Wealth Management


The wealth management industry was rocked this week by the announcement from the DOL that there would no further fiduciary rule delays and that the rule would be implemented come June 9th. However, despite the start of the rule, it won’t have any bite until January 1st. The reason why is that the DOL has already made clear it will not enforce any part of the rule until at least January 1st, 2018, meaning the rule is in effect in name only, not practice.

FINSUM: This is very important for brokers to remember, and we think it is the crux of the DOL’s strategy to get rid of the rule. By letting the rule going into supposed effect now, the DOL avoids an immediate-term fight and saves it resources towards the economic review that will be needed to truly kill the rule. The goal seems to be to get this review done before January 1st.

Source: FINSUM

(San Francisco)

As Merrill Lynch, Morgan Stanley, and UBS, all abruptly back out of their aggressive broker recruiting strategies, one big player is stepping in to try to steal market share—Wells Fargo. The bank is planning to sweeten its bonus offers for veteran brokers in order to capitalize on their rivals backing out of such recruiting. Wells Fargo has been bleeding advisors since its retail banking scandal, and they think this move may help them grow their headcount. In fact, Wells Fargo comments that such recruiting practices have helped them grow in strategic markets. The bank is currently making offers of up to 3x annual revenue.

FINSUM: This seems like a smart move by Wells Fargo, and having lost 3% if their advisors recently, the opportunity appears to have arrived just when they needed it most.

Source: Wall Street Journal

(New York)

There is a big battle between banks and robo advisors going on in the wealth management market. Big banks think their wealthiest clients won’t leave their services for automated online wealth management. However, Betterment, one of the largest robos, think it can grab market share. “Higher net-worth or more sophisticated investors will, in our view, always demand face-to-face advice”, says Citi. Betterment has recently overhauled its marketing focus with the aim of attracting wealthy individuals, who are reportedly just becoming aware of robo-type wealth management services. Betterment counters by saying it has many customers with over $10m in AUM, and that over 10% of its client base are accredited investors.

FINSUM: This is an important question for every advisor—will clients with several million Dollars or more truly turn their backs on human management? We think Baby Boomers certainly will not, but Gen X and Millennials (the latter especially), gladly would, putting the onus on advisors to stay ahead with specialist services.

Source: Bloomberg

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