Displaying items by tag: SEC

(Boston)

Advisors will have likely noticed that Massachusetts has just introduced a new fiduciary rule. The rule, announced on Friday, makes Massachusetts the first state to adopt a best interest standard since courts struck down the DOL’s fiduciary rule. The rule is under the usual attacks from industry trade groups, but more surprisingly, it is also being attacked by fiduciary rule advocates. Such advocates had initially praised the rule’s first draft, but now say the state made too many changes before implementation. According to the Consumer Federation of America “What’s left is a modest improvement on Regulation Best Interest but not the kind of tough standard needed to protect investors from conflicted advice.”

FINSUM: The changes to the rule were significant, such as not applying to insurance product sales and not applying to brokers unless “account monitoring” was specifically specified in the customer contract. The rule takes effect March 6th.

(Washington)

The terrible, no-good, hated first version of the DOL Rule could be on its way back. While most advisors are aware that many of the Democratic candidates want to bring back the old version of the rule, one big surprise came out this week—even Mike Bloomberg explicitly says he wants the rule reinstated. That comes as a bit of a shock because he is seen as the most moderate candidate (he was a Republican while mayor of NYC!).

FINSUM: There is a huge amount on the line for the wealth management industry in this upcoming election. Not only will taxes likely change drastically, but the regulatory environment may shift radically.

(Washington)

Industry lawyers are checking every day, but nothing is happening. Everyone keeps looking at the DOL’s information portal to see if the agency has posted a new version of its Fiduciary Rule. Many thought the rule would be published by the end of the year, but so far nothing. The reason this is important is that the agency is running out of time to get the rule finalized and in place before the election. Rules that get approved immediately before elections are much more likely, and easier, for successors to undue. Therefore, if the rule does not get approved soon (which is near impossible because of the long approval process the White House has once the DOL proposes it), the rule is at risk of a victorious presidential candidate undoing it.

FINSUM: It seems likely this rule won’t get done until right before the election. If Bernie, or really any Democrat, wins it will likely be undone and the path will be paved for a much tougher rule.

(Washington)

The SEC’s Reg BI and the DOL’s return of the Fiduciary Rule are set to shake up the industry in several ways (though to a much smaller degree than the 2017 version). However, one of the lesser appreciated areas of disruption created by the rules is in advisor recruiting. Big independent broker-dealers think that the regulatory strain that the rules will put on smaller firms means there will be an exodus of brokers. The logic is that many brokers will feel their small firms do not have the resources, and are therefore not offering the infrastructure to adequately support broker compliance. Accordingly, many big shops like LPL, Ameriprise, and Stifel are planning efforts to seize on this recruiting window.

FINSUM: This makes good sense and it does appear that it will be an ideal time to poach brokers from smaller firms.

(Washington)

More focus has been put on what Elizabeth Warren has said about wealth management, but the reality is that Bernie seems much likelier to win the bid, and his opinions are more poorly understood. With the Iowa caucus starting today, it seems the right time to start thinking about it. Bernie seems likely to take a very hard line on wealth management, likely replacing all the top management of the relevant agencies and taking a new line on Reg BI and the Fiduciary Rule. It is hard to imagine he would be comfortable with existing regulation and given how the Democratic party views the role of agency power, it seems like big changes might be made.

FINSUM: Given Bernie’s views, the changes to the industry might not just be limited to regulations, but also to mergers and acquisitions of wealth managers, and of course, huge tax changes.