Displaying items by tag: wealth management

(New York)

LPL, the largest independent broker-dealer out there, is debuting what seems a curious new model to some. It is making some brokers employees of the firm, completely breaking the mold of the entrepreneurial independent broker running his own office. The firm says it is trying to offer as many good options as it can to make recruits happy and excited about joining LPL. Employees will get a lower payout but better overall benefits. LPL may start to offer attractive bonuses to recruit brokers who want to be/stay employees.

FINSUM: This makes perfect sense to us from a recruiting perspective. There are likely plenty of brokers out there who like their job job but want more stability. This seems like a good compromise.

(New York)

Morgan Stanley’s earnings this week were an absolute blow out for the Street. The bank beat all expectations and performed exceptionally well. For us, the earnings really feel like a salute to the whole wealth management industry, as it was Morgan Stanley’s pivot to focus more on that business that has made it the reliable earnings machine that it has become. Revenue from wealth management accounted for around 40% of the whole bank’s revenues, and was up 11% on the year.

FINSUM: Wealth management is a rock solid and capital light business, and MS’ earnings are a testament to that. Gorman’s choice to focus on this segment of their business a few years ago was a very smart one.

(Los Angeles)

Regulators might be about to really shake up the all important annuities market. The National Association of Insurance Commissioners, which is comprised of state level regulators, has just proposed a new suitability standard for annuities transactions. The new rule would require insurance brokers to act in the best interest of clients when recommending products. The specific wording used says that the insurance salesperson must act “without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest” and that they must “without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest”. Speaking about the rule, the NAIC says “It’s in harmony with what the SEC did but goes a little further in providing clarity as to what the conduct standard actually is”.

FINSUM: The annuities market has had some bad behavior so a clean up to give peace of mind to all involved is warranted, but this will likely mean big changes if it comes to pass.

(New York)

JP Morgan finished 2019 on a bang and was a great stock all year. It rose by a market-beating 42% over the course of the year despite worries over the economy and declining interest rates. This has led some to think the bank’s stock is overpriced, but many, like RBC believe it will continue to rise. The bank has what is considered a “fortress” balance sheet and it has done a great job diversifying its revenue streams so that its earnings are smoother. Jamie Dimon has no plans to retire.

FINSUM: Aside from its well balanced revenue streams (47% from consumer and community banking, 31% from its corporate and investment bank), the bank is also making a bigger push into wealth management, which could start helping the stock.

(Washington)

Elizabeth Warren, top Democrat in the running for the presidency, has been looming over the wealth management sector for months. She has staunchly consumer-protectionist leanings, but yesterday she made very apparent how she feels about forthcoming regulation in wealth management. Warren wrote a letter to DOL Chief Scalia warning him about the forthcoming DOL rule. “Given your past statements that the fiduciary rule ‘is a matter that ought to be addressed by the SEC,’ I am concerned that the DOL may simply copy the wholly inadequate standards of conduct framework developed by the [SEC] in its recently-finalized Regulation Best Interest (Reg BI)”, she said, continuing “Americans’ savings should never be willfully compromised by conflicted actors operating under anemic rules — but they are … broker-dealers to give clients advice that is not in their best interest”.

FINSUM: Usually one would argue that politicians don’t know much about the ins and outs of wealth management, but Warren knows much more than usual given her background with the CFP. That makes her a very significant opponent for the industry.