Wealth Management
In a blog post, Bill St. Louis, FINRA’s head of enforcement, said that more Reg BI cases are ‘in the pipeline’ and that ‘disciplinary actions have been increasing’. He added that these cases in the pipeline involve Form CSR, excessive trading, complex products, and variable annuities.
Two recent enforcement actions involved the use of social media influencers for customer acquisition. FINRA fined Cobra Trading $200,000 for paying social media influencers with larger followings to promote the firm. According to the agency, these promotional posts made false claims and were not fair or balanced. Similarly, M1 Finance was fined $850,000 for social media posts made by influencers on the firm’s behalf that violated FINRA’s guidelines.
Given that a growing share of the public now gets news and information about investments from social media, the agency is conducting regular sweeps. Firms are also required to conduct a consolidated audit trail. According to St. Louis, most firms are in compliance with these reporting obligations, but some audit cases are also in the pipeline.
Finsum: FINRA is stepping up enforcement of Reg Bi. Two recent enforcement actions were due to firms improperly using social media for promotion.
When selecting the best wineries to visit, the environment can play as crucial of a role as the wine itself. With over 400 wineries in Napa and Sonoma counties, up from just 25 in Napa during the 1970s, the region has seen a surge in tourism driven by Michelin-starred restaurants, luxurious accommodations, and unique wine experiences.
This intense competition has forced Napa Valley wineries to boost their offerings beyond standard tastings with luxurious experiences like sensory garden tours and private dining with Michelin-starred chefs.
- Stags' Leap Winery, the Napa landmark that was established in 1883, helped create the iconic AVA. The 240-acre estate offers extensive tours and features an Apothecary and Sensory Garden along with a Kitchen Garden, providing a rich historical experience.
- Beaulieu Vineyard, renowned for its Georges de Latour Private Reserve Cabernet Sauvignon, offers experiences celebrating its nearly 120-year history, including the Cabernet Collector tasting and the Georges de Latour Legacy Experience, all set against stunning valley views.
- Cakebread Cellars, family-owned since the 1970s, is a premier destination for both wine and culinary enthusiasts. Visitors can enjoy farm-to-table cuisine, cooking classes, and strolls through the estate’s culinary garden, with various seated tastings and tours to choose from.
Finsum: The serene views at these Wineries provided a much-needed respite for RIAs looking for a chance to decompress.
According to a white paper by SEI and FP Transitions, nearly 99% of independent financial services and advisory practices fail after the founder retires, so succession planning is not just survival but an opportunity for growth.
The paper found that although 32% of advisors claim to have a succession plan, only 17% have a binding agreement, highlighting the need for more actionable planning. But this plan helps gain new clients and encourage growth because many firms don’t have a strategy in place and can’t draw in new talent.
Succession planning should focus on building a sustainable business that aligns with long-term goals, whether through acquisition or extending ownership. The white paper also notes that while 45% of advisors have a continuity plan, many intend to implement one soon, reflecting an increasing awareness of its importance.
Finsum: The current benefits of succession planning are growing and could improve practice performance today.
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A recent deep dive by Cerulli Associates explored how defined contribution (DC) managed account users and non-users perceive the value of DC managed account programs.
Managed account users appreciate the time, energy, and stress saved by delegating 401(k) and retirement planning to professionals. They also value the human advice component and the employer’s vetting of the solution.
Many non-users were shown to be swayed by the human advice component of managed accounts and affected the fee structure they were willing to accept. Adding to this a meager 16% of non-advice users feel very confident in their investment strategy, while nearly all DC managed account users express strong confidence.
As the retirement industry shifts away from defined benefit systems, individual plan participants must educate themselves and implement effective retirement investment strategies.
Finsum: Retirement accounts seem ready-made for managed accounts and clients seem to desire them based on this research.
According to Cerulli, wealth management firms vying for high-net-worth clients should increase their focus on personalization and private markets. With traditional wealth management, it’s increasingly challenging for advisors to differentiate their services. Additionally, it doesn’t fully meet the needs of clients, especially given unprecedented amounts of uncertainty in terms of the economy, monetary policy, and geopolitics.
A consequence of this uncertainty is unpredictability in terms of return and risk in terms of major asset classes, highlighting the need for effective asset allocation. The report also showed that direct indexing is utilized by 55% of advisors who are looking to provide active management and customization to clients.
The firm also projects growth for separately managed accounts given high net worth investors’ growing demand for customization and private market investments. As a result, these trends underscore the need for effective account aggregation and performance reporting.
This enables the alignment of solutions across different areas such as financial planning, investing strategy, banking, estate planning, etc. Equally important, this type of comprehensive reporting and consolidation eases the transition to having higher allocations to alternative investments.
Finsum: Cerulli conducted a survey of advisors and high-net-worth clients. The findings highlight the importance of providing access to private markets and personalized services.
Herbers & Co. conducted a survey of investors with more than $250,000 in assets and advisors to identify whether advisors’ offerings are effectively meeting clients’ needs. Among the findings, the biggest takeaway is that there is some misalignment between advisors and clients in certain areas.
One change from the survey, compared to previous years, is that 90% of clients said effective tax planning is their highest priority. Previously, clients cited retirement, investment management, and cash flow as top concerns. Currently, only 73% of wealth management firms offer tax planning services. For advisors, it’s an opportunity to offer more comprehensive planning solutions that encompass cash flow, education, estate planning, investments, retirement planning, and tax management.
Many wealth management firms self-identify as offering comprehensive planning, yet only 31% actually do so. This means planning for a client’s specific needs, such as business planning for business owners.
The survey also revealed that a portion of clients are interested in alternative investments, including cryptocurrencies. The challenge for advisors is that most firms currently don’t offer advice in these areas. However, they are likely to get questions from clients, especially with the introduction of crypto ETFs backed by asset managers like Blackrock and Fidelity. Advisors should proactively prepare for these conversations.
Finsum: A survey of clients and wealth management firms found that there are some areas in which advisors can do a better job of understanding and meeting client needs.