Wealth Management
(Washington)
Advisors need to prepare themselves for what could be a harsh reality. While the wealth management business collectively holds a great deal of hope that the SEC will come out with an enlightened rule that makes much more sense than its DOL predecessor, the reality is that the SEC rule is likely to be much more expansive, and potentially much more onerous. The new SEC rule seems poised to cover all types of accounts and all groups—RIAs, B-Ds, and “associated persons”, all under a broad umbrella.
FINSUM: While the industry definitely has a much higher faith in the SEC, there is certainly an element of the “devil you know” going on here. If the rule is much more expansive, it could lead to a higher regulatory burden and yet more disruption to the industry.
(Washington)
Many advisors are hoping the SEC will dive headlong into the fiduciary rule debate and quickly put in place a new fiduciary standard of their own. SEC chairman Jay Clayton has said it is a priority, and hopes got a big boost this week as the SEC is holding a pubic meeting to discuss the specifics of forming a new rule. However, those hoping for a quick resolution will be sorely disappointed, as there are still many steps, and many potential pitfalls, before the rule could become a reality. In particular, the DOL could still challenge its court loss, and many lawsuits could hold up the implementation of any SEC-proposed rule.
FINSUM: When you really take a look at the procedure and the legal risks, the timeline to actually get a new rule in place seems very far away indeed.
(Washington)
Well, after a long wait (but perhaps one shorter than most expected), the SEC is ready to announce its framework for a new fiduciary rule this week. The SEC plans to hold a public meeting to discuss the three components of its new rule: “whether to propose new rules and forms for brokers and RIAs to summarize their relationships with clients; whether to establish a standard of conduct for brokers; and whether to provide an “interpretation” of the fiduciary responsibility of RIAs”. Advocates of the current DOL rule don’t like the approach the SEC is taking because it appears to be disclosure-based, something they think is insufficient to fulfil the need for fiduciary duty.
FINSUM: To be honest we did not think the industry would be able to have this much insight into the new SEC rule this quickly. Stay tuned.
More...
(New York)
Fidelity, one of the largest US wealth managers, is shaking up its fees, and not just in small pockets of the business. The company is moving to a single unified fee schedule that works entirely by how much assets under management a client has with Fidelity. Existing clients will have their fees frozen so as to avoid paying more, but for many, services will cost less than before, while in certain areas they will cost more. Fidelity is also cutting the cost of its robo advisor to 0.35%.
FINSUM: This is happening across the industry, and this sort of move was led by Merrill in 2016. Nonetheless, it is a pretty significant change.
(New York)
Can you remember any technology (maybe since the internet) that has had as much hype as artificial intelligence? Blockchain and Bitcoin come close, but other than that we cannot think of one. That said, advisors may be wondering how it is going to affect them. Well, Barron’s has published a long piece looking at how the technology will impact everything in wealth and asset management. Everything from portfolio optimization, to trade execution, to loss harvesting is being looked at through the lens of AI. Even securities selection itself is having AI applied to it through a number of techniques that all harvest big data on stocks.
FINSUM: AI has a lot of promise, not just hype. And from looking at how it might impact the sector, we don’t think the effects are going to be detrimental to human advisors, at least not in a major way.
(New York)
UBS has just launched its own robo advisor, which means that every wirehouse now has their own robo service. UBS’ new service caters to client with under $250,000 in their portfolio. The robo provides “risk assessment, online enrollment, regular monitoring for rebalancing, tax-loss harvesting functionality, and ongoing professional portfolio management aligned with UBS GWM CIO capital markets assumptions”. UBS joins Merrill Lynch’s robo launch a year ago, as well as Wells Fargo and Morgan Stanley’s platforms.
FINSUM: After all the fear and anxiety, robo advisors seem to have found a comfortable niche alongside human advice.