Wealth Management
(New York)
When the pandemic first hit, recruiting slowed down, with less advisors moving firms. However, after a couple of months, things started to pick up. According to a TD Ameritrade survey, 40% of advisors now say they are more likely to move than they were before the pandemic. Only 15% say they are less likely. If one comment sums up the increased velocity of recruiting, it might be this, “Advisors are at home and working in an independent environment. That can cause them to question what they are paying for at their firm. ‘Do I need the overhead and management of the wirehouse? Am I doing alright without it now?”.
FINSUM: On top of the questioning of whether all the overheads associated with a wirehouse make sense when they are working from home, the other big thing driving moves is the simple fact that it is easier for recruiters to reach advisors when they aren’t in the office. This makes the whole courting and exploration period much simpler.
(New York)
A new survey by the Money Management Institute and AON has come up with some interesting findings as it relates to client satisfaction with their advisors. One of the most intriguing findings was that clients say they wished their advisors used more goals-based financial planning. Goals-based planning is the idea that you plan around clients’ individual life goals (e.g. saving enough money to pay for children’s college) and then continually report to clients how they are doing in those areas. Incorporating values into their financial planning is another area where clients say advisors could improve.
FINSUM: Many advisors already do this, but there is likely room for improvement, especially as it relates to reporting. Very few invest and save just for the sake of accumulation without a plan for their money, so reporting on the key areas they are making progress towards is a good step. There are even funds that specialize in helping aid goals-based investing.
(Washington)
Most brokers out there have been relatively happy with the new DOL Rule. No one likes new regulations, but it is reasonably un-disruptive, and miles easier to stomach than the first DOL rule. However, under the surface lurks another problem that the new DOL rule has actually worsened—the push for state-level fiduciary rules. Many states had been pushing for their own fiduciary rules, and some had been standing by to see what the federal rule would look like. With the adoption of a new fiduciary rule for Massachusetts yesterday, it is clear that many states are not satisfied with the new federal rule and will keep designing their own. Thus, the new threat is a patchwork of differing fiduciary regulations across the country.
FINSUM: The idea of a fiduciary rule is kind of like playing whack-a-mole at present. You may “win” in one area, but then it pops back up in another.
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(Chicago)
Earlier this year LPL launch its new Strategic Wealth Services program. It is a special program designed to help advisors with all aspects of setting up their own business, including everything from finding an office to setting up a tech stack to executing payroll. Best of all, LPL promises to do this with “zero out-of-pocket costs for the advisors”. Despite the pandemic, the program seems to be doing well. Once advisors from a Wells Fargo team that recently departed for LPL commented on the program that “LPL’s new affiliation model really appealed to me. It allows me to be an independent advisor but solves for the business operational needs”.
FINSUM: This is a smart program. It appears specifically designed to address the multitude of anxieties advisors feel when moving to an IBD.
(Washington)
While it has not been nearly as tumultuous as the first time around, the DOL 2.0 rule-making and approval process has already been rocky. There was a great deal of upsettedness over the short comment period. So much so that the DOL reversed course and offered a public hearing to gather more opinions. That was held this week. However, the DOL says no further public hearings or comment period will be extended (despite previously mentioning this possibility). Accordingly, it is looking very much like a rule will be brought forth ahead of the election, significantly in advance of where the timeline looked to be even a few weeks ago.
FINSUM: The DOL is really pushing the pace here. It seems like this might get on the books before the election, but it would still be quite easy for Biden to undo if he takes office.
(San Francisco)
The wealth management market is already in shock from Democrats’ tax proposal—think top tax rates of over 65% for high tax states. Remember that a large majority of states charge taxes on residents, including big ones like New York and California, where large numbers of America’s wealthy reside. Now, California, the largest and one of the most influential states in the union, has just put out a proposal for taxing wealth, not income. The plan comes from the state’s legislator. Here are the basics of the plan: “The state would apply a 0.4% rate to all net worth above $30 million for single or joint filers. The tax would apply on wealth above $15 million per spouse for married taxpayers who file separately. Net worth would include all assets and liabilities held globally by a taxpayer”, according to Barron’s.
FINSUM: Two eye-opening things here. Firstly, Democrats have a veto-proof supermajority in the state legislature, so passing this will be much easier than elsewhere. Secondly, how much will this influence other states? It was easy to see how left-leaning states influenced others as it regarded state-level fiduciary rules.