Some major industry lawyers think the DOL is poised to issue the newest fiduciary rule in short order. Bradford P. Campbell, partner at Faegre Drinker Biddle & Reath says that the new rule will be coming this Spring. The new rule is a long-time coming if you consider that they began working on it when Biden took office well over a year ago. According to Campbell, that makes sense, "That's because the issues are hard. To their credit, they're spending a lot of time meeting with people and discussing the issues. I think DOL is just taking time to do the rule as best they can". According to Fred Reish, another partner at the firm, "I've heard from people that they're actually working very hard on it right now ... So it's not like it's been set aside on the top of a desk until somebody gets confirmed".

FINSUM: This would be a big move by the DOL and is likely to catch advisors unaware as with all the volatility this year, this has not been high on the overall wealth management radar.

Wealth technology is rapidly changing, and the landscape could be very different in the next 30 years. Princeton Economist Burton Malkiel said that a combination of the ‘democratization of investing’ and technology is pushing down fees and cutting costs. Overall he sees wealthfronts and betterments taking center stage, which include products like direct indexing. These practices not only help with tax management and rebalancing but they have lower costs than traditional active management. This sort of investment strategy will only grow as wealth management and financial management converge and FinTech companies change the way industry stalwarts operate.

FINSUM: Direct/custom indexing is one of the most interesting products because of the cheaper hybrid setup that really integrates technology to make management easier. 

Europe has been the dominant authority in shaping ESG guidelines around the globe, however, Russia’s invasion of Ukraine is bringing weapons to the forefront of ESG labeling. The bloc is redefining its ESG rules and the no-brainers include rules on gender pay equity, humane supply chains, and banning cigarettes and goods produced from forced labor. While there is hot debate on weapons German defense lobby group BDSV is pushing hard for the case as to why weapons are part of ESG. They are making the case that a strong defense is critical to the governance component of ESG. There is a willingness to hear these arguments by ESG labelers and it is being put under fair consideration.

FINSUM: Euro area defense companies have had a huge boost in the last couple of weeks and securing ESG financing could be pivotal to their future.

Wells Fargo has employed a number of strategies in both advisor recruiting and retention but is still losing teams. Recently Stratos Wealth Holdings added Jason Howerd, Shane Kunz, and Chad Horne who oversaw $1billion at Wells before their move. It was the additional resources and financial software that were key drivers in their decision-making process. LPL’s affiliate Gladstone Wealth Partners also added nearly a half dozen advisors from Wells, with well over $400 million in AUM. Overall Gladstone has seen strong growth already in 2022 adding 20 advisors in the first two months.

FINSUM: It appears technology and tools are a growing part of the decisions advisors are considering when transitioning between financial firms.

Inflation and interest rate risks are two of the most prominent risks in the economy, and they are the reason so many are fleeing traditional fixed income. One place many investors are turning is to annuities, but how does interest rate risk affect annuities? For fixed annuities appreciating rates mean investors can get a better payout with the same premium and generally expand the offerings. For variable annuities, it's trickier as they are more tied to equity markets. If the Fed hikes too aggressively and markets respond adversely this could hurt variable rate products but if the stock market stays steady they won’t be under much pressure. As an income value proposition generally they both perform better than bonds in raising rates because higher yields (inflation and interest rates both moving) suppress bond prices directly.

FINSUM: Annuities have a lot of value in rising rates environments as an income product especially compared to government securities and CDs. 

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Investors, advisors included, seem to be wondering why the stock market has done quite well since Thursday morning when Russia invaded Ukraine. Many expected stocks to tumble—and they initially did—but the opposite has happened, with the S&P 500 up around 5% since the close of business on the 23rd. The reason why has everything to do with the Fed and interest rates. The market now thinks the Fed is in a bind and won’t be able to hike rates as fast as they would have been able to before the conflict. This would mean a slower stop of the easy money surge that has gone on for years. Markets are now only forecasting a 12.5% chance of a 50 bp hike in March.

FINSUM: Stocks have jumped as a simple reaction to the fact that the path of rate hikes looks less steep right now than it did a week ago, which is also why the tech-heavy Nasdaq has jumped the most.

Fidelity has just taken a big step in the direct indexing game. Direct indexing has been very hot across the asset management space over the last 12-18 months and has mostly been marketed so far as a high-minimum service for advisors to customize portfolios to client desires. Now, with a product called FidFolios, Fidelity is poised to launch a service to let mom and pop investors customize their portfolios with a minimum of just $5,000.

FINSUM: This was bound to happen. Most advisors may see this as a threat to their value proposition, but we more see it as a validation of the utility of direct indexing for clients. Advisors should take this as a sign of confidence that they should offer direct indexing to clients!

Financial firms have tried desperately to increase recruiting efforts in the last year or two. While companies like Wells Fargo concentrated on incentive-based tools around retention and recruiting Ameriprise Financial has taken a technology approach. In partnership with Seismic, they have ramped up the suite of technological offerings in order to track, grow, and run their business. The biggest tools offered are LiveDocs, LiveSend, and Interactive Content which all augment their services in order to allow them to compete with larger companies They see their automation efforts as a superior offering to purely financial incentives and it resulted in over 2% growth in the last year.

Finsum: A new approach to advisor recruiting by Ameriprise could definitely give their advisors an edge over competitors and lead to more long-term growth in recruits.

Fixed-income investors are in the doldrums when it comes to today’s ultra low yield environment. Guaranteed income from CDs is just not high enough, and while bonds may be secure their value is at a valley. Laddering annuities is maybe the best strategy, but the questions are under duration. In a flat yield curve going for a short duration makes sense, and as the yield curve steepens moving to long-term contracts is more attractive. In today’s interest rate market, the goldilocks spot is around 5-years, it is a much higher return than shorter-term annuities and longer-term contracts tie your money up without much more of a return boost. The best part is you can integrate this annuity laddering strategy into IRAs and take advantage of all the tax solutions they bring to the table.

Finsum: It's critical to ladder the right duration depending on the current rate environment and given how much interest rate risk there is today it's more important than ever to be precise.