Outside voices and views for advisers

Jul 26, 2016, 2:48 PM EST

Top adviser questions on DOL fiduciary rule answered

By Tom Corra

If advisers have questions about the Department of Labor's investment advice rule, they are not alone. Among the more than 3,000 third-party financial advisory firms we work with, many are waiting for more clarity on the fiduciary rule — which requires advisers to act in the best interests of clients when handling retirement accounts — before committing to a compliance strategy.Here are the top questions we hear from firms, as well as some answers that might help guide their strategy. An adviser firm should consult its legal and compliance teams for specific guidance on how the rule will apply.Can I use the best-interest contract exemption, also known as BICE, to keep doing business as usual under the fiduciary rule?The BICE can be used to support a number of existing business models, including broker-dealers who operate under a commission-based model, but the BICE generally requires advisers to make changes to their... Read full post

Jul 24, 2016, 8:00 AM EST

Why women tend to outperform men when investing

By Kara Murphy

Wall Street is often portrayed as dominated by fast-paced trading and massive risk-taking. But it turns out that qualities like patience, humility and risk aversion can drive better returns over time. It may prove lucrative to remember that women tend to naturally exhibit these qualities. Over the last few decades, women have made great gains in education and business. In fact, the National Center for Education Statistics shows women now earn 60% of all undergraduate and graduate degrees, and 46% of all MBAs. When it comes to investing, however, women remain vastly underrepresented. According to a 2015 study by Morningstar, women manage only 8.69% of open-ended stock funds. On the other hand, female investors tend to consistently outperform. According to the University of California, Berkeley, study, “Boys will be boys: gender, overconfidence and common stock investment” by Brad M. Barber and Terrance Odean published in... Read full post

Jul 21, 2016, 4:34 PM EST

Robo-advisers increasingly represent a useful ally for human advisers

By Thomas Hoops and Roger Paradiso

We are witnessing the beginning of a fusion between financial advisers and technology, which are coming together to be more competitive and offer holistic solutions to a broader range of clients. This robo-advising or digital advisory is not just here to stay, but growing in importance. The financial services industry has been slow to embrace technology in client service: it has not been easy to go from simple questions to the high-quality execution investors require, and deserve. The result is an exciting new generation of online products that can help advisers better serve clients — if they embrace them.(Related: Legg Mason acquires 82% stake in robo-adviser)This should free advisers' time to allow them to broaden and enhance their roles, to move beyond asset allocation to become true wealth managers. Technology promises to aggregate additional types of assets: insurance products, savings accounts and more. Aggregation is very... Read full post

Jul 21, 2016, 1:57 PM EST

Key fiduciary decisions loom for retirement plan advisers using money market funds

By Blaine F. Aikin

In October 2008, the Reserve Primary Fund "broke the buck," and its $1 net asset value dropped to 97 cents. That may not seem like much, but it sent shock waves through an industry already shaken by the Lehman Brothers bankruptcy two days prior. Even though the Reserve Fund held only 1.2% of its assets in Lehman Brothers debt, the bankruptcy was enough to send panicked institutional investors rushing for the exits, resulting in massive outflows of $350 billion from money market funds before the U.S. Treasury Department stepped in with temporary guarantees.Those guarantees are long gone, replaced by rules governing money market fund providers that are designed to help avoid or mitigate the impact of future runs. In 2010, the SEC undertook limited reforms to improve fund transparency, strengthen liquidity and credit quality requirements, and restrict riskier types of holdings. In July 2014, the agency went even further by adopting a... Read full post

Jul 13, 2016, 5:23 PM EST

DOL fiduciary rule brings different adviser standards to light

By John Nersesian

The recently issued Department of Labor fiduciary rule is arguably one of the most sweeping regulatory changes in recent decades. While many continue to debate its merits or, in some cases, lack thereof, the rule succeeded in bringing the different adviser standards of care into the spotlight.To be clear, the different adviser standards of care have been largely unchanged since the original Employee Retirement Income Security Act of 1974. These differing standards can be confusing, particularly to investors, in part because the word “fiduciary” has different definitions and requirements under the Securities and Exchange Commission and DOL. The key difference with these standards is that they are governed by different laws, despite using similar terminology. The ERISA fiduciary standard under the DOL was established by the ERISA legislation; the investment adviser fiduciary under the SEC was established by the Investment... Read full post

