Outside voices and views for advisers

May 23, 2016, 2:57 PM EST

Why Phil Mickelson's SEC insider-trading deal was better than a hole-in-one

By David R. Chase

At first glance, the SEC's insider-trading settlement with professional golfer Phil Mickelson is noteworthy if only because of Mr. Mickelson's celebrity status and the press coverage it has generated.However, looking beyond the sordid tabloid appeal of a high-profile athlete becoming entangled with individuals who are alleged to have been waist-deep in a long-running insider-trading scheme, there is a much more significant, arguably ground-breaking, aspect of the case. Namely, the settlement Mr. Mickelson cut with the SEC.As a former SEC enforcement attorney, I investigated and prosecuted several insider-trading cases for the government, and as SEC defense counsel, I have defended and settled even more over the last 16 years. Yet, I have never seen a settlement anything like that in the Mr. Mickelson insider-trading case — it is truly unique. And, it has absolutely nothing to do with Phil Mickelson per se.To understand, we need... Read full post

May 12, 2016, 5:46 PM EST

Tax change may mean more money for small business owners

By Jennifer Friedman

Investors in small businesses around the country may be pleasantly surprised in the aftermath of tax season. Thanks to the recent extension of the Section 1202 of the Internal Revenue Code, small businesses stand to attract even more investors, due to a surprising long-term advantage: tax-free gains upon the sale of qualified stock.In December 2015, a previous extension was made permanent by the Protecting Americans from Tax Hikes Act of 2015, or PATH Act. Under the revised provision, small-business owners and investors can now exclude 100% of any gain they realize from the sale of qualified small-business stock. The extent of the savings will depend upon the value of the stock, but collectively, investors across the country are poised to save millions. Owners of qualified small-business stock have been able to exclude a portion of the gain for years, but the percentage of the tax-free exclusion has varied. Even during the times the... Read full post

May 12, 2016, 3:55 PM EST

How advisers can win in the financial services industry revolution

By James T. (Jim) Swink

To adapt a Charles Dickens quote from “A Tale of Two Cities,” “It is the best of times; it is the worst of times.” It is the best time to be in the financial planning business, and it is the worst time to be in the financial planning business. There is a revolution in the financial services industry; fortunately, there is no guillotine involved. As we review our practices in the light of transformation, is it the best of times?The uprising in France changed the path of that country forever. France would no longer operate as an absolute monarchy. The citizens would have much more say in how the country was governed. Just as France was molded by outside pressures, the upheaval in the financial services industry is coming from three sides, and each in its own right involves a change in how we practice our craft. These three areas are technology (aka robo-advice), regulatory pressures and, most importantly, our... Read full post

May 12, 2016, 11:30 AM EST

Why the DOL fiduciary rule will lead to more ETF innovation

By Thomas Hoops

Everyone is talking about the U.S. Department of Labor's final fiduciary rule and related Best Interest Contract Exemption (BICE). Some like them, some really don't. It's still early, but the emerging consensus seems to be that much of the industry can work with them.Full implementation will not come until January 2018, but strategies for compliance — and for seizing upon the new opportunities these changes offer — are already in play. These changes were promulgated because the DOL estimated that conflicts of interest in retirement advice cost American investors $17 billion a year, and undermined confidence in the markets. How the industry evolves in response to the changes promises to have a significant impact on financial advisers and their clients.(Related: How advisers expect DOL fiduciary to reshape the industry)The DOL set out to give retail investors who may have viewed the markets with trepidation more confidence... Read full post

May 11, 2016, 5:06 PM EST

Advisers need to adapt to DOL fiduciary rule or risk getting left behind

By Bob Ward

Why are so many in the financial services space on the wrong side of industry evolution, complaining that the DOL's new fiduciary standard will be detrimental to their way of doing business?The Department of Labor's final ruling showcases how an entire industry — one that claims to be committed to people's financial well-being — will continue trying to convince retirement savers that they are better off in an industry rife with conflicts of interest, sky-high commissions and questionable revenue-sharing arrangements. As the controversy brews and lawsuits are prepared, advisers can rest assured that tools exist to help them comply with the new ruling in its current form. In fact, some have said that it's due to the advent of new technology that the DOL can demand the new levels of transparency laid out in the ruling. Said writer Alessandra Malito in a recent InvestmentNews article, “The final rule won't just change the ... Read full post

May 9, 2016, 2:12 PM EST

Is the Fed's latest decision to leave rates unchanged truly dovish?

