Wealth Management
FINRA recently announced that it has fined and censured a New York firm for violations of some of the basic written and supervisory requirements of Regulation Best Interest. The violations date back to June 2020 when the advice standards went into effect. The regulatory body charged the Long Island Financial Group, a five-person broker-dealer based in Roslyn, N.Y., with failure to supervise and “to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance” with the regulation that requires advisors to put customers’ best interests ahead of their own financial gain. The firm settled the charges for a $35,000 fine, without admitting or denying guilt. The broker-dealer also received a public censure and is required to certify that it has remedied the compliance failures within 90 days. According to FINRA, Long Island Financial Group also “failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with Reg BI.” In addition, the firm also failed to deliver to its clients Form CRS, the customer relationship summary that broker-dealer clients and prospects are supposed to receive, explaining the firm’s service offerings, products, fees, and conflicts of interest.
Finsum:A small NY firm was fined and censured by FINRA for failure to supervise, maintain, and enforce policies and procedures reasonably designed to achieve compliance with Reg BI.
J.P. Morgan Advisors continues to boost its advisor headcount with the latest addition of a Boston-based Merrill Lynch team that generates $2 million in revenue. The team is led by Andrew Parvey and Maureen Wilson who oversee $200 million in client assets. They moved to J.P. Morgan along with support staffers Victoria Steele and Ko Dong. Parve started his career at Olde Discount Corp. in 1996 and also worked at Gruntal & Co., and Citigroup’s Smith Barney before joining Merrill in 2008. Wilson started her career as a personal banker at Bank of America in 2003, and worked at Chase between 2005 and 2007, before restarting her brokerage career in 2015 at Merrill. They will report to Rick Penafiel, regional director for Boston, Miami, and Palm Beach. This marks the second Merrill team to join J.P. Morgan Advisors in as many months. Another team led by Marc Karstaedt in New York City joined in January. The Advisors unit, which JPMorgan acquired from Bear Stearns during the financial crisis, has around 450 advisors. In July 2021, the group announced a plan to double its headcount over the next five to seven years. J.P. Morgan ended last year with 5,029 total advisors, up 6% from the prior year.
Finsum:J.P. Morgan lured away its second Merrill Lynch team in as many months in a bid to boost its advisor headcount.
For decades, the wealthy have been able to see huge tax savings. Over one hundred years ago, investors could take tax deductions on wash sales, which involved selling a security at a loss and then buying back the same security. While Congress outlawed that technique in 1921, investment firms have continued to help billionaires save on taxes through other techniques such as tax-loss harvesting, which allows an investor to sell an investment for a loss and replace it with a reasonably similar investment. Direct indexing, which continues to gain steam among advisors, provides the perfect strategy to employ tax-loss harvesting. In a recent article, ProPublica authors Paul Kiel and Jeff Ernsthausen reported on the tax savings techniques of billionaires. The authors were able to reconstruct the tax-loss strategies of some of the nation’s wealthiest people using IRS data. For instance, they estimated that from 2014 through 2018, Goldman Sachs was able to generate tax savings of $138 million for Steve Ballmer, former CEO of Microsoft and current owner of the Los Angeles Clippers, without changing his investment portfolio in any meaningful way. In the year 2017, Ballmer’s direct indexing accounts posted over $100 million in tax losses through 15 loss-harvesting transactions, while the performance of the indexes it tracked, was way up. Tax records also show that Goldman Sachs routinely made trades for direct-indexing clients like Ballmer.
Finsum:Based on recent reporting by ProPublica, billionaires such as Steve Ballmer have been able to save billions through tax-loss harvesting in direct indexing accounts.
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There’s no question that 2022 was a tough year for investors, but even with all the volatility, investors remain confident in their advisor’s abilities. That is according to the results of State Street Global Advisors’ ETF Impact Survey: Advisor Edition. The survey found an overwhelming majority of investors who work with an advisor remaining confident in their insight and guidance. The percentage of U.S. investors indicating they value their financial advisors’ knowledge and guidance even more during uncertain times held steady at 89% compared to June 2022, when it was 91%. In addition, 81% indicate their advisor has helped them remain confident during this period of rising inflation and market volatility, compared to 86% in June. The survey also revealed that investors are listening to their advisors and not requesting panic-induced trades as 57% of U.S. investors plan to keep their money ‘as is’ and stick to their long-term strategy. Brie Williams, head of Practice Management at State Street Global Advisors had this to say about the survey results, “Helping clients remain confident and committed during times of volatility can be a challenge for advisors whose clients may have a kneejerk reaction to abandon their investment strategy if markets get choppy. Our survey found 86% of investors have discussed market volatility with their financial advisor and 83% say their advisor has informed them of how volatility will affect their long-term financial goals.”
Finsum:A recent SSGA survey found investors remain confident in their advisors’ guidance amid heightened market volatility and rising inflation.
There are numerous ways advisors can generate leads for their business such as word-of-mouth marketing or cold-calling, but social media can provide them with a much larger landscape in which to work and is less time-consuming. That is according to Rebecca Lake who recommended five ways for advisors to drive business through social media in an article on SmartAsset. In terms of which social media platform to use, that depends on your target client demographics. For instance, if your target client is younger, your best bet is on Instagram, TikTok, or Twitter. But if your target client is older, then you might get better results on Facebook or YouTube. Lake’s first tip is to be authentic as it’s essential to build trust with prospective clients. For instance, you could share a little about yourself on social media. Her next tip is to be consistent, as it’s also important in building trust. Posting quality content on a regular schedule is ideal. Lake’s third tip is to provide value. The content has to provide value for the people who see it. Plus, valuable content gets shared, which can help you attract even more business. The next tip is to engage with the people viewing your content. This could include replying to comments or even asking your followers to participate in a survey. The fifth and final tip is to be compliant with federal regulations and your firm’s regulations.
Finsum:Rebecca Lake, a contributor for SmartAsset, provided five tips for advisors to drive business through social media, including being authentic, consistent, compliant, providing value, and engaging with followers.
Vanguard, which is the second-largest ETF issuer, is planning to go all in on direct indexing. That is according to Tim Buckley, Vanguard CEO, as he was being interviewed on stage at the recent Exchange ETF conference. Buckley said that Vanguard looked at direct indexing years ago and started thinking about it. He stated, "What's a way that you could disrupt the ETF or the mutual fund? You always should be looking if there is a better way to do it." While direct indexing has existed for some time, it is typically only reserved for the "ultra, ultra, high-net-worth," according to Buckley. The CEO added "And we can see that … there's huge tax benefits for a lot of investors in using direct indexing." He said that the idea of creating portfolios that don't undermine people's retirement but let them invest in line with their values was something the fund firm found interesting. Instead of hoping that direct indexing would go way, Buckley said Vanguard decided to embrace it and "see if it is a better way to do something." He added, "And we'll find out over time. But we'll be investing heavily." The fund giant, which manages $2 trillion in assets across 81 US-listed ETFs, started its move into direct indexing in October of 2021, with its purchase of Just Invest and its direct investing platform, Kaleidoscope.
Finsum:According to Vanguard’s CEO Tim Buckley, the fund firm plans to go all in on direct indexing as there are huge tax benefits for a lot of investors.