Wealth Management

(New York)

In what comes as an interesting article, Bloomberg has published a piece arguing that instead of the status quo, asset managers should be paying investors for the chance to manage their money. The idea comes from Mercer, a top asset management consultant, and argues that to overcome the problems plaguing active management, investors should agree to pay out a fixed percentage return to investors over a certain timeframe, with the manager keeping any excess that is produced. “We keep getting told by managers that their value creation process tends to be longer than the typical horizon of an investor … This in turn leads to short-termism. Under the new model their investment time horizon can be aligned to their value creation process”.


FINSUM: This would be a total reconceptualization of the way the industry works. The big question is how the investor would get paid if the manager fails to meet the minimum payout. It sounds like third party insurers would have to take part. This is a very interesting proposition.

(Washington)

We urge our readers in strong terms to not get their hopes too high about the new SEC “fiduciary rule”. Putting that in quotes was at the heart of why the rule looks very likely to suffer setbacks and ultimately fail to become an industry standard. The rule is already facing an onslaught of attacks, both externally and internally by the SEC’s own commissioners. The rule has been lambasted as not being a true fiduciary rule, and the long and arduous rulemaking process, combined with a formal public commentary period, mean the rule seems likely to fail.


FINSUM: We don’t think there is any way this rule will turn into an industry standard looking anything like it currently does. We suspect it is time to go back to the drawing board.

(Washington)

Just when you thought it was all over, it isn’t. The DOL technically only has until Monday to try to appeal its court loss in March, but one of the risk factors cited in the case just came to pass. The AARP, a big proponent of the DOL’s version of the fiduciary rule, has just asked the courts if it can step in as the defendant in the 5th circuit court case the DOL has already lost. It is doing so in an attempt to appeal the verdict and keep the rule alive given the agency’s reticence to ask for an appeal itself. According to the AARP, “AARP is not giving up on our fight to make sure that hard-earned retirement savings have strong protections from conflicts and hidden fees”.


FINSUM: This is one of the eventualities we warned about. We would not be surprised if this attempt was successful and the DOL fiduciary rule saga went on. In reality, the AARP was probably just waiting to see how strong the SEC’s proposals were before launching this effort.

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