Wealth Management

There is a subtle distinction between fee-based and fee-only advisors. Fee-only advisors exclusively offer financial advice but don’t sell any products with commissions. Fee-based advisors also mainly offer financial advice, but they may also sell other non-investment products with commissions, like insurance. This means that they cannot market themselves as being ‘fee-only’. 

Many advisors are moving to these models due to their simplicity, while there has been an increase in regulations around the fiduciary standard. In fact, the industry as a whole is seeing fewer broker-dealer accounts and growth in investment-advisory accounts. As a result, many products can now be bought in investment-advisory accounts without a commission, such as annuities and alternative investments. 

An important consideration for an advisor going independent is responsibility for compliance. This requires registering with the state regulator or the SEC if there are more than $100 million in assets. It also means responding to regulatory inquiries, developing a compliance program, and having a system to ensure compliance. 

This additional burden highlights the challenge of running an independent shop. Another is that there is less time for clients, especially during the initial stages. Even afterwards, the additional responsibilities will lead to less time and energy for client service, prospecting, marketing, etc. By choosing a fee-only or fee-based model, advisors can have less of a regulatory burden.

Finsum: Many advisors are moving towards a fee-only or fee-based model. The biggest reason is that it simplifies and reduces the compliance demands for advisors.


In Q1, inflows into active fixed income ETFs exceeded inflows into passive ETFs at $90 billion vs. $69 billion. This is a remarkable change from last year, when active fixed income ETFs had net inflows of $19 billion vs. $279 billion for passive bond ETFs.  

Two major factors behind this development are an increase in uncertainty about the economy and monetary policy and yields above 5% for some of the most popular offerings. According to Ryan Murphy, the head of fixed income business development at Capital Group, this is the beginning of “a longer multi-quarter and potentially multi-year trend out of cash. Investors are getting the best compensation on fixed income in 20 years.” 

Flows could accelerate into bond funds as there is $6 trillion in money market funds once the Fed actually starts cutting rates. Yet, the current ‘wait and see’ period is challenging for fixed-income investors, but it’s an opportune moment for active strategies given opportunities to find distortions in prices and credit quality. Stephen Bartolini, portfolio manager at T. Rowe, notes, “The ability to not just blindly buy the index but be smarter and choose around security selection is critical at the moment.” 

Finsum: Active fixed income inflows were greater than inflows into passive fixed income ETFs. It’s a result of attractive yields and heightened uncertainty about the economy and monetary policy.    

One of the most important decisions that retirees will make is their Social Security claiming date. It’s only made once, and it will have long-term repercussions. Therefore, it’s crucial to make the best decision. 

There are single-premium, non-variable fixed or indexed annuities that are designed to offer retirees income at one level during the first benefit period and then at a different level during the second benefit period. 

This can help retirees push back their claiming date so that they can receive a higher level of benefits. The initially higher level of income can last up to 8 years. The median premium is $100,000, with an average of $155,000. 

These offerings have been popular with middle-income clients and even some wealthier clients, especially among workers in government jobs who can retire at earlier ages. Additionally, these products are also amenable to investors with less tolerance for risk who value steady income over asset appreciation. One obstacle to greater adoption of these types of annuities is that it’s challenging for advisors and agents to explain the benefits of pushing back the Social Security claiming date. 

Finsum: Annuities can help retirees by pushing back their Social Security claiming date. One annuity product is increasingly popular as it comes with a higher level of income in the upfront years to help bridge the gap.

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