Wealth Management
(New York)
Annuities have had a very strong 18 months or so. Ever since the pandemic began, demand has risen. Additionally, the pending inclusion of annuities in 401(k) plans will be a tailwind. However, a new regulation was just put in place in Connecticut which could spell trouble for the asset class. The state just put annuities under a best interest rule, the 16th state to do so. States have continued to use the National Association for Insurance Commissioners’ model rule as a template for covering annuities under BI legislation.
FINSUM: How far might this go? We think not too much further, if only because many of the states that would want to pass a fiduciary rule for annuities have already done so, which means that even if the DOL drags its feet on its new rule, most of the state-level regulations would have already happened.
(New York)
The annuities market is healthy and doing well. According to Ken Burger, national sales director for annuities at Luma, “When you look at our current market environment of minimal low fixed-income yields, high levels of volatility, and fears of mounting inflation, it’s easy to see the attractiveness of the annuity category”. The issue for advisors though is that annuities have long been a complicated and crowded space that is too complex and time-consuming for advisors. That is where Luma is trying to expand the market, as they have a slick annuities comparison tool that allows advisors to easily compare annuities side-by-side.
FINSUM:Annuities are a great fit for the current market given ultra-low rates and the huge mass of Americans who are retiring. Check out Luma.
(New York)
Advisors, try to breathe just a tiny sigh of relief, your clients just got a victory. It is being reported by prominent political paper The Hill that big Washington lobbyists have already succeeded in greatly watering down Biden’s tax plans, and perhaps eliminating their chances. Evidently lobbyists have done very well at getting middle of the road Democrats to turn against Biden’s tax plans. Biden’s plans include increasing long-term capital gains taxes to regular income tax levels and eliminating the “step-up in basis” at death in inheritance.
FINSUM: This has two clear effects on Biden’s plan. Firstly, because the numbers are so tight, Biden can’t afford to lose anyone from his party in a vote. Secondly, and relatedly, this means the middle of the road Democrats have a lot more power to shape the proposal that makes it to a vote.
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(Washington)
If there were ever a sign of things to come from the SEC, this is it. There has been a lot of speculation about how the SEC will approach enforcement of Reg BI under new chief Gary Gensler. It is widely expected that the new administration will be much tougher than under Trump. But even with that expectation, this week’s move is big. The SEC just hired the every-broker-curses-her-name longtime head of investor protection at the Consumer Federation of America Barbara Roper as a senior adviser. Roper has been by far the biggest critic of Reg BI and was the biggest proponent of the Obama era DOL Rule.
FINSUM: The SEC could not have done a better job of signaling where things are heading. Time to buckle down on your compliance and start setting aside working capital to deal with beefed up protocols and more investigations.
Going independent is one of the biggest decisions an advisor will ever make. Moving from being an employee to running your own business is a huge decision. Even simply changing firms once already independent is a major one. There are a thousand considerations beyond just the obvious—branding, client retention, compensation—and advisors need incredible support when making these decisions and even well past the initial integration with a new firm.
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*As of Aug. 17, 2019. Based on number of broker-dealer clients. Investment News.
(Washington)
Advisors and their clients have spent the whole summer dreading Biden’s tax plans. Two of Biden’s budgetary linchpins for raising taxes on the wealthy are: nearly doubled capital gains taxes and the elimination of the step-up in basis in inheritance. Until now, they had merely been proposals. However, yesterday the House Democrats passed a budgetary resolution to bring a full vote on the topic. It is expected to pass along party lines.
FINSUM: The Democrats have a very narrow path to getting this passed as part of their $3.5 tn spending package. However, if they can get every Democrat in the Senate to sign, it becomes a reality.