(Washington)

The Department of Labor made a critical move this week in announcing a regulation that is likely to affect almost all advisors. During the Trump administration the DOL made a rule that made investing client Dollars in ESG funds very complicated from a compliance perspective. It has long been expected that the Biden administration would try to undue that rule and make one of its own. It appears that day is here as the DOL announced a new rule (the wording of which is still unclear) which would clear up the uncertainty and risk advisors have in recommending ESG funds.

FINSUM: This will become more clear in the coming days, but the bottom line is that it appears the Biden administration is trying to take the doubt/uncertainty/risk out of ESG for advisors. And good thing because demand for ESG products has surged this year.

(New York)

Retirement costs are a major pitfall for advisors, if only because clients generally underestimate them! Nowhere is this more true than in regards to healthcare. Since healthcare costs tend to increasing very significantly as one ages, it is difficult for the average person to understand just how costly medical expenses can become when they get older. To make things more complicated, the situation is highly variable for each person. For example, in a married couple, do they enroll in Medicare at the same time or are they of different ages; does one spouse still work full-time and give healthcare access to other? There are also several financial products which can help in supporting these costs, such as HSAs and annuities, both of which can help offset the inevitable costs that arise even when covered by Medicare.

FINSUM: Retirement healthcare costs need to be a critical of advisors because they are generally poorly planned for by clients’ themselves.

(New York)

The bond market has had a good year. For the last several months, yields have been falling and corporate bonds have seen big gains this year thanks to better earnings and ratings upgrades. Munis have been a big success too. But one area has been even hotter: ESG bonds, which have will see over $1 tn of issuance this year. To put that in perspective, it would be more than double what was issued in 2020. JP Morgan explained the big surge in ESG best, with their head of ESG debt capital markets saying “What began with ‘why should I issue?’ is now ‘why aren’t you? … your absence in the market says something now”.

FINSUM: ESG is fully mainstream now and seems to be gathering more and more assets/issuance. What will this do to issuance in clear non-ESG sectors?

(New York)

If advisors ever feel like hold their fates in the palms of their hands, they’d be right. At this very moment, a big change is looming for all brokers. In the near future, industry lawyers are expecting that SEC chief Gary Gensler will announce a definition of “best interest” within Reg BI. Previously, the thinking had been that defining the rule might actually make it easier to get around, but the emerging industry view is that defining it would indeed make the rule look much tougher.

FINSUM: A definition of “best interest” seems like a foregone conclusion to us at this point. The main question is when, and how restrictive is the verbiage.

(New York)

The bond market is in an odd place right now. For the first part of the year, yields jumped on the threat of inflation. Then in the middle of Spring, those fears started to wane and yields started to fall. Other than a quick reversal of direction off a hot June inflation reading, that has been the trend all summer. However, the whole market looks very vulnerable to a change in sentiment. If inflation comes in warm again for July—especially coupled with some very good jobs numbers—the overall economic picture might move back to bullish, which could swing yields rapidly back in the direction they were headed in Q1.

FINSUM: Essentially this market could quickly realized it mispriced the direction of the economy, so there is a lot of risk for advisors and their clients. Nasdaq and Fidelity are having an interesting webinar on how to plan for this risk. Check it out here.