Wealth Management
(New York)
Annuities are an important part of both advisors’ businesses and their clients’ portfolios. However, the options in the market can be overwhelming, especially if you are an advisor new to the asset class. The annuities business has cleaned up its act in the last few years and is finally getting some respect because of its ability to alleviate retirees’ worst fears—running out of money in retirement. Well, Barron’s has put out a list of the top 100 annuities in the market, including how to pick them. The list is quite extensive, so here is a link. The choices are broken down into numerous categories and include offerings from Lincoln National Life, Transamerica, Prudential, CUNA Mutual Group, and beyond.
FINSUM: Not only do annuities help alleviate the fear of running out of money for retirees, but they are also popular with Millennials, who are financially conservative and have a similar concern about future income.
(Washington)
Astute observers will have noticed that President Trump last week nominated Eugene Scalia to head the DOL following Acosta’s resignation. Even sharper readers will know that likely means the DOL’s newest version of the Fiduciary Rule is likely dead. Scalia was instrumental in the first version of the rule’s defeat last year. He was the lead counsel for SIFMA and the body of trade groups that defeated the rule. With him becoming head of the DOL, it seems highly unlikely the Labor Department would advance the newest version of the regulation.
FINSUM: We think Eugene Scalia is the DOL head that most of the industry has been waiting for. He has a reputation as a fierce anti-regulation warrior, so is hard to imagine him advancing the newest version of the Fiduciary Rule to any degree.
(Washington)
The wealth management industry has been holding its collective breath for the last week or so. Ever since DOL chief Acosta resigned, it became very unclear what sort of Fiduciary Rule might be released later this year. Would it be a more onerous version, or a more lenient one? Well, the answer seems very likely to be a lighter-touch version of the rule. That is because Trump has just announced his nomination to the position—Eugene Scalia, son of the former Supreme Court Justice. Scalia has a long and quite conservative track record, and is seen as likely to deregulate more quickly than Acosta.
FINSUM: Scalia seems like an ideal choice for those hoping the DOL’s new Fiduciary Rule is significantly lighter than the 2017 version. Perhaps he even scraps it altogether?
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(Washington)
Advisors look out, the potentially easy Fiduciary Rule you have been counting on is now seriously in doubt. For several months the consensus view was that the DOL would create a companion rule to the SEC’s Best Interest rule, but in a significantly less onerous way than the original Fiduciary Rule. That assumption now looks misguided because DOL chief Acosta has resigned, meaning there will be a major leadership change and a likely revisiting of strategic priorities.
FINSUM: Acosta has been pretty industry friendly, so this review is nerve-racking as there seems to be an equal likelihood of a either a tougher new chief, or a similar/relaxed one.
(Washington)
Have you been concerned about the newest iteration of the DOL’s Fiduciary Rule, which is due out by the end of this year? You should have been. While investors have been anxious about it, the generally more industry-friendly DOL under Trump has alleviated some anxieties. However, some thing very big just happened—DOL chief Acosta has resigned (amidst the Jeffrey Epstein scandal). That means there is likely to be a significant review and change of priorities as new leadership comes in. That leaves the fate and direction of the DOL very uncertain.
FINSUM: This is not necessarily good news. One could get giddy and think the Fiduciary Rule might no longer be a priority, but there is an equal chance the next head of the department may come in and say “this isn’t tough enough”.
(Washington)
Jay Clayton came out punching for the SEC’s new Best Interest Rule this week. The rule has faced a lot of criticism from all sides, but was finally approved internally. Now, Clayton is combatting critics. In particular, the SEC chairman is defending the harshest criticism of the rule—that it does not define “best interest”. Clayton argues that using a principles-based framework, which relies on a contextual definition of best interest depending on the situation in question, is a well-trod regulatory path and one that is superior to creating a definition for every scenario.
FINSUM: We don’t love this rule, but we agree with Clayton on this point. Having a highly defined rule leaves it more vulnerable to loopholes. With the current contextual structure, one has to worry whether their behavior could be considered “best interest” depending on an amorphous standard. It seems like a better way to keep bad actors in line.