Wealth Management
Recruiters and broker-dealer executives are gearing up for one final recruiting push this year before FINRA’s annual pause in registration. Brokers who want to change firms must move before December 22nd. That date is when FINRA halts its registration systems to generate year-end renewal statements. New registration requests for license requests and terminations will stop at 11 p.m. ET on the 22nd and then resume again on January 3rd. In anticipation of the pause, many wirehouse firms have already made plans to transfer licenses well ahead of the December 22nd deadline. For instance, Merrill Lynch set December 7th as its cut-off to prevent any foreseen registration issues. In other words, advisors don't want to be in a situation where have notified their old firms that they’re leaving but are unable to transfer accounts to their new firm. Also adding to the pause in recruiting in December is the preference of advisors to wait until the new year to change firms.
Finsum:Advisor recruiting is expected to temporarily cool down in December ahead of FINRA’s pause in registration on December 22nd.
Following Altruist’s recent announcement that is enhancing its Model Marketplace and adding UMA capabilities, the firm has now announced a partnership with ESG firm HIP Investor to provide advisors with access to its Fossil Fuel Free Portfolio models. HIP, which was founded in 2006, manages impact-themed strategies and ESG portfolios for advisors and investors. The addition of the ESG models expands Altruist’s values-based investing offerings. Adam Grealish, Head of Investments at Altruist, stated the following as part of the announcement, " With HIP’s Fossil Fuel Free Portfolios on our platform, advisors can build portfolios for any stage of their ESG journey—from dipping in a toe to full allocations to climate action and impactful investing. Our partnership with HIP Investor represents a cornerstone in our continued expansion into values-aligned and higher-impact investing." The firm is also telling advisors to expect more offerings within its Model Marketplace in the coming months.
Finsum:Altruist continues to expand its Model Marketplace with the addition of Fossil Fuel Free model portfolios managed by HIP Investor.
According to a recent survey released by professional services firm Ernst & Young, institutional investors are showing more confidence in alternative assets. The 2022 EY Global Alternative Fund Survey revealed that approximately 75% of institutional investors felt their alternative asset managers "met or exceeded performance expectations during a challenging and volatile market period, successfully protecting capital in down markets while positioning for long-term income generation." Private equity received the best feedback with 50% of institutional investors citing the outperformance of expectations of this asset class. This was followed by real estate strategies at 45% and real assets/infrastructure at 38%. While the majority of investors expected to keep their alternative asset allocations constant, investors that are expecting to make changes stated that "they will increase their allocations in the next three years." The survey also found that in response to rising demand, alternative fund managers are increasing their product offerings in areas such as illiquid credit, real estate, private equity, venture capital, and opportunistic or special situations.
Finsum:Based on the results of a recent Ernst & Young survey, institutional investors are showing more confidence in alternative strategies such as private equity and real estate.
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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.
If firms haven’t addressed and mitigated any potential conflicts of interest yet, they better start soon. Both FINRA and the SEC have not only brought their first Regulation Best Interest enforcements this year, but both agencies are promising that they will be ramping up enforcement. Robert Cook, President and CEO of FINRA, warned at the recent ALI-CLE Life Insurance Products Conference in Washington, D.C. that “Anything that would be a violation of the old suitability standard is now going to be a violation under the Reg BI standard.” He also warned firms that there are more Reg BI enforcement cases in the pipeline and said FINRA exams will “continue to evolve in terms of expectations and the depth of what we’re looking for.” Reg BI, which requires that registered reps demonstrate they have put customers’ best interests before their own is an upgrade from the old suitability standard, which only required reps to make sure products and services are appropriate for clients. The SEC has also promised more Reg BI enforcements and is bringing similar cases against investment advisor reps under the fiduciary standard. SEC Chairman Gary Gensler recently stated, “The ‘interplay’ between Reg BI and the fiduciary standard is important and that the agency will publish a staff bulletin on the topic.”
Finsum:After bringing their first Regulation Best Interest enforcements this year, both FINRA and the SEC are ramping up Reg BI enforcement.
According to Pensions & Investments' annual survey of index managers, worldwide indexes managed in exchange-traded funds and exchange-traded notes have fared much better than index assets in other wrappers. Worldwide index assets managed in ETFs and ETNs totaled $6.51 trillion as of June 30th, down 4.8% from $6.84 trillion last year. Worldwide index assets overall fell 12.7% to $18.23 trillion. Exchange-traded products continued to see strong inflows despite headwinds such as inflation, rate hikes, and stock and bond losses. In fact, the global ETF industry saw its 40th straight month of net inflows during September and is on pace for annual net inflows that will be second to only last year's record of $1.29 trillion according to research and consultancy firm ETFGI LLP. Emily Foote McKinley, Head of Institutional Specialists for ETFs and Indexed Strategies at Invesco Ltd explained why ETFs continue to see strong inflows this year. She told Pensions & Investments, "I think that we've always seen the biggest pickups in institutional usage of ETFs around and after times of severe market volatility. That's because the ETF wrapper is able to prove itself as a provider of liquidity and access and transparency to underlying markets in times of crisis."
Finsum:ETFs continue to see massive inflows this year despite market volatility due to the wrapper’s ability to provide institutional investors with liquidity and transparency.