Wealth Management
(Washington)
Whether or not you are a supporter of Elizabeth Warren and her aggressive tax plans, one has to worry about the recent arithmetic that is coming out of her campaign. In particular, what is emerging is that many wealthy Americans would have tax rates over 100%. In many cases they would be as high as 158%. The reason why is a combination of the tax rates Warren favors, but critically, also her goal to tax unrealized gains. That means taxes would need to be paid in cash on investments that have not realized cash gains.
FINSUM: In our view, this is little more than divisive and punitive, not to mention rife with bad logic that will create unintended consequences. We are not in principle against the idea of some moderate level of redistribution to help strengthen the country and economy, but this is highly unfair.
(New York)
The world’s leader in managing the ultra-wealthy’s money says that the rich are bracing themselves for a big selloff in 2020. The firm’s clients hold near record level of capital in cash—25%—and think the stock market is going to have real trouble next year. The two major concerns occupying the minds of the ultra wealthy are the US-China trade war and the 2020 US presidential election. The bank got quantitative results on the topic from a recent survey, which received 3,400 responses.
FINSUM: Nobody knows how the market will do next year, and it is never hard to find people that are bearish. This looks like the perfect wall of worry for stocks to climb.
(New York)
After rumors circulating for weeks, Ladenburg and Advisor Group have jointly announced that they plan to merge. The new company will operate under the Advisor Group name and have over 11,000 advisors. None of the two companies nine broker-dealer subsidiaries will be merged, and advisors will continue their multi-party custody and clearing set up. The deal valued Ladenburg at $1.3 bn. One senior industry commentator said “It’s a very bold transaction that could create a major new player overnight that can go toe to toe with the other biggest firms in the independent space in terms of scale and resources”.
FINSUM: With margins so low across the IBD industry, scale is the only way to improve profitability. We expect the wave of deals to continue.
More...
(Washington)
Over the last month or so, the biggest risk for advisors in the regulatory space has been the reemergence of the fiduciary rule. The DOL is set to release a new version of the rule as soon as by the end of this year. While this caused anxiety in itself, the most worrying aspect has been that Eugene Scalia, new head of the DOL, appeared likely to have to recuse himself from involvement in the new rule-making process because of his involvement as a private lawyer with the first version of the rule. However, government ethics lawyers have just announced that after consideration of the situation, Scalia will NOT need to recuse himself and can take part in making a new rule.
FINSUM: This is a big win for those who do not want a new DOL rule, or at least not a new one that looks anything like the first version. Consumer advocacy groups are very upset about the decision.
(New York)
Raymond James just reported earnings and alongside its figures, it also released its latest advisor numbers, and they were eye-popping. The firm has grown its advisor head count to over 8,000, up 198 since last September. Raymond James’ recent recruiting success seems to come down to two factors: big recruiting loans, and the fact that with Raymond James, advisors own the client. According to Raymond James CEO Paul Reilly, “I can’t remember seeing so many $5 million to $10 million [advisors] in the pipeline”.
FINSUM: Big recruiting payouts and letting advisors own the client is a pretty compelling (if expensive) way to recruit.
(New York)
Regulation Best Interest could be on the verge of being struck down in court just like the DOL’s Fiduciary Rule. A consortium of state attorney generals and fiduciary advisers has brought a consolidated lawsuit aiming to stop the rule. The case was rapidly dismissed by the Southern District of New York because of a lack of subject matter experience and it will now be heard by the 2nd Circuit Court. The plaintiffs are arguing that in its current form the rule does not meet the clear demands laid out in the Dodd-Frank Act.
FINSUM: The smart money is on the SEC prevailing, but we expect this will just be an opening salvo in a long legal battle over the rule.