Wealth Management
(New York)
There has been a lot of media attention over the last year about the rise of faith-based and politics-based investing. New ETFs and advisors are currently cropping up to cater to investors who would like to invest based on these principles. However, Barry Ritholtz thinks the concepts may not be a good mix. The author looks at the returns of a popular biblical-based fund and finds that its performance lags broader indices significantly. Ritholtz argues that investors need to check their emotions at the door when investing, which is why this kind of philosophical investing may not create good returns. Ritzholtz says “Do your civic duty on Election Day and vote, go to church on Sundays, but always bring a cool unemotional detachment to investing on Mondays”.
FINSUM: The fees on these types of funds also tend to be much higher, which means that you are losing on both ends. That said, the peace of mind people get from investing in things they feel morally comfortable with may be greater than the expense.
(New York)
The fee war on ETF trading continues, both for advisors and for retail. Trading platforms providers have been engaged in an ongoing struggle to attract assets by slashing the price of trading, and Vanguard just took a big step. While Vanguard used to charge retail investors a flat fee for trades depending on their AUM (trading Vanguard funds was always free), the company is now cutting transaction fees for aboutx 1,800 ETFs on its platform. No more trading fees at all. The move follows Fidelity’s recent addition of more fee-free ETFs. FINSUM: This is a big deal. 1,800 fee-free ETFs dwarfs the competition and we definitely think it will help Vanguard gather more assets, both retail and institutional.
(Washington)
The SEC rule has been a getting a lot of pushback both in the press and by industry commentators. Now, in what only seemed a matter of time, a more formal campaign against the new rule is taking shape. The new “Raise Your Voice” campaign is being organized by a group of RIAs and seeks to unite fiduciaries in a push against the grouping of brokers and advisors in the new rule.
FINSUM: While we do see the SEC’s logic in how it drafted the new rule, brokers and advisors are very different animals and we believe more delineation needs to be drawn between the two.
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(Washington)
Advisors all across the country see a major flaw in the SEC rule. Fiduciaries feel they are being completely short-changed by the rule because the way the SEC has drafted it makes advisors and brokers look like identical twins, almost eliminating the distinction from a client’s perspective, according to the “Raise Your Voice” campaign, or a group of advisors pushing against the rule. “The proposed rules depict broker and advisers as essentially the same, like identical twins, but without identical investor protections”, says the spearhead of the campaign, continuing that “The legal, contractual, business and cultural differences dividing brokers and advisers are important and must be clearly stated and explained”. The campaign is encouraging advisors to make their opinions heard while the SEC comment period is open (it closes August 7th).
FINSUM: The SEC tried to make a rule that avoided over-delineating things as part of an effort to avoid loopholes, but this non-standard approach has made many quite angry. We suspect the rule will be edited significantly.
(New York)
If you are an RIA looking to sell your firm, the environment is looking stronger and stronger. Terms for deals have improved mightily. For instance, whereas terms from a few years ago were typically 30% paid up front with the rest paid over five years based on client retention, currently 60-80% is being paid up front with the remainder paid off over a year. According to Joe Duran of United Capital, “The market is frothy, and terms for sellers are getting better”.
FINSUM: The market is getting better because there are many more buyers than sellers, which is raising prices and pushing terms in favor of sellers.
(New York)
For the first time since WWII, Americans are retiring in worse financial condition than the generations that preceded them. Those aged 55 to 70 are preparing to retire with the biggest financial burdens and lowest benefits since Truman was in office. Many have high debt, including paying off children’s tuitions and for aging parents. Their 401(k)s are in poor shape, with a median income of just $8,000 per year for a household of two. According to the study, which was conducted by the Wall Street Journal, more than 40% of American households headed to retirement lack the resources to maintain their current lifestyles. That is about 15m households.
FINSUM: We are having a hard time reconciling this with all the reports of how wealthy the Baby Boomer generation is, yet this comes from quite a reputable source. It must ultimately come down to wealth inequality within that generation.