Wealth Management
(Washington)
The Department of Labor made a critical move this week in announcing a regulation that is likely to affect almost all advisors. During the Trump administration the DOL made a rule that made investing client Dollars in ESG funds very complicated from a compliance perspective. It has long been expected that the Biden administration would try to undue that rule and make one of its own. It appears that day is here as the DOL announced a new rule (the wording of which is still unclear) which would clear up the uncertainty and risk advisors have in recommending ESG funds.
FINSUM: This will become more clear in the coming days, but the bottom line is that it appears the Biden administration is trying to take the doubt/uncertainty/risk out of ESG for advisors. And good thing because demand for ESG products has surged this year.
(New York)
Retirement costs are a major pitfall for advisors, if only because clients generally underestimate them! Nowhere is this more true than in regards to healthcare. Since healthcare costs tend to increasing very significantly as one ages, it is difficult for the average person to understand just how costly medical expenses can become when they get older. To make things more complicated, the situation is highly variable for each person. For example, in a married couple, do they enroll in Medicare at the same time or are they of different ages; does one spouse still work full-time and give healthcare access to other? There are also several financial products which can help in supporting these costs, such as HSAs and annuities, both of which can help offset the inevitable costs that arise even when covered by Medicare.
FINSUM: Retirement healthcare costs need to be a critical of advisors because they are generally poorly planned for by clients’ themselves.
(New York)
If advisors ever feel like hold their fates in the palms of their hands, they’d be right. At this very moment, a big change is looming for all brokers. In the near future, industry lawyers are expecting that SEC chief Gary Gensler will announce a definition of “best interest” within Reg BI. Previously, the thinking had been that defining the rule might actually make it easier to get around, but the emerging industry view is that defining it would indeed make the rule look much tougher.
FINSUM: A definition of “best interest” seems like a foregone conclusion to us at this point. The main question is when, and how restrictive is the verbiage.
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(Washington)
When trying to discern the next steps for big regulations like Reg BI and the Fiduciary Rule, the best place to look is the revolving door between top industry law firms and US regulatory offices. And that revolving door is sending very scary messages for advisors. Take for instance these comments from Joshua Lichtenstein, an ERISA and benefits partner at Ropes & Gray LLP's ERISA fiduciary practice: "There are a lot of career people at the DOL still working there and it's not clear to me that their views would have necessarily changed just because of the 5th Circuit's action … So I am expecting to see a pretty fulsome rewrite of the definition of who is a fiduciary”.
FINSUM: The bottom line here is simple. A lot of the same people that wrote and pushed the Obama era fiduciary rule are still at the DOL and are once again empowered under Biden. Why would anything change from their 2017 effort?
(New York)
The annuities market has not been known for a great deal of innovation. But just like the industry’s reputation, things are improving dramatically. Entrepreneur.com has put out their new annuity awards and the best newcomer award goes to Brighthouse Financial. In just four years the innovative new annuities provider has gone from inception to a multi-billion Dollar annuities seller each quarter. It’s easy to see why. At the heart of their lineup are their FlexChoice Access and Shield products. FlexChoice Access is part of Brighthouse’s variable annuities suite while Shield is an index-linked annuity.
FINSUM: Brighthouse is really changing the game with its new products. For instance, Shield has no annual fees, has guaranteed income, and still offers upside tied to market indices.
n.b. This is sponsored content and not FINSUM editorial
(Washington)
This whole year it is has been assumed—almost as an unquestioned default—that taxes would rise under the Biden administration. For example, munis have surged in value on this expectation. However, that assumption seems to have gotten well ahead of itself as new developments suggest tax changes may be a way off yet. The big change is that the infrastructure package is coming up for a vote—potentially this week—and the deal which has materialized between the parties has no tax rises whatsoever in it. That means Biden’s plan to hitch tax rises to increased infrastructure expenditure have fallen through, at least for the time being.
FINSUM: So if this plan gets approved without any tax changes—which looks quite likely—it seems clear that clients will escape 2021 without any major changes to federal taxes (including long-term capital gains taxes). Therefore, any planning should take account of the fact that 2021 may be much more advantageous than 2022.