(New York)

LPL has been a true leader on the recruiting front in 2020. One should expect no less from the largest independent broker-dealer. As one of their new initiatives, they have just launched a program—called the “independent employee” model—to try to attract new advisors who want some of the benefits of being independent, but also want to be a W-2 employee. Such models have been around for a long time, and are most prevalent at Raymond James and Ameriprise, but LPL thinks there is an opportunity to scale it up. The program is designed to appeal to wirehouse advisors who like being W-2s but want to earn higher payouts. Payouts for the program range from 50-70%.

FINSUM: If an IBD is a halfway house between being a wirehouse advisor and being an independent RIA, then this is a one-quarter-way house. It does seem like this might be a smart move—W-2 benefits with higher payouts.

(Washington)

Advisors are mostly a conservative bunch, so many are incredulous of the current political polls. Others just don’t want to think about a Biden presidency. That said, if oddsmakers are right and the Democrats take over in a January, a strict new fiduciary rule is likely on the way much faster than almost anyone in the industry suspects. The reason why is the method the Democrats are likely to use to make a new rule. While all of us have seen how slow the rulemaking process has been at the DOL and SEC—and have probably thought of that as the status quo—Barbara Roper from the Consumer Federation of America pointed out this week that instead of crafting a new rule, democrats are probably just going to use the existing Reg BI framework and modify it.

FINSUM: Using an existing rule infrastructure and just beefing up parts of it would be a much quicker process than crafting a new rule. We might have a strict fiduciary rule by June 2021. You have been warned.

(New York)

Something very interesting is happening in recruiting. While advisor movement slowed down right at the beginning of the pandemic, it has bounced back strongly in the last couple month. The reason why is that advisors are finding it easier to explore opportunities with new firms while they are working from home. Any advisor recruiter will tell you that calling a wirehouse broker at their branch is an almost impossible task as the office itself works as a gatekeeper. Even if you can get the advisor on the phone, it is taboo for them to speak about moving firms while they are in the office. Thus, the ability to take zoom calls from their comfort of their kitchen has opened the door to more recruiting since advisors are free to explore firms in-depth and with total privacy. Further, the lack of a need for offices has made advisors wonder if they need the infrastructure (and lower payouts) that come with being at a wirehouse.

FINSUM: The landscape for recruiting has changed overnight. No conferences, but no office gatekeepers either! It seems a great time for advisors to consider a move, and firms would be smart to put effort into recruiting right now as this is truly an unprecedented opportunity.

(New York)

Cloud computing is a red hot area of tech. Amazon’s AWS division gets most of the attention, but the whole sector has grown greatly in total revenue over the last couple of years. Heavy growth is forecast to continue through the early 2020s, but there is an x-factor that may give a big boost to cloud stocks which the market is not pricing. That x-factor is the fact that work-from-home is sending the demand for cloud services much higher than baseline forecasts. With distributed workforces, the need for cloud-based computing is higher than if workers were in offices. For example, Audi’s cloud spend grew 12% in just a month between March and April.

FINSUM: So WFH is a great tailwind for cloud computing. The only challenge is that the costs for companies have been soaring so much that they are trying to renegotiate them back down. Overall, seems a big net positive.

(Washington)

Last week Democrats published a wide-ranging agenda for the potential Biden presidency. One section of it—which received much publicity in our niche wealth management world—was about the party’s intent to get rid of the SEC’s new Reg BI. However, another part of that plan was much less covered, but no less important: the party also wants to bring back a true fiduciary rule, potentially very similar to the failed DOL rule 1.0. Interestingly, Barbara Roper, head of investor protection at the Consumer Federation of America, says that the approach the Democrats would likely take is not to create an entirely new rule, but edit and “reign in” conflicts in the existing rule.

FINSUM: So this is quite unsurprising, but very important. What was interesting to us is Roper’s comment about the way Democrats would likely go about this. In our view, modifying an existing rule would be much faster than crafting a new one, which means a new version might come into force a whole lot faster than expected.