. With fee levels often tied to AUM, revenue seems likely to take a ~30% hit this year. That is enough to break many RIAs, especially those who were previously running only 10% profit margins. So how can RIAs cope? Firstly, those who have been very tight on budgets are in better shape. Those who were operating at 30% profit margins should be okay. A few of the key aspects to consider right now are: reaching out to vendors to “share the pain”, changing compensation structures towards lower fixed pay and more incentive-based pay, and switching to a quarterly budget, which will better align expenses and income.

FINSUM: We might go through a long period of lean times, so RIAs need to act fast to get their fixed costs under control.

(New York)

Any investor cannot help but have noticed very unusual movements in markets over the last couple of weeks. In particular, Treasury bonds have been behaving very oddly. After yields predictably plunged alongside stocks a couple of weeks ago, there have been abrupt movements higher, with 10-year yields rising around 90 basis points (from 0.4% to 1.3%) in just a few days. Even now, when yields would presumably be nearing zero, they have been see-sawing and are still near 1%. The reason why appears to be panic-selling in an effort to get cash in any way possibly. In particular, large investors need to meet redemptions in other areas of credit, which are much less liquid, and since getting cash for their holdings there is impossible right now, they are selling Treasury holdings to get the cash to meet redemptions.

FINSUM: This is not unlike selling your valuables to meet mortgage payments. It makes sense, but it is a worrying sign and a symptom of how dire the market has gotten.