Displaying items by tag: regulations

Saturday, 21 January 2023 09:18

ESG Themes to Keep an Eye on in 2023

Last year was a notable year for ESG investing. While ESG funds dealt with underperformance, anti-ESG initiatives, and regulation, demand continued to be strong for these funds. This year could be just as eventful for the strategy. First, there were record numbers of shareholder resolutions filed at public companies last year due to the SEC’s friendlier stance on them. That is expected to continue as companies set climate-related targets and shareholders press them on ESG matters. Second, while 57% of institutions expect the energy sector to outperform the market again this year, according to Natixis’ Global Survey of Institutional Investors, 46% said that they are increasing investments in renewables, twice the rate of those increasing investments in fossil fuels. Third, while the SEC has proposed a set of rules designed to help curb greenwashing, firms have a bigger motivator to stop, sweep examinations. According to Michael McGrath, a partner at K&L Gates, “That has had a greater impact on the approaches of firms to their ESG marketing actions thus far than have the new rules. That’s really because firms have an immediate concern that needs to be addressed.” The last theme to watch is anti-ESG initiatives. Asset managers that are focused on sustainable investing will have to accept the fact that they may not be competitive in some markets.


Finsum:2022 was a highly eventful year for ESG investing and this year will be no different due to themes such as shareholder resolutions, increased investments in renewables, SEC sweep examinations, and continued anti-ESG initiatives. 

Published in Wealth Management

According to a recent survey, market volatility is prompting advisors to actively grow their practices through digital marketing strategies. Broadridge Financial Solutions’ fourth-annual financial advisor marketing survey revealed that 63% of advisors are actively looking for new clients, while only 43% are seeing an increase in inbound prospect inquiries. Financial advisors from both Independent Broker-Dealers (IBDs) and Registered Investment Advisors (RIAs) continue to face challenges stemming from competition, increasing compliance, market volatility, and regulatory pressures. This has forced them to come up with new strategies to grow their book. Broadridge has found that one of the better strategies for advisors to increase their pipelines is by implementing digital marketing. Kevin Darlington, general manager, and head of Broadridge Advisor Solutions stated, “…digital media usage is a bright spot and continues to show upward-trending success, as advisors double down on digital strategies and maximize the use of websites, LinkedIn and Facebook to generate leads." The survey also revealed that the success rate of advisors in converting social media leads into clients has been increasing, climbing from 34% in 2019 to 41% in 2022.


Finsum:The current volatility, along with regulatory pressures, and increased compliance has spurred advisors to grow their books through digital marketing.

Published in Wealth Management
Thursday, 08 December 2022 16:15

Reg BI Sweep to Be Completed Early Next Year

Andrew Hartnett, president of the North American Securities Administrators Association, recently said in an interview that a massive, multi-state sweep of broker-dealers will be completed sometime early next year to gauge the effectiveness of their Reg BI implementation. This should give state regulators “what they hope” will be a clear snapshot of whether firms are putting investors' interests first or not. Last November, similar multi-state exams of 443 firms found pervasive retail advice and sales violations. This was in spite of the fact that Regulation Best Interest had already been in place for more than 15 months at that time. The 2021 sweep found a majority of broker-dealers and reps still putting their interests above their retail clients. The sweep also found that 65% of brokerage firms also failed to discuss lower-cost or lower-risk products with their clients, even when they offered such products. Hartnett stated, “Now we’re out there doing exams again to see where the industry is now, what’s changed and how well firms are implementing the requirements to look at reasonably available alternatives.” NASAA is also ramping up its focus on fees on the registered investment advisor side and expects to release that guidance next year.


Finsum:The time for leniency is over for broker-dealers as the NASAA is planning a multi-state sweep to gauge the effectiveness of their Reg BI enforcement.

Published in Wealth Management
Wednesday, 23 November 2022 04:05

ESG Regulation Moving Forward

It appears that the Office of Management and Budget (OMB) has finished its review of a new rule on ESG investing in retirement plans. The regulation was submitted for review on October 6th to the White House’s OMB as “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” in a “final rule stage.” “The rule implements Executive Order 13990 from January 20, 2021, titled Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis, and Executive Order 14030 from May 20, 2021, titled Climate-Related Financial Risks.” The rule was listed on the OMB’s review dashboard as of Friday but was removed over the weekend, suggesting that the review has now been completed. This means the Labor Department can now proceed with issuing the regulation.


Finsum:TheOffice of Management and Budget finished its review of a new rule on ESG investing in retirement plans which means that the Labor Department can now proceed with issuing the regulation. 

Published in Wealth Management

A form reviewer at the Securities and Exchange Commission recently said he wants to make sure life insurers give investors a clear picture of how their registered index-linked annuity (RILA) contracts work. RILAs are annuity contracts that can expose the holder to the risk of investment-related loss of principal, but that tie crediting rates at least partly to the performance of investment indexes, rather than to the performance of funds that resemble mutual funds. At the Life Insurance Products Conference, held recently in Washington, D.C., Michael Kosoff, an attorney on the staff of the SEC’s Division of Investment Management, stated that he wants one strategy to be available throughout the life of the contract. He also wants to require issuers to disclose maximum losses. Essentially, the SEC wants life insurance company clients to say which crediting strategy the clients' guarantee will be available for the life of a RILA contract. A crediting strategy includes a reference to a particular index such as the S&P 500. Kosoff’s concern is that many issuers have a provision stating, “After the first year, we can terminate any and all options currently available. So, in essence, after year one, investors have no idea what they’re getting.”


Finsum:Due toconcerns over changing crediting changes in registered index-linked annuities, an SEC form reviewer stated that he wants one strategy to be available throughout the life of the contract.

Published in Wealth Management
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