(Washington)

Reg BI has been in the spotlight recently. With incoming SEC chief being grilled by Congress before potentially being appointed, there is a lot of anticipation about where things might be headed. Some think Gensler will move quickly to alter Reg BI, while others (including us), think that he might move slower because of potentially more pressing issues like meme stocks and bitcoin. However, one change that may come quickly is a simple but important one: changing the regulation’s name. There is a loud call for the SEC to change Reg BI’s name because many say it is “grossly misleading” since it is not a true fiduciary rule. Gensler could potentially make this change much more easily than actually modifying the rule, so it makes sense this could be an immediate measure to appease critics.

FINSUM: What we find interesting here is that calls to change the name are not just coming from fiduciary rule advocates and the like, but also from brokers. The latter seem to be having some trouble with the clients thinking they are fiduciaries when they aren’t, which can then lead to big blowups/lawsuits.

(New York)

While yields have been rising over the last few weeks, the reality is that they are still near historic lows, and far below the level most retirees need in order to earn decent income, especially given how risky bonds currently appear. So, in this very difficult environment annuities have emerged as a good option, but how to take best advantage of them when rates are so low? There are a few options, but the best one is “laddering”, or buying multiple annuities over time in order to not commit your entire pot of capital at a time when rates are so low. Additionally, some annuities offer dividend payments on top of regular payouts, which can provide extra income.

FINSUM: One of the big worries right now is putting a big pot of money into annuities, only to see rates and payouts rise in a couple years. Hence laddering is good strategy.

(New York)

If there were ever a product built for steady retirement income, it is fixed annuities. With the big decline in fixed pensions, fixed annuities have become a must-have option for many retirees who need guaranteed income. They are the simplest annuity—principal and income are guaranteed, but rates are fixed. In other words, the insurance company is bearing the risk, so they get the upside, but the customer gets peace of mind. Therefore, the basic utility of annuities is to support everyday income in retirement. There are other uses too, especially in the current market environment. For example, “Right now, some fixed annuities make an attractive alternative to both bonds and CDs in a portfolio, due to the principal guarantees and interest rates offered”, says one financial advisor at Stack Financial Services.

FINSUM: The most important thing to remember is that annuities have utility in most portfolios, but they should only ever be just a portion of a portfolio. They suffer from illiquidity and are very susceptible to inflation, but they also have guarantees that no other asset class can offer.