According to a recent study by Lincoln Financial Group, market volatility is pushing Americans to refine their financial goals this year. The study revealed that 88% of Americans said they see room to improve their overall financial wellness, while 71% are likely to set financial goals in 2023. The respondents said that inflation and market volatility has made preparedness a top financial priority. For instance, 56% said protection from risk is most important to them, 39% said their greatest money goal is protecting their family, and 26% said guarding their income was a top priority. While data is showing that inflation is beginning to slow, there are still real concerns over whether the U.S. economy could enter a recession this year. This has investors nervous. David Berkowitz, Lincoln Financial Network president, said the following in a statement, "Our research reinforced the importance of financial solutions that can help consumers navigate through market cycles and protect their loved ones. People are not only concerned about having enough to pay their bills, but also saving for retirement and preparing for the unexpected.” For example, 40% of respondents said that financial protection meant being able to comfortably pay for basic living.

Finsum:A recent study by Lincoln Financial revealed that market volatility and inflation are pushing a majority of investors to set financial goals this year to navigate the market uncertainty.

While investors remain spooked by market volatility, Goldman Sachs believes direct indexing may benefit from the volatility. In its recent Market Know-How report, the firm wrote, “Direct indexing involves purchasing the underlying shares of an index, rather than owning an index fund. This investment strategy prioritizes tax-loss harvesting, which builds tax savings through capital losses while attempting to keep tracking error tight to the benchmark. Tax-loss harvesting works not only in down years but also in up years, historically, as individual constituents can still see intra-year declines.” The firm also listed the benefits of direct indexing beyond the tax-alpha achieved from harvesting losses. For instance, the firm lists benefits such as the ability to liquidate concentrated stock positions, reduce active risk in portfolios, and help offset significant taxable events such as the sale of a business or real estate. These can all be achieved through building a “war chest of capital losses.” In addition, Goldman also wrote that “owning individual securities instead of an index fund allows investors to achieve these potential benefits while expressing preferences, such as sector tilts.”

Finsum:In a recent report, Goldman Sachs stated that direct indexing may benefit from market volatility since the strategy prioritizes tax-loss harvesting, and historically, tax-loss harvesting works in both up and down markets.

If advisors are looking to build out their practice, they should look no further than Millennials and Generation Z. That is according to Fidelity, which believes younger investors represent substantial, long-term wealth potential. According to a recent report from Fidelity Institutional, population and wealth are significantly shifting to the younger generations, who now collectively represent 47% of the U.S. population. These findings came from the Fidelity Investments 2022 Investor Insights Study, which included 2,490 investors who were 21 and older and had household investable assets of $50,000 or more. Fidelity also offered recommendations on how to approach younger investors. For instance, advisors should create an ideal profile of the young clients they would like to work with. They should also engage with the children of their current clients as a way to retain assets when wealth is transferred. Financial advisors can differentiate themselves by becoming a coach and elevating the client experience with frequent check-ins and establishing and monitoring financial routines. In terms of gathering clients, Fidelity recommends that advisors refine their social media strategy to capture their attention, while also telling younger prospects what they do for the community and the causes that they care about.

Finsum:According to a recent study by Fidelity, advisors should consider reaching out to Millennials and Generation Z as they offer substantial long-term wealth potential.

JPMorgan Asset Management recently announced that it plans to convert four of its mutual funds into ETFs, pending fund board approval. This includes three municipal mutual funds. The firm plans to switch all share classes of the Limited Duration Bond, High Yield Municipal, Sustainable Municipal Income, and Equity Focus fund. If approved at a meeting scheduled for February, the funds will be converted to actively managed transparent ETFs in July. The JPMorgan Limited Duration Bond fund invests mainly in mortgage-backed or mortgage-related securities that it believes will perform well over market cycles. The JPMorgan High Yield Municipal fund is designed to deliver a high level of current income exempt from federal income taxes. The JPMorgan Sustainable Municipal Income fund is designed to deliver current income exempt from federal income taxes by investing in municipal bonds with the use of proceeds that provide positive social or environmental benefits. According to the firm's announcement, the new ETFs will mainly have the same investment strategies as the mutual funds. JPMorgan was one of the first companies to convert active mutual funds into ETFs with the Inflation Managed Bond ETF conversion taking place in April.

Finsum:JPMorgan announced that it plans to convert three active municipal bond funds into actively managed transparent ETFs in July.

The SEC brought its first enforcement action this year for alleged violations of Reg BI, which requires that broker-dealers act in the best interest of their clients. The action came almost two years after Reg BI took effect. There are signs that there will be more Reg BI enforcement this year as the agency has issued subpoenas to dozens of broker-dealers. Toby Galloway, chair of the securities litigation and enforcement practice at Winstead PC stated, “They’ve got this rule that hasn’t been enforced a whole lot just yet. But they’re going to use it.” Reg BI isn’t the only enforcement action expected to take place this year. Communication technology and other issues are expected to see new enforcement actions in 2023. For example, several big banks were fined close to $2 billion in September for failing to monitor employees’ communications on messaging apps such as WhatsApp. Bloomberg News reported that the SEC’s probe into communication is expanding to other industry players such as asset managers. In addition, the agency is working to finalize new climate disclosure requirements for companies, while also looking for ways to bring litigation related to ESG issues under existing regulations.

Finsum:The SEC is expected to litigate more violations of Reg BI, communication technology, and ESG-related issues this year.