(Washington)

While it never really seemed to be in doubt, it is all but certain now that Democrats are going to bring articles of impeachment against President Trump. The party is likely to bring two separate articles against Trump by today, with an additional one possible. One will be focused on abuse of power, and the other one or two on obstructing Congress and obstruction of justice. In response to Republican criticism that the Democrats are rushing the impeachment process, Jerrold Nadler said “I want to be absolutely clear: the integrity of our next election is at stake. Nothing could be more urgent”.

FINSUM: No surprises here, but this will likely all be for nothing because of the Senate.

(Washington)

One of the leading trade bodies of the brokerage industry has just put out an alarming, and frankly logical, warning. SIFMA says that a growing body of regulation is threatening to completely end the brokerage industry as we know it. In particular, SIFMA says the rise of state-based fiduciary rules is likely to lead to the “lowest common denominator” regulatory solution in many states. Instead of trying to navigate a complex network of rules, the solution is simply to say “we do not have brokerage in our state”. Many states may only have advisory accounts, which according to SIFMA will mean "Clients will have one choice they can buy, which in many cases will be buying more services than they wanted and having to pay more than they wanted to”.

FINSUM: So anyone in the industry will realize that trade bodies put out warnings all the time. What makes this different is that it seems highly realistic, which makes it quite troubling. The reality is that for many clients brokerage is the right model, so it needs to be defended.

(Boston)

Earlier this year (before the Schwab deal), TD Ameritrade put out an interesting report about breaking away. The report was centered on advisors’ motivations for breaking away as well as their likelihood of doing so. One of the most interesting findings is that as of July, 46% of advisors who were thinking of breaking away said that they had increased urgency since the start of the year. 44% said they would move within the next year. The main reasons were freedom, compensation, and client service, all of which they felt were better at an independent. Another key finding is that only about 36% of advisors wanted to breakaway on their own; most wanted to merge with another partner or join an established firm.

FINSUM: The breakaway movement is only gaining momentum. Wirehouses are shedding advisors and RIAs and IBDs are picking them up left and right.

(New York)

Here is an eye-opening stat for anyone working in wealth management: 37% of all advisors expect to retire in the next decade. That will put about 39% of all AUM in the industry in motion. The biggest surge in retirement will be on the B-D side of the fence. The major question is who will replace all these advisors? “While some progress is being made, the industry is struggling to recruit and retain advisor talent that is adequately prepared to inherit the businesses … In an effort to overcome this challenge, firms are boosting recruiting efforts to bring new advisors into the industry and revamping training efforts to improve success rates”, says Cerulli Associates.

FINSUM: Succession panning has not been very good in general, so there are big questions about how this will play out. This is either one of the best opportunities in the history of the business, or the whole market might shrink naturally if older advisors retire and Millennials don’t hire new ones.

(New York)

One of the ways that wirehouses have been trying to make their brokers (and their brokers’ clients) more sticky is by pushing loans. Brokers are encouraged to get clients to borrow money. These loans have the effect of binding clients to firms for long periods, and correspondingly, it makes it harder for brokers to breakaway because clients are more likely to stay put. However, some RIAs are combatting the trend by offering to replace client loans during the transition period when brokers are joining their firms. Perhaps even more interestingly, custodians are getting into the game too, with Schwab announcing recently that they would be increasing lending products available to advisors to help them transition clients away from wirehouses. The loans provided often have lower interest rates than what the wires offer, so the success rate in migrating clients has been quite high.

FINSUM: The loan game has been the domain of the wirehouses for years, but with the big custodians getting involved, this is another important structure that will make breaking away easier.