By Brian M. Scotto

At its two-day meeting in late April, the Federal Open Market Committee voted to leave interest rates unchanged at a range of 0.25% to 0.50%. The Fed delivered a statement that was interpreted as dovish, but in reality it was relatively neutral, with a little something for everyone. In the statement, the FOMC removed a prior reference to “global economic and financial developments [that] continue to pose risks,” but added new language saying that it will “closely monitor inflation indicators and global economic and financial developments.” The FOMC also acknowledged slower growth by stating that “labor market conditions have improved further, even as growth in economic activity appears to have slowed.” Clearly, FOMC members are concerned about inflation and slow growth, but they are slightly less concerned about global developments.The Fed's dovishness initially came on the heels of concerns about... Read full post

May 8, 2016, 12:01 AM EST

SEC proposals target mutual funds

By Andrew Rogers

The regulatory environment for financial services is ever-changing, and periods following market disruptions create opportunities for regulators to propose new rules to prevent further failures. For example, the financial crisis of 2008 resulted in Dodd-Frank, which set forth new rules centered on capitalization requirements to prevent similar events. Regulators are now proposing rules for advisers and investment companies that will change the mutual fund universe. The mutual fund industry has created an alphabet of share classes based on broker commissions and platform fees. Proposed fiduciary standards from the SEC requiring representatives to select investments in the best interests of investors (along the lines of the Labor Department's recently released fiduciary rule for retirement advice) may limit the ability to sell classes with higher expenses and load commissions. This may result in the collapse of many classes of mutual... Read full post

May 5, 2016, 11:32 AM EST

Does Warren Buffett really love the S&P 500?

By Nir Kaissar

Warren Buffett crooned one of his greatest hits for groupies attending Berkshire Hathaway's annual meeting in Omaha last weekend: “Just buy an S&P index fund and sit for the next 50 years.”Mr. Buffett has a well-deserved reputation as a legendary investor, but if ordinary folks want to mimic the master, the last place they should be parking their funds is the S&P 500.Mr. Buffett is a big fan of the S&P 500. He has already declared that 90% of the money he leaves to his wife will be invested in Vanguard's S&P 500 index fund. He also wagered a million dollars that Vanguard's S&P 500 index fund would beat a basket of hedge funds over ten years from 2008 to 2017. (The S&P 500 index fund is currently crushing the hedgies.)Mr. Buffett's enthusiasm for the S&P 500 is a wee bit odd because he has spent an entire career guided by the investment principles of his teacher, Ben Graham, who can genuinely be called the godfather of... Read full post

May 5, 2016, 10:39 AM EST

What the loss of Prince can teach us about estate planning

By Bill Ringham

For many people, thinking about what will happen to their estate after they die is too uncomfortable or too complicated of a topic to tackle. Some decide to wait. Some decide that a plan is not necessary. Others simply never get to it.But for any estate where there is no concrete plan, a number of complications can arise. Unfortunately, many of those complications have been brought to light in the wake of the untimely death of musical icon Prince. As far as anyone can tell, Prince did not have a will. In Minnesota, where he resided, any estate for which there is no will is subject to the intestate probate process. In other words, rather than divide the assets according to someone's wishes, the laws of the state of Minnesota determine who will get what from the estate. Taxes are another important consideration. The actual size of Prince's estate is still unknown, but various news reports peg it at somewhere between $300 million and $800 ... Read full post

May 5, 2016, 4:31 PM EST

Activities every financial adviser should delegate to someone else

By Shawn Sparks

If you're a financial adviser and you feel overwhelmed by all the things you have to get done or you feel like you're on the verge of burnout from working long days for weeks or months in a row, then there's a good chance you're suffering from something I call the “adviser's curse.”What is the adviser's curse? It's the curse of feeling like you have to do everything yourself. It's the curse of wanting to be in control of everything all the time because you don't believe anybody can do what you do as well as you can.The adviser's curse is one of the biggest reasons adviser businesses stop growing and get stuck on a plateau. Because when an adviser refuses to delegate, he eventually runs out of hours in the day. There's only so much one person can do.A much better approach is to create procedures, hire great people and delegate as much as you can. This is the path to steady long-term growth — without stress or risk of... Read full post

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