Technology's allure is undeniable for financial advisors weighing a move to a new broker-dealer. Sleek interfaces, integrated apps, and workflow-reducing features promise efficiency and a world-class client experience. But while ease-of-use and functionality deserve scrutiny, a truly informed decision involves understanding the security, legal, and compliance capabilities of the prospective firm's tech.

Ask how client data is secured. What are the client-facing system's encryption standards, two-factor authentication, and access controls? Understand how the platform complies with industry regulations and data privacy laws. And most importantly, what happens if the lights go out? Does a comprehensive disaster recovery plan ensure business continuity and safeguard client assets even during outages or cyberattacks?

These may seem like technical minutiae, but your clients trust you've vetted these issues thoroughly when they follow you to your new professional home. Prioritizing security and compliance in your tech evaluation isn't just about ticking boxes; it's about safeguarding your practice's foundation and fostering the trust your clients deserve.

Finsum: Cybersecurity, compliance, and data privacy are key factors to consider when evaluating a potential broker-dealer’s technology.

Over the last couple of months, there has been an increase in the enforcement of Regulation Best Interest (Reg BI). Over the last year, the number of actions taken by the SEC and FINRA have substantially increased. It’s consistent with warnings from regulators that there would be a ‘more substantive’ period of enforcement and that Reg BI will be enforced ‘to the letter’.

Regulators want to see a more robust process to ensure supervision of brokers. The ultimate goal of Reg BI is to ensure that all recommendations are made in the clients’ best interests.  So far this year, there have been 22 FINRA enforcement actions after just 8 in 2022. Penalties are also growing in size as evidenced by an SEC settlement with Laidlaw and Company for $800,000.

Recent enforcement has also seen advisors having to pay back a portion of customers’ losses. This is a departure from precedent when firms were typically on the hook for compensation and indicates a serious commitment to deterring misconduct. 

In 2024, even more enforcement is expected given public comments from SEC and FINRA officials. They see enforcement expanding across all 4 pillars of Reg BI which include disclosures, care obligation, conflicts of interest, and compliance. 

Finsum: The SEC and FINRA are increasing enforcement of Reg BI. They are also looking to fine individual advisors and brokers for misconduct.

Schwab conducted a survey among its ETF-investing clients. Among the takeaways is that Millennial investors are quite partial to ETFs, relative to other generations. 37% of their portfolios are allocated to ETFs. 89% said ETFs were their investment vehicle of choice, while 25% of Millennials plan to increase their exposure to ETFs next year. 

Another interesting finding from the survey is that Millennials also have a strong interest in more personalized investment options. 88% said that they are somewhat or very likely to personalize their portfolios. 78% want their investment to align with their personal values. This is much higher than older generations. 

The survey also showed substantial interest in direct indexing among Millennials. This isn’t too surprising considering that 65% of Millennials said it’s extremely important to have more control over investments, 61% want greater ability to customize their investments, and 61% want their investment to be managed to optimize taxes. 

Currently, 87% of Millennials are familiar with direct indexing, an increase from 80% in last year’s survey. Additionally, 53% of Millennials are extremely interested in learning more about direct indexing, while only 34% of Gen X and 22% of Boomers feel the same way. 69% of ETF investors, not investing with direct indexing, said that they are likely to invest in one next year. For Millennials, 80% feel this way.

Finsum: Schwab conducted a survey among its ETF-investing clients. Among the findings, Millennials are partial to the asset class and also have strong interest in direct indexing. 

2023 has been a year defined by twists and turns that has defied the expectations of most market participants. Amid the tumult, alternative assets have been a source of resilience especially as the industry continues to evolve. According to Prequin’s Head of Private Equity Research Insights Cameron Joyce, the best opportunities are in private debt and secondaries.

In terms of various categories within the asset class, rising interest rates have been a major headwind for private equity. This has limited deal activity and exits, however there are indications that the climate could be improving as we head into 2024, while long-term investor demand remains strong. 

Similar to private equity, venture capital has also been hamstrung by tighter monetary policy in terms of exits and valuations. Real estate has also been negatively impacted by rising rates, resulting in a weaker fundraising environment and muted deal activity. It’s also become more challenging for mid-sized and smaller funds given that many investors are gravitating towards larger funds.

Private debt has been relatively strong due to its seniority in the capital stack and floating-rate structure. This has been increasingly important for companies given that banks have raised lending standards. For investors, private debt has been effective in terms of dampening volatility while delivering above-average returns. 

Finsum: Alternative assets performed quite well in 2023 amid a turbulent year for financial markets. Here’s a roundup of some of the key categories within the asset class.

At the onset of their careers, most financial advisors have big aspirations. Yet, many fail to realize their ambitions and plateau at certain levels. At each level, there are common obstacles that need to be overcome. 

The first phase is the hustle phase, when a lot of energy is expended to start building the business. During this phase, key steps to take are to invest in yourself by embracing discomfort and stretching beyond yourself to grow, build a capable team, get in the habit of giving out value without any expectations, find like-minded and supportive individuals to surround yourself on the journey, and embrace acting fast. Technology can also be leveraged to level the playing field.

The next phase is the surrender phase. During this, the major focus is on building a team and transitioning from being a solo operator. At some point, this becomes necessary in order to achieve more growth. It will require adopting a CEO mindset, focusing on key tasks while delegating others, and developing scalable systems. 

The final phase is the harmony phase. This is when you can step back with minimal interruption to the business. During this phase, the major focus is on aligning personal and professional goals, finding new avenues of growth by leveraging your team, investing in sustainability, instilling a culture, and embracing the flow. 

Finsum: Financial advisors go through phases during their careers that require different strategies and ways of thinking.