(New York)

Despite the fact that the fiduciary rule has not yet been implemented and there are numerous efforts underway to repeal it, it is already causing great harm. That is the view of Paul Schott Stevens, head of the Investment Company Institute, a trade group and opponent of the rule. He says that hundreds of thousands of retirement accounts have already been “orphaned” by the forthcoming rule, as it forces advisors to get rid of small clients. Summarizing the situation, he said “Faced with the sizable if uncertain legal and regulatory risks of assuming DOL fiduciary status vis-à-vis these fund shareholders, brokers are simply resigning from small accounts en masse”.


FINSUM: It seems that though the fiduciary rule has not been implemented, the harm it was set to cause is already occurring. We are in no way opposed to fiduciary duty in principle, but we disagree with how the DOL is seeking to implement such changes.

Source: FINSUM

Published in Wealth Management

(New York)

Merrill Lynch has so far been the poster child for fiduciary endorsement. It was the leader in doing away with commissions and restructuring its offerings in a way that complied with the fiduciary rule. However, that stance has been slowly receding and now Merrill has announced new commission-based retirement accounts that will be available next month. Merrill Lynch reportedly got negative feedback on a fee-only model from both clients and advisors, which encouraged them to change their position.


FINSUM: This is good news for clients and brokers. Clients will still have some lower-priced options, something the fiduciary rule seems like it may undermine.

Source: Wall Street Journal

Published in Wealth Management

(New York)

Barron’s has just published the results of a survey which shows that more than 9 out of 10 investors want the fiduciary rule. The study was done by Financial Engines, and was comprised of individual investors. 93% of Americans said they wanted a best interest rule, a big jump from last year’s survey, which saw only 73% wanting a rule. However, more than half of all respondents mistakenly thought such a rule was already in place. Other stats cited in the study show that investors are becoming more attuned to the issue of fiduciary status.


FINSUM: The thing this article does not mention is how many of the respondents realized the new rule being put in place would raise average costs to investors?

Source: Barron’s

Published in Wealth Management

(New York)

The fate of the fiduciary rule is unclear, but some things are not: that big firms are making loads of money on conflict-free advice. For instance, Bank of America Merrill Lynch saw a big jump of $29.2 bn in fee-based client assets in the first quarter. JP Morgan saw $8 bn of inflows, including those with a recurring fee. The piece argues firms had already begun the switch well-before the rule was released, and that the new rule just helped them cement the changes. Fee-based accounts are great for firms as they can get as much as 50% more revenue out of an account than with a commission-based model, says Morningstar. Merrill Lynch is already seeing gains from its fee-based model, with revenue up 3% in the first quarter.


FINSUM: This article highlights the inherent flaw of the fiduciary rule and the measure is not even finalized yet. What good is a conflict-preventing rule if it ends up raising costs for so many retirees?

Source: Wall Street Journal

Published in Wealth Management
Wednesday, 19 April 2017 00:00

Why You Should Buy Charles Schwab

(New York)

Charles Schwab seems to have done everything right. The company is delivering good financial performance with recent first quarter results showing a revenue jump of 18%. Brokerage revenue rose 44%, and interest income was up 30%. The company’s P/E ratio is now under 20x, which is looking more reasonable, says this piece. A Wells Fargo analyst summed Schwab up this way, saying “[R]evenues were stronger than expected, organic growth was very solid (implies investment spend is yielding faster growth) and net interest margin dynamics were favorable”. The results also show that Schwab can deliver despite quickly falling industry fees.


FINSUM: Shares in Charles Schwab fell on this good earnings announcement, which was quite curious. Overall, the firm looks to be in good shape.

Source: Barron’s

Published in Equities
Page 1 of 9

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