Jul 13, 2016, 4:45 PM EST

5 steps to elevate the next generation

By John Furey and Brandon Kawal

As an independent firm grows, the role of an owner evolves from being a player on the team, to leading and managing an organization. Eventually, size and complexity will drive the need for greater professional management to help drive the owner's vision. Firms facing this need have three options: have the owner move into professional management and reduce responsibilities, elevate next generation professional talent from within or hire professional management from outside. Elevating internal talent may be the optimal path for some advisory firms. For most, it is likely a combination where talented next generation professionals are elevated within the firm, and outside professional management is hired as a compliment. If your firm is in need of a diversified management capability, consider elevating the next generation to create leverage and return for the current founders/owners.UNIQUE POINT OF VIEWTalented professionals often have a... Read full post

Jul 12, 2016, 5:37 PM EST

The ABC's of the DOL fiduciary rule

By Anthony Domino, Jr.

A casual reading of any financial publication recently is certain to have a headline featuring three letters: D – O – L. What they are referring to is the U. S. Department of Labor Conflict of Interest Rule, popularly referred to as the fiduciary rule. The culmination of a long tussle between regulators and professional advisers who engage in retirement planning — the final version has seemingly not satisfied either camp. Nonetheless, the most concerned — financial advisers and the companies they represent — will do what is needed to adapt while some final maneuverings remain.The amount of investor assets accumulated in retirement plans is significant — $6 trillion, according to recent Cerulli & Associates research. Add another $3 trillion in individual retirement accounts, and that's a total of $9 trillion. Sounds like a lot, but when spread over the 245 million adult Americans, it is a less than... Read full post

Jul 6, 2016, 1:27 PM EST

How financial advisers can rethink alternatives

By Dayne Roseman

After an arduous 2015, plagued by disappointing returns and roller-coaster markets, many financial advisers hoped the new year would bring renewed promise of investor-friendly markets. Now, some sevens months into the new year, 2016 is starting to look a lot like 2015. China's economic challenges, continued strain on oil, dismal broad markets performance and general global apathy have put returns under pressure and financial advisers on the defensive.Even hedge funds, once the alternative investment go-to for non-correlated market returns, are only performing about half as well as the broad markets (as of June), leaving many advisers at a loss for what to do next. Remember George Orwell's often-repeated line from Animal Farm (1945), “All animals are equal, but some animals are more equal than others.”? It could just as easily be attributed to alternative investments. Hedge funds are just one component of the alts universe,... Read full post

Jun 28, 2016, 4:22 PM EST

How to turn new clients into raving fans in the first 100 days

By Brad Johnson

Here's a startling fact about business: Somewhere between 20% and 70% of new clients will stop doing business with you within the first 100 days of becoming a client.Now most financial professionals will disagree with these figures. After all, you can barely get all the paperwork done in the first 100 days, so there's no way a new client could stop doing business with you that quickly, right?Well, not so fast. Branding expert Joey Coleman points out that if you don't get the first 100 days right, then new clients will mentally and emotionally check out. They won't become referrers, and they might start looking for other options, even if they don't officially leave for another few months.Now, here's the good news according to Mr. Coleman (who's used these strategies with Zappos and Hyatt Hotels). If you can create a positive and impactful client experience during the first 100 days, then your clients will stay an average of five years.... Read full post

Jun 24, 2016, 5:43 PM EST

Radio show host Ric Edelman rants about raging fiduciary battle

By Christine Idzelis

Seven years after the Treasury Department recommended in a financial reform report that brokers be held to a fiduciary standard, the industry is struggling to come to grips with it.The Securities and Exchange Commission “should be given new tools to increase fairness for investors by establishing a fiduciary duty for broker-dealers offering investment advice and harmonizing the regulation of investment advisers and broker-dealers,” the Treasury Department said in the report released June 2009.What brokers got instead was the Labor Department's fiduciary rule, issued in April, requiring all financial advisers to put their clients' interests ahead of their own when helping with their retirement accounts. About two months later the lawsuits began, getting under the skin of Ric Edelman, who runs one of the country's largest registered investment advisory firms and has his own radio show about personal finance. “I'm in a... Read full post

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