(Washington)

As of last Wednesday, Trump-appointed SEC chief Jay Clayton has departed, with an interim head now in place. That means the Trump era is effectively over at the agency. It is now Biden’s turn to take the reins, and according to industry experts, that likely means two big changes. The first is the type of SEC chief he will choose, and the second is the nature of Reg BI. On the chairperson front, it is rumored that Biden with choose Preet Bharara, a former prosecutor, which would be more in line with Obama era chief Mary Jo White. This would be a departure from Clayton, who is also a lawyer, but worked on behalf of corporate clients. Secondly, the nature of Reg BI would likely change in substantial ways. “Best interest” seems very likely to be defined under Biden; and additionally, enforcement efforts will likely be stepped up considerably versus the status quo.

FINSUM: Our instinct is the SEC is going to be a totally different animal under Biden, as a definition of “best interest” and rigorous enforcement efforts would significantly change the general wealth management regulatory environment. Plus, a prosecutor as head of the SEC sort of says everything you need to know what about what the enforcement regime might look like.

(New York)

Munis have long been very popular with HNW clients because of their tax exempt income. However, a new—and slightly confusing—part of the industry is increasingly becoming popular. That new niche is taxable muni bonds. According to Barron’s “Taxable municipal bonds are the fastest-growing sector in U.S. fixed income. This year, issuance has totaled more than $170 billion, double the $85 billion sold in all of 2019. The total market has grown to $700 billion—sizable but still below the $3.7 trillion tax-exempt muni market”. Many think the new vaccines will give a boost to munis, which have suffered under COVID.

FINSUM: If you are interested in this market, check out Invesco’s Taxable Municipal Bond ETF (BAB).

Dear FINSUM readers, we want to gauge your interest in a potential new ETF coming to market in 2021. As many of you will know, thematic tech ETFs have had some of the best returns over the last half decade, and there is a new ETF in the works that appears like it might have found another niche for excellent growth.

The M2M (symbol: MTOM), or machine-to-machine, economy is one where the smart, autonomous, networked and economic independent machines or devices act as the participants, carrying on the necessary activities of production, distribution, and allocation with little to no human intervention. It is often referred to as the fourth stage of the industrial revolution. M2M transforms traditional industries into technology industries. The enabling technologies include five G, cloud computing, artificial intelligence, edge computing, big data, blockchain, quantum computing and, of course, the internet of things.

Please tell us what you think of MTOM in the form of a 30-second survey (2 multiple choice questions).

(Washington)

Sneaking in right after Christmas and just before a change of administration, the SEC has announced an important rule change that affects all advisors. In particular, the SEC has updated a rule that has not been touched in decades and was increasingly out of touch with reality. The change has to do with marketing communications, particularly those through internet channels. According to Barron’s, “The new regulation also allows financial advisors to use testimonials, endorsements, and third-party ratings to woo potential clients, as long as they meet certain conditions”. SEC chief Jay Clayton commented that “The marketing rule reflects important updates to the traditional advertising and solicitation regimes, which have not been amended for decades, despite our evolving financial markets and technology. This comprehensive framework for regulating advisers’ marketing communications recognizes the increasing use of electronic media and mobile communications and will serve to improve the quality of information available to investors”.

FINSUM: Advisors have had to tread very lightly in digital communications/advertising for years because of a high degree of uncertainty about what was permissible. This goes a long way towards making that very clear.

(New York)

The new year brings many opportunities for advisors. One which is not utilized enough is the implementation of goals-based investing. The new year naturally brings a focus on goals, resolutions, and planning, making it the perfect time to get clients to commit to defining their goals and how their portfolios can get them there. Goals-based investing has been known to help get clients to really commit to their investments and stay in the market for the long haul.

FINSUM: This approach can get help clients get more bought into their own planning and strategies and help give meaning to why they are saving/sacrificing/investing. Just make sure the goals they give are genuine, as many clients will not put enough thought into describing these. There are also a number of funds that directly cater to a goals-based approach.