(Washington)

This whole year it is has been assumed—almost as an unquestioned default—that taxes would rise under the Biden administration. For example, munis have surged in value on this expectation. However, that assumption seems to have gotten well ahead of itself as new developments suggest tax changes may be a way off yet. The big change is that the infrastructure package is coming up for a vote—potentially this week—and the deal which has materialized between the parties has no tax rises whatsoever in it. That means Biden’s plan to hitch tax rises to increased infrastructure expenditure have fallen through, at least for the time being.

FINSUM: So if this plan gets approved without any tax changes—which looks quite likely—it seems clear that clients will escape 2021 without any major changes to federal taxes (including long-term capital gains taxes). Therefore, any planning should take account of the fact that 2021 may be much more advantageous than 2022.

(New York)

If you listen to the industry chatter, it appears Gary Gensler, Biden’s head of the SEC, may be poised to define “best interest” as part of the SEC’s Regulation Best Interest. If advisors recall, when the BI rule was first proposed the main criticism was that they did not define the term “best interest”. Many thought this would allow loopholes, while the SEC said it would make enforcement stronger because by defining a term, it actually creates ways around it. According to Blaine Aikin, from Broadridge, “I think there’s an appetite for the Biden administration … We’ve had certain calls from many different audiences: ‘Wouldn’t it have been better if the SEC had actually defined best interest?”. Aikin added that he believes there is “huge collaboration” going on between the SEC and DOL on the topic of Reg BI and Fiduciary Rule synergy.

FINSUM: The big question here is whether a definition of the term will somehow change enforcement in some way. It seems a toss-up as to whether the definition creates loopholes or weakens them, but for the average advisor enforcement makes all the difference.

(New York)

When Schwab announced its acquisition of TD Ameritrade in November 2019, there was a big and sustained surge of consternation among RIAs. TDA had long been known as specializing in RIAs, especially on the smaller end of the spectrum. Schwab had exactly the opposite reputation. That has left a general void for the smaller advisor looking to go independent for the first time. However, Goldman is apparently ramping up its new custody unit and clearing platform for RIAs. The move is still in its early stages, but the firm is hiring several executives to lead the charge and seems to be aiming to compete with Schwab, Fidelity, BNY Mellon etc.

FINSUM: Advisors may recall that Goldman acquired United Capital in 2019. United was an RIA consolidator, so this seems like a natural step for the bank. In our view, it would be great for the industry to have more competition on the custodial front.