Wealth Management
(Washington)
The terrible, no-good, hated first version of the DOL Rule could be on its way back. While most advisors are aware that many of the Democratic candidates want to bring back the old version of the rule, one big surprise came out this week—even Mike Bloomberg explicitly says he wants the rule reinstated. That comes as a bit of a shock because he is seen as the most moderate candidate (he was a Republican while mayor of NYC!).
FINSUM: There is a huge amount on the line for the wealth management industry in this upcoming election. Not only will taxes likely change drastically, but the regulatory environment may shift radically.
(New York)
Fixed index annuities can be an ideal investment if you are looking for a mix of upside gain and downside protection. Many annuities in this category allow a range of choices that mean investors can get much of the upside of an index and still combine it will downside protection. A couple good examples include Lincoln National’s OptiBlend 5 and Delaware Life Insurance Company’s Retirement Stages 7 Fixed Index Annuity. For instance, Lincoln’s offering allows investors to choose exposure to the S&P 500 or the Fidelity AIM Dividend Index and holders can change their allocation each year. Holders can receive a percentage portion of the upside of each index (i.e. up to 35% from the S&P 500 and up to 89% of the AIM Dividend Index).
FINSUM: FIAs can provide a nice mix of benefits and peace of mind, but it is key to remember that the cost of that protection can be quite high.
(San Francisco)
It isn’t just Apple that is at risk from coronavirus. A lot of other tech companies are too, and it makes perfect sense. Apple is far from the only major US tech company that sources many of its parts from China and relies on the country for a significant portion of revenue. The other major companies which are highly exposed are Tesla (20% of its supply and demand comes from China), Dell, HP, and Corning (which looks especially vulnerable).
FINSUM: Corning has a major glass factory in Wuhan itself and relies on China for 25% of its revenue.
More...
(New York)
Ever since the announcement of the Schwab-TDA merger, RIAs have been nervous about their future with the combined custodian. TDA was known for working hard for smaller RIAs, whereas Schwab was not at all. Now, with the combined entity, RIAs are worried about being neglected, or dumped altogether. However, Schwab has just put out a public pledge, saying “When it comes to independent advisors, we’re all in … Today, over half of the firms we serve have under $100 million in AUM. You are the future of this industry”. Schwab also promised no AUM minimums or custody fees, saying they have “no intention to raise them. Because we believe that every firm of every size deserves world-class support”.
FINSUM: This was a more specific pledge, but it will likely do little to calm small RIAs.
(Washington)
Industry lawyers are checking every day, but nothing is happening. Everyone keeps looking at the DOL’s information portal to see if the agency has posted a new version of its Fiduciary Rule. Many thought the rule would be published by the end of the year, but so far nothing. The reason this is important is that the agency is running out of time to get the rule finalized and in place before the election. Rules that get approved immediately before elections are much more likely, and easier, for successors to undue. Therefore, if the rule does not get approved soon (which is near impossible because of the long approval process the White House has once the DOL proposes it), the rule is at risk of a victorious presidential candidate undoing it.
FINSUM: It seems likely this rule won’t get done until right before the election. If Bernie, or really any Democrat, wins it will likely be undone and the path will be paved for a much tougher rule.
(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.