Wealth Management
In a recent Business Insider article, Charles Schwab is warning that stocks could see more volatility through the rest of this year, as we head into what the firm considers a weak earnings season. The company believes that more companies could miss earnings estimates in the following quarter, using FedEx as an example. The transportation firm slashed its earnings guidance last week in what is expected to be a sign of things to come for the rest of the S&P 500. In a note on Monday, analysts stated, "We believe the weakness in expected earnings growth is early in its trip to an ultimate negative (year-over-year decline) destination." Analysts also noted that the rate at which S&P 500 companies beat earnings expectations fell to 5% last quarter. This compares to over 20% in the middle of 2021. The company noted that the trend could be even lower in the third quarter as earnings reports come in. Excluding the energy sector, Schwab estimates that earnings growth in the S&P 500 will shrink by 2% over the third quarter, down over 11% from June.
Finsum:Analysts atCharles Schwab are warning of more stock volatility as we head into a weak earnings season.
The Carson Group recently announced several new developments during a Partner Summit, including a new model portfolio hub. The company, which was founded in 1983, is made up of three related businesses including a wealth management firm, a coaching network, and a partnership established in 2012 with approximately 120 affiliated firms. The firm’s announcements included updates and additions to its rapidly growing platform, including a lead generation program, a new investment research portal, additional alternative investment options, and a “model hub” to let advisors administer multiple accounts simultaneously. Burt White, Chief Strategy Office of Carson said this of the new model portfolio hub, “What it allows you to do is to create a model and tie multiple clients to that model. One, two, 15, or a hundred. And then every time you change the model, it goes through and does it for all 100 of those clients that are tied to the model, as opposed to today, where you have to go into every single one.” The model portfolio hub is expected to launch early next year.
Finsum:Carson Group announced several new additions to its platform, including a model portfolio hub that lets advisors administer multiple accounts simultaneously.
The Department of Labor has asked a Texas federal judge to toss a fiduciary rule lawsuit brought by a group of licensed independent insurance agents and the trade group Federation of Americans for Consumer Choice Inc. The agents and the trade group had sued the agency in February arguing that a December 2020 DOL regulation advances policies that the Fifth Circuit invalidated in 2016. Their complaint alleges that the 2020 rule illegally expands the definition of an Employee Retirement Income Security Act fiduciary. The plaintiffs moved for summary judgment in July asking the court to vacate the new interpretation of the law. They reasoned that the rule allows the DOL to "rewrite and expand" the definition of a fiduciary, much in the same way that the Fifth Circuit had ruled against it. The DOL, in a recent memorandum, said the plaintiffs adopted "several extreme positions" to conflate a 2016 agency rule with a newer version from 2020 and that they distorted Fifth Circuit precedent.
Finsum:The DOL asked a federal judge in Texas to toss a fiduciary rule lawsuit against the agency that claims its 2020 regulation advances the same policies that the Fifth Circuit invalidated in 2016.
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According to an analysis by ESG specialist Elisabeth Steyn, U.S. equity funds that are classified as ESG, have on average 29% of their holdings in tech stocks. Steyn told Alice Ross of Financial Times that the figure is well above the 23% average for general equity funds. Ross used the iShares ESG Aware MSCI USA ETF as an example. The fund’s top holdings include Apple, Microsoft, Amazon, Tesla, and Alphabet. This may help explain why many ESG funds are seeing heavy losses this year. Ross attributed the reason to two factors. First, ESG funds are exclusionary. Once certain areas of the market are stripped out, tech is typically over -represented. The second reason is that ESG rating agencies can differ greatly on which companies are sustainable. That reason alone can help explain why the SEC is going after ESG labeling. Ross also noted that ESG funds outside the U.S. are not typically overweight in tech stocks.
Finsum:U.S. ESG funds are heavily overweight in tech stocks due to differing ESG labels and exclusionary factors.
Ethic, which is an ESG investing fintech that offers direct indexing to investment advisors, has raised $50m in a Series C funding round. Ethic is available to advisors that use the custody services of Fidelity, Charles Schwab, U.S. Bank, Northern Trust, Morgan Stanley, or Pershing. The company offers custom direct indexing portfolios that reflect a client’s values, financial goals, and tax preferences. The firm also offers impact reporting and educational materials. The asset manager, which focuses on socially responsible portfolios, currently has over $2 billion in assets. The latest funding round was led by Jordan Park Group. Other firms involved in the funding round include UBS’s venture arm, UBS Next, and existing investors such as Oak HC/FT, Nyca Partners, Sound Ventures, Urban Innovation Fund, and Kapor Capital. In an announcement, the firm stated that the new capital will “support Ethic’s ambitious growth plans, including expansion into new markets and products, and continued investments in its platform experience.”
Finsum:Direct indexing firm Ethic raised $50 million in a new funding round to expand into new markets and products.
A new insurance company plans on selling non-variable annuities directly to consumers. Former Global Bankers Insurance Group executives teamed up to start Pillar Life by forming Pillar Insurance LLC and using the entity to acquire Continental Life Insurance Company. Pillar Insurance renamed Continental Life to Pillar Life last year. The company plans on building a web-based self-service process by April 2023. The insurer has already posted guides to multi-year guaranteed annuity contracts and single-premium immediate annuities on its website. The Interstate Insurance Compact, which is an organization that helps states review product and rate filings, has approved Pillar Life forms for an SPIA contract and a single-premium deferred annuity contract. Pillar Life will also offer life insurance and supplemental health insurance products. For clients, this means they will have more ways to buy annuities on their own. For advisors, however, it will likely make it more difficult to go through the paperwork to find out what clients own.
Finsum:Pillar Life plans on offering non-variable annuities direct to consumers through a web-based self-service model.