Displaying items by tag: SEC

The SEC has introduced new disclosure requirements and registration processes for registered index-linked annuities (RILAs) and registered market value adjustment (MVA) annuities in hopes of bringing clarity to the industry. The final rule mandates issuers of non-variable annuities to use Form N-4, updating the framework for these products. 

This change aims to help investors make informed decisions, as the market for these products has grown significantly, with RILA sales reaching $47.4 billion in 2023. The amendments include a summary prospectus framework and extend Rule 156 to non-variable annuity advertisements to prevent misleading materials. 

While SEC Commissioner Hester Peirce supports the general approach, she expressed concerns about potential biases and the need for creative disclosure techniques to enhance investor understanding. The amendments will take effect 60 days after publication in the Federal Register, with full compliance required by May 1, 2026.

Finsum: Annuities seem bogged down by more complexity, and this ruling could help the industry in the long run. 

The gigantic win for spot Bitcoin ETFs with the SEC represents a significant milestone in facilitating compliant access to the leading cryptocurrency. Since January 10, inflows exceeding $10 billion have bolstered optimism for Bitcoin and the broader market outlook. For retail investors, these ETFs offer a streamlined pathway to securely backed Bitcoin, simplifying the complexities associated with managing private keys.

As institutions grapple with meeting client demand for digital asset exposure, crypto separately managed accounts (SMAs) have emerged as a complementary investment solution gaining traction among wealth managers, family offices, and registered investment advisors (RIAs). SMAs, a staple in traditional asset classes, allow for direct ownership of underlying assets and provide customizable portfolios tailored to individual client preferences and investment strategies.

 With their ability to offer regulatory compliance, security measures, and tax optimization strategies, SMAs present a compelling option alongside spot Bitcoin ETFs for navigating the evolving landscape of digital asset investments.

Finsum: SMAs are a great pathway to optimize tax structure for investors and get simplicity in a turbulent alternative space like crypto.

In late 2022, the SEC amended its marketing rules for financial advisors. One change was that client testimonials were permitted under certain conditions. Many practices are seeing success by showcasing testimonials from satisfied clients. 

Michelle Tigani, the director of marketing and communications at Cassaday & Co., added a client testimonial page to the firm’s website, which simply shares positive feedback that the practice has received over the years. She plans to use these testimonials in ads, emails, and targeted campaigns. She notes that the client testimonial page is the most visited on the firm’s website, underscoring their efficacy.

Susan Wilkinson, the founder of Wilkinson Wealth Management, recommends reaching out to long-term clients to ask if they would be willing to share a testimonial. The firm displays these on their website and integrates quotes from clients into various marketing mediums such as social media, emails, and print. She believes it’s more effective and authentic for prospects to hear from satisfied clients rather than traditional forms of marketing which many instinctively tuneout.

Finally, Terra McBride, the chief marketing officer at Prime Capital Investment Advisors, asserts that financial advisors are in the relationship business. Client testimonials are the most effective way to communicate your ability to form positive and successful relationships. She recommends using testimonials in multiple formats, including websites, videos, and marketing campaigns. Ultimately, it adds more credibility and layers to help prospects get a feel for the client experience.  

Finsum: Late in 2022, the SEC amended its rules for client testimonials. Here’s why they are effective and how some practices are integrating testimonials into their marketing strategy.

There is a subtle distinction between fee-based and fee-only advisors. Fee-only advisors exclusively offer financial advice but don’t sell any products with commissions. Fee-based advisors also mainly offer financial advice, but they may also sell other non-investment products with commissions, like insurance. This means that they cannot market themselves as being ‘fee-only’. 

Many advisors are moving to these models due to their simplicity, while there has been an increase in regulations around the fiduciary standard. In fact, the industry as a whole is seeing fewer broker-dealer accounts and growth in investment-advisory accounts. As a result, many products can now be bought in investment-advisory accounts without a commission, such as annuities and alternative investments. 

An important consideration for an advisor going independent is responsibility for compliance. This requires registering with the state regulator or the SEC if there are more than $100 million in assets. It also means responding to regulatory inquiries, developing a compliance program, and having a system to ensure compliance. 

This additional burden highlights the challenge of running an independent shop. Another is that there is less time for clients, especially during the initial stages. Even afterwards, the additional responsibilities will lead to less time and energy for client service, prospecting, marketing, etc. By choosing a fee-only or fee-based model, advisors can have less of a regulatory burden.

Finsum: Many advisors are moving towards a fee-only or fee-based model. The biggest reason is that it simplifies and reduces the compliance demands for advisors.

According to Bloomberg senior ETF analyst Eric Balchunas, there is only a 25% chance that the SEC approves a spot ethereum ETF. He points to the lack of SEC engagement on the topic and the absence of any positive signs or chatter on the subject, which is a departure from the lead-up to bitcoin’s approval. Balchunas believes this lack of engagement is ‘tactical’ rather than ‘procrastination’. 

The crux of the issue is how ethereum should be classified. There are indications that the SEC is leaning towards treating it like a security based on subpoenas to crypto companies that have interacted with the Ethereum Foundation. 

However, there are some dissenting voices who are more optimistic about approval. Craig Salm, Grayscale’s Chief Legal Officer, says the SEC’s reticence is due to most issues already being cleared up during the bitcoin ETF approval process. He believes both ETFs are nearly identical, except for the underlying asset. He also pointed to the approval of an ethereum futures ETF and its classification as a commodity future as a favorable sign. 

Currently, several asset managers have filed for approval for an ethereum ETF, including Blackrock, VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, Grayscale, Franklin Templeton, and Hashdex. The most immediate deadline is May 23 for VanEck.

Finsum: Over the next couple of months, the SEC will decide on an ethereum ETF. Reading the tea leaves, Bloomberg’s Eric Balchunas is not optimistic that it will be approved.