Displaying items by tag: regulations

According to a Cogent Syndicated report from Escalent, advisors are not optimistic about the future of ESG investing partly due to growing political tension. Last year, 58% of advisors used ESG investments, down 10 percentage points from 2020, according to the Livonia, Michigan-based firms survey of over 500 financial advisors in September. In addition, only 15% of advisors who used ESG agree with its importance, while the majority of advisors don’t think ESG investing is a significant factor in attracting new clients. As part of the report, Linda York, a senior vice president in the financial services research division of Escalent, stated, “In the past six months, the topic of ESG investing has become even more divisive as political tensions rise. With firms suffering public backlash from using what many call ‘woke’ investment strategies, many advisors are waiting for clarity from regulators before using ESG investments. Increased supervision from federal or state legislature with added qualifications and reporting can only help in terms of ESG becoming more popular among advisors and investors alike.” In examining the reasons for the growing tension, Escalent said that advisors were concerned by the inconsistent definitions and perceived negative public sentiment of ESG.

Finsum:Based on the results of a recent report from Escalent, advisors are not optimistic about the future of ESG due to inconsistent definitions and perceived negative public sentiment.

FINRA recently announced that it has fined and censured a New York firm for violations of some of the basic written and supervisory requirements of Regulation Best Interest. The violations date back to June 2020 when the advice standards went into effect. The regulatory body charged the Long Island Financial Group, a five-person broker-dealer based in Roslyn, N.Y., with failure to supervise and “to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance” with the regulation that requires advisors to put customers’ best interests ahead of their own financial gain. The firm settled the charges for a $35,000 fine, without admitting or denying guilt. The broker-dealer also received a public censure and is required to certify that it has remedied the compliance failures within 90 days. According to FINRA, Long Island Financial Group also “failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with Reg BI.” In addition, the firm also failed to deliver to its clients Form CRS, the customer relationship summary that broker-dealer clients and prospects are supposed to receive, explaining the firm’s service offerings, products, fees, and conflicts of interest.

Finsum:A small NY firm was fined and censured by FINRA for failure to supervise, maintain, and enforce policies and procedures reasonably designed to achieve compliance with Reg BI.

There are numerous ways advisors can generate leads for their business such as word-of-mouth marketing or cold-calling, but social media can provide them with a much larger landscape in which to work and is less time-consuming. That is according to Rebecca Lake who recommended five ways for advisors to drive business through social media in an article on SmartAsset. In terms of which social media platform to use, that depends on your target client demographics. For instance, if your target client is younger, your best bet is on Instagram, TikTok, or Twitter. But if your target client is older, then you might get better results on Facebook or YouTube. Lake’s first tip is to be authentic as it’s essential to build trust with prospective clients. For instance, you could share a little about yourself on social media. Her next tip is to be consistent, as it’s also important in building trust. Posting quality content on a regular schedule is ideal. Lake’s third tip is to provide value. The content has to provide value for the people who see it. Plus, valuable content gets shared, which can help you attract even more business. The next tip is to engage with the people viewing your content. This could include replying to comments or even asking your followers to participate in a survey. The fifth and final tip is to be compliant with federal regulations and your firm’s regulations.

Finsum:Rebecca Lake, a contributor for SmartAsset, provided five tips for advisors to drive business through social media, including being authentic, consistent, compliant, providing value, and engaging with followers.

On Tuesday, the Securities and Exchange Commission announced its examination priorities for 2023. The agency said it is going to focus on Regulation Best Interest, ESG, the new marketing rule, and a host of other issues. When it comes to investigating Reg BI violations, the SEC will zero in on advisors’ recommendations on complex investments such as derivatives and leveraged ETFs, and high-cost and illiquid products such as annuities and nontraded REITs. According to the division, SEC examiners analyzing Reg BI will look at investment advice and recommendations, disclosures made to clients, the processes firms have in place for making best-interest recommendations, and the kind of factors that are considered in light of an investor’s profile, including their goals and account characteristics. The report stated, “Examinations may also focus on recommendations or advice to certain types of investors, such as senior investors and those saving for retirement, and specific account recommendations, such as retirement account rollovers and 529 plans.” The division will also be focusing on the SEC’s new marketing rule, which reached its compliance date last November after taking effect in May 2021. Examiners will be looking at whether advisors have adopted written rules and procedures that “are reasonably designed” to prevent rule violations. Several experts also believe that SEC examiners will expect firms to apply Reg BI standards to ESG recommendations.

Finsum:The SEC's Examinations Division released its annual Exam Priorities this week, detailing its areas of focus for 2023, which includes Reg BI, ESG, and the new marketing rule.

The SECURE 2.0 Act of 2022, which was passed in December 2022, is retirement reform legislation that aimed to increase retirement access and security for Americans. While the legislation’s focus was on defined contribution plans, it still had an impact on annuities. For instance, Section 201 of the SECURE 2.0 act removes availability barriers to some life annuities in tax-advantaged retirement accounts. Before the bill was passed, required minimum distribution tests limited the availability of some lifetime annuities which had large benefit increases from year to year. The passage of the bill now allows these annuities to increase at a constant percentage, no more than 5% per year. In addition, Section 202 seeks to make Qualified Longevity Annuity Contracts (QLAC) easier to invest in. The section raises the cap to $200,000 on how much money a participant can use from their retirement account to purchase a QLAC. Previously, it used to be either 25% of the account’s value or $125,000, whichever was greater. Plus, Section 204 allows a retiree with a partially annuitized plan to combine the payments from both the annuity and the plan to calculate their required minimum distribution, according to Elizabeth Dold, a tax attorney and executive committee member at the Groom Law Group. Before the bill, the two accounts had to be separated, each with its own RMD calculation, which could result in higher RMD payments than if they were counted together.

Finsum:While the SECURE 2.0 Act focused on DC plans, the legislation made changes to annuities such as removing availability barriers to some life annuities in tax-advantaged retirement accounts and making QLACs easier to invest in.