(New York)

Like Morgan Stanley, Merrill Lynch is in the middle of a big bet on its wealth management unit The broker has decided to focus less resources on hiring senior advisors and more on training younger staff. Accordingly, its staff costs have shrunk despite growing its advisor base by 2%. By some accounts the early signs for the experiment are good, but it will take a long time to see how well it plays out.


FINSUM: The whole industry has a bit of an inheritance problem right now, since there are herds of baby boomer advisors who are set to retire in the coming years, and as yet, a dearth of young advisors to take their places.

Published in Wealth Management
Wednesday, 10 January 2018 10:42

What’s Next for ETFs in 2018

(New York)

Despite reaching a much more mature stage of their development, ETFs, overall, are still on a torrid run. But what is next for the all-consuming asset class? Barron’s argues there are a few trends to watch. The first will be an expansion of fixed income ETFs, which have grown considerably, but have much more room to run. Secondly, advisors might have bigger clout in the sector, as RIAs may start converting their own strategies into ETFs. Also, the further hybridizing of passive/active funds may go faster as Vanguard is debuting a new range of very low-cost active ETFs.


FINSUM: Mentally we sort of compare ETFs to the growth of Amazon. The question is where WON’T they head next.

Published in Equities
Wednesday, 10 January 2018 10:39

FINRA Puts Out New Warning to Advisors

(New York)

Advisors keep your eyes open, FINRA has put out a new warning on what not to do. The regulator says that dually-registered advisors need to be very careful when moving client funds from a brokerage to an advisory account. FINRA explains best, saying “Finra will review situations in which registered representatives recommend a switch from a brokerage account where that switch clearly disadvantages the customer … such as where the registered representative recommended that the customer purchase a securities product subject to a front-end sales charge in a brokerage account and then shortly thereafter recommended that account be transferred to a fee-based account”.


FINSUM: This is sort of a suitability/fiduciary rule hybrid type of enforcement. We thought all advisors should be aware that FINRA is on the lookout for this.

Published in Wealth Management
Thursday, 04 January 2018 11:27

Merrill Lynch Bans Bitcoin

(New York)

Merrill Lynch took a big step yesterday. Seemingly espousing the same view as Jamie Dimon, the firm officially blocked clients and all advisors who act on their behalf from trading Bitcoin. The firm does not believe in the asset class’ investment suitability. The ban extends beyond direct purchases of the cryptocurrency and extends to all futures and funds that trade in bitcoin. Advisors reportedly have mixed feelings on the move, with some saying it is a missed opportunity.


FINSUM: In our opinion, Bitcoin is a solid idea and is here to stay, but it just has so much regulatory risk right now that we think only accredited investors should be allowed to have it in their portfolios.

Published in Wealth Management
Tuesday, 02 January 2018 10:20

The Fiduciary Rule is Devouring Assets

(New York)

The fiduciary rule is in an odd sort of limbo. Despite being seemingly dead from a rule-making point-of-view, it is still very much alive as a practical rule that needs to be abided by even if it is not in full force. But is still surprising to learn, especially given all the hype over the rule’s possible dissolution, that 42% of all advisor-held US assets under management are now subject to the fiduciary rule. That figure is up from what would have been 24% in 2005 and 33% in 2010. The growth has come from the large number of firms seeking to grow their fee-based managed account programs.


FINSUM: That is a quite a high proportion of assets. We hope the DOL rule will not be implemented and the SEC will come up with a more effectual version.

Published in Wealth Management
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