As our readers will know, we have been covering some of the best funds we met at February’s Inside ETFs conference. Today we want to profile a great service we found that we think would be useful to our readers. The service is a new ETF screener and research tool called ETF Action. The service was built by an experienced team from a major distributor and their experience shows in the design of the system. We were offered a free trial for their screener and found the user interface and functionality of the system very appealing. It was not only fast, but it was also useful to compare different funds side by side and search for new ones. For instance, we compared various dividends funds to help choose the best for our purposes, and the platform offered easy-to-access and multifaceted information for doing so. We preferred the system to the numerous other ETF screeners we have used. The company is building out the tool as a paid service and they have promotional pricing for advisors.
FINSUM: We really liked ETF Action and were impressed with the functionality. The management team clearly knows what they are doing and have in-depth industry experience, which is invaluable when it comes to thoughtfully building the system.
If there was ever a stat that really represented the big changes underway in the wealth management industry, it is this one: a new survey shows that broker-dealers are earning more revenue from fees than they are commissions. That is a major shift for the group, who until recently existed mostly as commission engines. The stat also reflects the growing trend towards dually-registered B-D/RIAs, allowing advisors to perform both functions.
FINSUM: The regulatory trend and customer trend is moving towards fee-based payment. This stat reflects just how pervasive the model is becoming.
One of the most contested parts of the 2010 Dodd-Frank legislation was the legal mandate the act gave to regulators to create pay caps for Wall Street. The industry has fought tooth and nail to block their imposition, successfully curbing any changes for nine years. The last major push to cap pay was in 2016, but nothing has happened since then. Now a consortium of regulators, including the Fed, FDIC, and the Office of the Comptroller of the Currency and Federal Reserve are coming together to create new rules. The most likely target are high ranking executives, but talks in the past have extended to rank and file employees.
FINSUM: Caps for top executives will be anathema to some, but restrictions for regular employees are a whole other issue that will cause a major uproar.
Fund fees are a hot area, and not just in terms of them falling in absolute terms. While everyone is aware of Fidelity’s new zero fee index funds and the price war going on in top line fees, there are also new and interesting fund structures emerging. One kind of new fee model is called a fulcrum structure, where fees are low (ETF-like) unless the funds outperforms its benchmark, in which case the provider gets a performance fee. This kind of structure is more popular with mutual funds and can offer the best of both worlds—low fees for ordinary performance, or outperformance that comes with active management.
FINSUM: We think these kinds of funds offer a better alignment of interest while offering multi-sided benefits. However, the risk is that managers are incentivized to take excess risk in an effort to boost performance over the fulcrum threshold.
A fool-hardy travesty is the word that came to mind when we read the headline that Bank of America was dropping Merrill Lynch branding. Our worst fears were allayed when we saw the move was only for the investment banking brand, not wealth management. Yet the change stills begs big questions and seems like a poor idea for B of A. Bank of America had little in the way of a strong investment banking brand before it bought Merrill Lynch, so the change is an interesting (read “odd”) one. It also makes one wonder if the Thundering Herd is safe from its own B of A rebrand in the near future.
FINSUM: We have to believe B of A will be smart enough not to drop the Merrill Lynch name from the wealth management business, but even the current move is an exceptionally poor idea. Members of our team worked in investment banking at “Bank of America Merrill Lynch” and can say from experience that the first part of that name didn’t carry much weight. To be honest, Bank of America would have done better to drop its own name!
It seems like wealthy people everywhere are talking about picking up and moving to Florida to get away from the lack of SALT deductions in so many states. However, UBS financial advisors say it isn’t as easy as it is made to sound. Firstly, there are significant residency rules—it is not as if you can just buy a place in Florida and make it your tax home without really leaving your high tax state. And secondly, even for those who do actually want to move, the issue is that the wealthy suburban home market is very soft at the moment, and these residents are having a hard time selling their primary home, which means they are stuck.
FINSUM: Moving is not nearly as simple as the idea of “retiring in Florida” sounds. We do think this will cause a migration, but it will not be a flood.