Wealth Management

(New York)

One of the biggest changes in the advisor-oriented ETF market in recent years has been the sharp rise in broker-owned ETFs, such as those from Schwab and Fidelity. Both have jumped to be major players in the ETF market thanks to their ability to sell these funds on their own platforms. One of the important things advisors need to understand is that a lot of new funds are seeded by the provider itself. Some ETFs have hundreds of millions put into them by their sponsors, which means they are not as liquid, or in-demand as they appear. Hartford and John Hancock are examples of this approach.


FINSUM: Brokers deposit huge sums in new ETFs to make them look established and in-demand. The best way to actually double-check that AUM figures are representative of reality is to look at the volume of shares traded, which is much less likely to be misleading and gives a true picture of liquidity.

(New York)

There are many big concerns surrounding the new Reg BI. It is considered an industry-friendly regulation, but questions abound: can we call ourselves advisors, how should we conduct rollover advice etc. The truth is that the pain and anxiety has not even really begun. Being a principals-based rule, Reg BI really won’t be understood until enforcement has begun. Therefore, it is very hard to plan for how to deal with certain questions until one feels how the SEC is behaving in practice.


FINSUM: There is a lot of uncertainty regarding this rule. In some ways, it could turn out to be very light touch, or it could be very onerous. It all depends on how it is enforced.

(New York)

Fixed index annuities had a really rough time in the year or so leading up to the debut of the first Fiduciary Rule. The DOL’s changes all but made the product extinct. However, since the rule was struck down, fixed index annuities have made a resurgence, posting their biggest ever quarter for sales with $20 bn in Q2 this year. The good news for brokers is that changes in the government’s regulatory approach means that fixed index annuities will now be treated like an equity product, which means they will be under the SEC’s purview. Additionally, a new kind of FIA has been developed—fee-based—which means brokers and advisors have a choice between a fee-based product or a commission-based one.


FINSUM: The big question for FIAs is how to do a best interest comparison between the fee-based and commission-based versions, as the cost changes depending on time and other factors.

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