Displaying items by tag: clients

In an article for InvestmentNews, Mark Schoeff Jr. covers the latest developments in the SEC and FINRA’s implementation of Regulation Best Interest (Reg BI). Reg BI was passed in 2019 and implemented in 2020. It requires brokers to only recommend products to customers that are in their best interests, while also informing clients of any potential conflicts of interest and financial benefits to them. 

There were some questions about how Reg BI would fit in along with ‘fiduciary duty’ which is another standard that brokers must abide by. Based on recent SEC comments, it seems as if the Reg BI and fiduciary duty are working in tandem to ensure that brokers are placing their clients’ interests above their own. They also stress that although both may be triggered at different times, they are having a similar impact in terms of promoting better behavior from brokers.

In recent months, enforcement of Reg BI and the fiduciary standard have increased. In part, it’s due to greater clarity around the topic and a change in SEC leadership to Chair Gary Gensler and control of the body by Democrats. Until Gensler’s tenure, Republicans see Reg BI as the primary tool for oversight, while Democrats traditionally favor the fiduciary standard.

Finsum: One area of confusion has been the implementation of Reg BI which overlaps with the fiduciary standard for broker-dealers. Recently, the SEC has been saying that both are effective tools that are resulting in better behavior for brokers.

Financial advisors looking to build an online presence must have a content strategy that is effective in terms of converting visitors into leads and then into prospects. However, these efforts have to be efficient in terms of impact given the time and energy involved.

In terms of efficiency, the best content strategy for advisors is to create evergreen content. In addition to being effective, evergreen content also has a high return of investment, because it can be reused in the future rather than most other types of content which can be only used once. In contrast, most online content has a short shelf life.

A big challenge for advisors creating online content is that it takes time, patience, and repeated postings to see any results. Ideally, this content is informative, educational, and entertaining while transmitting your authentic personality. 

Some effective strategies for evergreen content are to create posts around topics like savings, planning, and investing that are educational in nature and consistent with your brand and messaging. Another option is to create evergreen content around market events that can be posted on FOMC decisions, elections, or during big swings in the market when people are naturally more interested in financial discussions. 

Finsum: Creating effective online content can be time-consuming and challenging for advisors. However, one strategy is to create evergreen content around topics that can be regularly reused.

In a piece for Vettafi’s ETFTrends, James Comtois covers how direct indexing can improve portfolios through increased diversification while also leading to savings on capital gains taxes. The strategy achieves both objectives by helping portfolios from becoming overly concentrated.

Typically, no stock should account for more than 10% of a portfolio due to the risk of a significant decline in price or a bankruptcy filing. Portfolios can become overly concentrated due to a client receiving stock options, early investments in a company, or large holdings of vested stock. 

For clients in these unique situations, the traditional investing strategy would not suffice. Instead, they need a unique solution. Simply selling these positions is not prudent as it could lead to a massive tax bill. 

A better option is direct indexing which lets clients own the actual index holdings in their portfolio. Then, the portfolio can be adjusted to reduce overconcentration. Further, tax losses can be harvested on a regular basis during periods of market volatility. Subsequently, holdings of the overconcentrated position can be sold with the capital gains offset by these harvested losses. 

Finsum: A unique problem for some investors is becoming overconcentrated in one position. Direct indexing offers a solution as it can help reduce the tax bill of selling these positions and lead to more diversification.

In an article for ThinkAdvisor, John Manganaro shares some concerning research that shows most advisors are not preparing for succession planning and that it poses a significant threat to the industry. It’s also commonly cited as a risk by the leaders of various advisories as there are forecasts of a massive wave of retirements by advisors over the next decade.

Many are incorrectly assuming that they will be able to gracefully exit the business and hand over their clients to the next generation. Yet, this is easier said than done since it assumes that the incoming advisor will have the talent and ability to serve clients and help them reach their financial goals. 

There are additional challenges such as many clients may not be comfortable with younger or newer advisors and elect to go elsewhere. Often, relationships between the retiring advisor and the newer one can fray over questions about leadership, compensation, and the financial structure of the new arrangement. 

It’s ironic because advisors intuitively believe in long-term planning to help their clients reach their goals. Yet, many are not doing the same for their practices.

Finsum: Financial advisors need to embrace long-term planning to ensure a successful exit with the same diligence that they help their clients build a plan to reach their financial goals.

Following a couple of quiet months in terms of financial advisor recruiting, there’s been another surge in activity in terms of M&A for RIAs as covered by Ali Hibbs for WealthManagement. It’s not a coincidence that this renewal in appetites is happening along with a resurgence in ‘animal spirits’ due to strong stock market gains and constructive developments on the economic and inflation front.

Commensurately, Cetera Holdings which is the parent company of Cetera Financial Group, acquired The Retirement Planning Group (TRPG). TRPG is a firm with 14 advisors and 40 employees with headquarters in Kansas City and offices in St. Louis and Denver. It marks the first pure RIA acquisition by Cetera, but it wasn’t exactly surprising given the recent arrival of former Fidelity senior executive Mike Durbin as CEO. As of the end of Q1, Cetera had $330 billion in assets under administration and $116 billion in assets under management. 

According to Durbin, the deal is accretive for Cetera and ‘represents our commitment to constantly identify and deliver multiple options that give advisors a depth of choice and flexibility to affiliate their business with Cetera.’ Earlier this year, Cetera made minority investments in Prosperity Advisors and NetVEST Financial. It also acquired the retail wealth business of Securian Financial Group. 

Finsum: M&A activity is picking up once again in the RIA space after a couple of months of less activity. The most high-profile is Cetera’s acquisition of The Retirement Planning Group.