Wealth Management

(New York)

Morningstar has become a leader in model coverage. The firm covers several hundred models and gives each multiple ratings. As the model world continues to grow, this is getting more and more useful. Here is our third installment of our coverage of Morningstar’s rankings, with the top 5 covered. The rankings: #5 is American Funds Growth (silver rating); #4 is American Funds Growth & Income (silver); #3 is American Funds Income; #2 is Vanguard Core (gold); and #1 is BlackRock Target Allocation ETF (gold).

FINSUM: There is a pretty low diversity of providers in the top 15, but this speaks to the expertise a handful of firms have developed in this space.


The SEC just put out a shot across the bow of brokerage firms as it regards Reg BI. Firms and industry attorneys have been expecting the SEC to ratchet up enforcement over the coming year as the agency starts to bring Biden’s priorities into reality. However, the SEC made it very clear this week, telling firms that it is not enough to tell reps what Reg BI says, but educate them with examples of how to meet Reg BI’s requirements. Investment News summarized the SEC’s comments this way, saying “Financial firms that are failing to comply with the broker standard of conduct aren’t aligning their internal controls to meet its requirements”. The SEC is now checking to see if firms have set up a robust Reg BI compliance program, and if not, they will be in hot water”. According to Corey Schuster, assistant director of Division of Enforcement’s asset management unit, “firms may want to consider: Have you done a deep dive on conflicts? … Have you examined your disclosures regarding conflicts? And is there a need to mitigate certain conflicts of interest?”.

FINSUM: The SEC is gearing up to drop the hammer on Reg BI enforcement, which has long been expected. However, the reality of heavier enforcement and the specifics of how it is executed are very different than seemingly far-off expectations.

President Joe Biden is expected to nominate Professor Saule Omarova for the office of the Comptroller of the Currency, one of the leadership positions in banking oversight and regulation. Omarova is currently teaching at Cornell University Law School and is a critic of the role fintech is playing in the current financial system, all the way from cryptocurrency to robo-advising. Additionally, she believes regulation should be tightened across the board in banking, calling for a larger role in government supervision. She has also advocated for restructuring the Fed and having them provide consumer bank accounts. This is only the beginning of the journey as both fintech and the banking sector will lobby hard to make sure she doesn’t get confirmed for her position.

FINSUM: This would be a drastic leadership change in regulation compared to the relatively hands-off approach fintech has benefited from so far. The suggested changes to the Fed would pump shockwaves through the financial system.

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