Displaying items by tag: fiduciary rule

(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.

(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.

(New York)

The new version of the fiduciary rule which is in the works will have a major effect on many financial advisors, but most think of this from a regulatory and customer interaction perspective. However, the rule will likely have an effect on some products too. One that seems likely to surge is usage are model portfolios. Model portfolios grew in prominence as the Obama era rule ascended. They tend to benefit clients and firms alike since they save time and money for advisors and give a great deal of outsourced investing expertise to clients. Also, because of their fee structure, they tend to create predictable revenue streams without any way to accuse an advisor of preferring specific funds which could be construed as not being in their clients’ best interests.

FINSUM: This makes total sense. Model portfolios were in part driven by the first version of the DOL rule, so a resurgence of the spirit of that rule will likely make firms and advisors push even further into this product.

(Washington)

Advisors better get ready because the Trumpian era of relatively loose SEC enforcement is about to come to an abrupt end. The SEC has just appointed a new enforcement chief and his record says everything about where the Commission is heading. Gurbir Grewal, former State Attorney General for New Jersey has been appointed as the SEC’s top enforcer. Very notably, Grewal proactively proposed a uniform fiduciary standard in his home state of New Jersey, which speaks volumes about his views.

FINSUM: So the bottom line here is that this is the clearest sign yet that the SEC seems likely to rather dramatically scale up its enforcement. Many are now expecting that the SEC will define “best interest” and then employ Grewal as a strongman on enforcement.

(Washington)

In what would come as very welcome news for financial advisors, the newest version of the fiduciary rule may have its implementation delayed. The rule was first thrown out by the fifth circuit court a few years ago, then reproposed and accepted in the early part of Biden’s term. Now it is set to go into effect in December. However, a large contingency of trade groups are putting together a formal request to have the DOL delay the full implementation of the rule to give firms more time to get into compliance.

FINSUM: This is potentially good news, but in the longer term it is likely a moot point since it is widely expected that Biden’s DOL will be redrafting an entirely new version of the rule, and probably one that is closely aligned with the original iteration from the Obama era.