The American Council of Life Insurers (ACLI) has put its support behind a lawsuit challenging the Labor Department’s subsequent guidance on the fiduciary rule. The ACLI is the nation’s largest life insurance trade association. The group added an amicus brief to an ongoing lawsuit by the Federation of Americans for Consumer Choices against the DOL. The suit, which was filed in March, claimed that agents “oftentimes make rollover recommendations for purchase of annuities to IRA owners and participants in employer-sponsored 401k and similar benefit plans, for which they receive commissions or other compensation from annuity issuers.” The concern is that these agents will be adversely affected by the DOL’s new interpretation of the Fiduciary Rule that categorizes their status as investment advice fiduciaries under ERISA. ACLI believes that the new interpretation would achieve the same outcome as the 2016 Fiduciary Rule, which was rejected in the Fifth Circuit court. ACLI was one of the lead plaintiffs in that decision.
Finsum:The American Council of Life Insurers has put its support behind an ongoing lawsuit against the DOL and their new interpretation of the Fiduciary Rule.
There is no question ESG strategies have seen their fair share of negative press lately, but a new deterrent for investors may lead to more pressure for some asset managers. According to a paper by André Wattø Sjuve, a scholar from the Norwegian School of Economics, ESG funds that charge higher fees are seeing outflows, while ESG funds that charge lower fees are seeing inflows. The study looked at the capital flow data of over 16,000 mutual funds during a period between August 2018 and September 2021. These findings indicate that investors are just as concerned over high fees with ESG funds as they are with other strategies. This doesn’t bode well for asset managers charging higher fees based on the massive demand for sustainable investing strategies. Sjuve believes a possible explanation for outflows out of expensive funds is that prices of ESG assets have risen substantially over the past few years and investors could be concerned about the prospects of future returns.
Finsum:As theprices of ESG assets skyrocket, investors are leaving higher fee ESG strategies for lower-cost funds.
According to LIMRA’s U.S. Individual Annuity Sales survey, U.S. annuity sales increased 16% to $79.4 billion during the second quarter. The top selling annuities were fixed-rated deferred annuities, which posted their best quarterly sales result ever. Sales came in at $28.7 billion, a jump of 79% from the prior year’s quarter. In fact, all fixed annuities showed positive growth. Fixed-rate deferred annuities are contracts that offer investors a fixed annual percentage yield with tax-deferred growth. They typically offer a higher rate of growth instead of an income stream over a specific period. The massive jump in sales can be attributed to the volatility in the markets this year and rising interest rates. The current average yield on a fixed-rate deferred annuity is around 3% or higher. Sales for traditional variable annuities didn't fare so well, falling 27% year over year to $16.5 billion, the lowest quarterly sales since 1995 due to market volatility. Variable annuities are tied to the market with no downside protection.
Finsum:Driven by market volatility, sales for fixed-rate deferred annuities had their highest quarter ever.
Direct indexing will now become available to teens and young adults after the gig economy platform PettyGigs and financial API Atomic announced a partnership. PettyGigs is a two-sided platform that connects young adults with local businesses and busy professionals. Teens can perform small tasks to earn money in their free time. Atomic provides fintech companies the ability to integrate wealth management and trading into their products. This includes capabilities such as conscious investing, direct indexing, and tax-loss harvesting. Through the new partnership, users of PettyGigs, also known as "Giggers," can allocate their earnings from each Gig into a fully diversified curated portfolio with benefits including direct indexing, tax-loss harvesting, and ESG investing. The portfolio has no account minimums. The partnership will also introduce socially responsible investing to young investors.
Finsum:A recently announced partnership between Atomic and PettyGigs makes direct indexing and ESG investing available to teens and young adults.
According to a survey conducted by Schroder Investment Solutions, more financial advisors are outsourcing investment management to model portfolio services. The survey, which was conducted in May, suggested that the shift towards third-party portfolio management is continuing, with 17% of advisers stating that they have increased their use of outsourced solutions over the past twelve months. The number of advisers that reported outsourcing more than half of their client’s assets had risen from 21% in November to 31% in May. The factors influencing advisor outsourcing include, in order, access to investment expertise and resources, effective volatility management, spending more time with clients, and improved operational effectiveness. For some advisors, investment expertise in sustainable investing has led to outsourcing. Volatility management as a factor reflects an emphasis that advisors have placed on active management during the current market turmoil.
Finsum:Based on the results of a recent survey, more advisors are outsourcing investment management to third-party model portfolio providers due to their investment expertise and volatility management.
Single security ETF launches have been all the rage this summer, but regulators are now sounding the alarm. Broker-dealers that sell single-stock ETFs in Massachusetts are being investigated by regulators according to Massachusetts Secretary of States William F. Galvin. Galvin has directed his Securities Division to investigate Mass-based registered broker-dealers that sell single stock ETFs to retail investors. He believes that the leverage used to magnify gains and losses in single stocks is not suitable for "Main Street" investors. This follows a statement by SEC Commissioner Caroline Crenshaw earlier in the summer in which she stated that the approval of single-stock ETFs posed a “greater risk” for investors than index-based leveraged and inverse ETFs. She also stated it would be difficult for advisors to recommend these products while meeting their Reg BI obligations.
Finsum:Regulators are sounding the alarm on single-stock ETFs, indicating that advisors may be in breach of Reg BI for recommending them.