(Boston)

Fidelity is making a renewed push into model portfolios. After launching its first model portfolios in 2018, the firm has realized that RIAs and BDs want different types of models. RIAs use models to a great degree, but don’t tend to put a whole lot of assets in them. Fidelity realized it needed to optimize its approach. According to Suzanne Daly, Fidelity’s VP of model portfolio distribution, “RIA growth is really accelerating, and in a different manner [than IBDs] … [They are] looking to blend equity and fixed income models to build a more personalized fully asset allocated unified managed accounts (UMA) model”.

FINSUM: This makes a lot of sense. RIAs used to balk at the 25 bp fee for UMAs (which goes on top of the underlying management fees), but they have recently been coming around.

(Washington)

The Department of Labor made a critical move this week in announcing a regulation that is likely to affect almost all advisors. During the Trump administration the DOL made a rule that made investing client Dollars in ESG funds very complicated from a compliance perspective. It has long been expected that the Biden administration would try to undue that rule and make one of its own. It appears that day is here as the DOL announced a new rule (the wording of which is still unclear) which would clear up the uncertainty and risk advisors have in recommending ESG funds.

FINSUM: This will become more clear in the coming days, but the bottom line is that it appears the Biden administration is trying to take the doubt/uncertainty/risk out of ESG for advisors. And good thing because demand for ESG products has surged this year.

(New York)

Retirement costs are a major pitfall for advisors, if only because clients generally underestimate them! Nowhere is this more true than in regards to healthcare. Since healthcare costs tend to increasing very significantly as one ages, it is difficult for the average person to understand just how costly medical expenses can become when they get older. To make things more complicated, the situation is highly variable for each person. For example, in a married couple, do they enroll in Medicare at the same time or are they of different ages; does one spouse still work full-time and give healthcare access to other? There are also several financial products which can help in supporting these costs, such as HSAs and annuities, both of which can help offset the inevitable costs that arise even when covered by Medicare.

FINSUM: Retirement healthcare costs need to be a critical of advisors because they are generally poorly planned for by clients’ themselves.

(New York)

The bond market has had a good year. For the last several months, yields have been falling and corporate bonds have seen big gains this year thanks to better earnings and ratings upgrades. Munis have been a big success too. But one area has been even hotter: ESG bonds, which have will see over $1 tn of issuance this year. To put that in perspective, it would be more than double what was issued in 2020. JP Morgan explained the big surge in ESG best, with their head of ESG debt capital markets saying “What began with ‘why should I issue?’ is now ‘why aren’t you? … your absence in the market says something now”.

FINSUM: ESG is fully mainstream now and seems to be gathering more and more assets/issuance. What will this do to issuance in clear non-ESG sectors?

(New York)

If advisors ever feel like hold their fates in the palms of their hands, they’d be right. At this very moment, a big change is looming for all brokers. In the near future, industry lawyers are expecting that SEC chief Gary Gensler will announce a definition of “best interest” within Reg BI. Previously, the thinking had been that defining the rule might actually make it easier to get around, but the emerging industry view is that defining it would indeed make the rule look much tougher.

FINSUM: A definition of “best interest” seems like a foregone conclusion to us at this point. The main question is when, and how restrictive is the verbiage.