Wealth Management
(Washington)
Sneaking in right after Christmas and just before a change of administration, the SEC has announced an important rule change that affects all advisors. In particular, the SEC has updated a rule that has not been touched in decades and was increasingly out of touch with reality. The change has to do with marketing communications, particularly those through internet channels. According to Barron’s, “The new regulation also allows financial advisors to use testimonials, endorsements, and third-party ratings to woo potential clients, as long as they meet certain conditions”. SEC chief Jay Clayton commented that “The marketing rule reflects important updates to the traditional advertising and solicitation regimes, which have not been amended for decades, despite our evolving financial markets and technology. This comprehensive framework for regulating advisers’ marketing communications recognizes the increasing use of electronic media and mobile communications and will serve to improve the quality of information available to investors”.
FINSUM: Advisors have had to tread very lightly in digital communications/advertising for years because of a high degree of uncertainty about what was permissible. This goes a long way towards making that very clear.
(New York)
The new year brings many opportunities for advisors. One which is not utilized enough is the implementation of goals-based investing. The new year naturally brings a focus on goals, resolutions, and planning, making it the perfect time to get clients to commit to defining their goals and how their portfolios can get them there. Goals-based investing has been known to help get clients to really commit to their investments and stay in the market for the long haul.
FINSUM: This approach can get help clients get more bought into their own planning and strategies and help give meaning to why they are saving/sacrificing/investing. Just make sure the goals they give are genuine, as many clients will not put enough thought into describing these. There are also a number of funds that directly cater to a goals-based approach.
(New York)
2020 was a very unique year for recruiting. In particular, despite the obvious market and economic turmoil, it was a year in which almost all aspects of going independent got more favorable. Not only did working from home making recruiting conversations with new firms easier, but working from home itself made going independent seem less daunting. Further, firms’ appetite to offer great packages to recruit has grown considerably since this time last year, so it is certainly an advisors’ market when it comes to moving.
FINSUM: One other point to mention here is that clients themselves have also gotten more comfortable with their advisors being independent. The lack of office visits and growth of Zoom communication has limited the need for the big well-known logo in the office lobby when clients arrive. Independents seem likely to gain more market share.
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(New York)
Many wealth management firms find themselves challenged by female clients. The industry has long been dominated by male advisors, and many firms have been slow to adapt to the needs of female clients. The increasing asset controlled by women has created more urgency to rectify this issue, and one approach that might aid in understanding how to better serve women is goals-based investing. According to one firm that has been very successful with female clients, “Women have to understand why they are doing stuff”. According to studies, meeting financial goals is more important to women than to men, and women tend to put more thought and work into defining the goals for their finances. Thus, making sure to deeply understand goals and explaining how certain investing/wealth management approaches will meet them is integral in making women feel comfortable.
FINSUM: Goals-based investing has many utilities in wealth management, and this one applies to a critical industry issue.
(Washington)
The House Financial Services Committee sent a very strong message to president-elect Joe Biden this week: dissolve Reg BI. Chaired by Maxine Waters, the committee said that the Trump administration had "taken several actions that have eroded shareholder rights, established regulatory barriers to shareholder engagement, increased issuer involvement in the proxy voting advice process and stripped away fundamental investor protections, including safeguards around private markets, where investors have few protections”, and that Biden should take care of the issue by getting rid of Reg BI, and separately, CRS altogether.
FINSUM: Industry experts seem to agree that the Biden Administration is unlikely to completely unwind Reg BI, if only because getting a new rule through would require Congressional approval. While that could still happen depending on how the Georgia runoffs go, it seems more likely the new SEC team would just employ very strict enforcement of Reg BI.
(New York)
Goals-based investing and planning is a well-known, but not greatly understood topic within asset and wealth management. The idea of goals-based investing is to make the goals for investment clear so as to match them to life needs and keep motivation high for clients. However, many advisors do this incorrectly and resultingly think it is ineffective. The main problem is always that advisors don’t take enough time to truly understand their clients’ goals. Many clients, when posed question about goals, will give half-hearted answers that they think they should say (e.g. a comfortable retirement). It is on advisors to dig deeper and truly understand what they want. For example, a client who is fully engaged might say they want to buy a retirement home on the coast when they are 65 and afford to give their daughter a six-figure wedding.
FINSUM: If the goal that you are trying to align investment to isn’t completely genuine for the client, then it doesn’t truly serve as motivation. That said, true insight into what a client wants can deliver enormous value.