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InvestmentNews reporters offer their take on intriguing or controversial articles from around the web.

May 2, 2019

Alexander Acosta is the Night King from 'Game of Thrones'

By Greg Iacurci

For those of us who love the HBO series "Game of Thrones" — and I'm guessing that's pretty much everyone reading — one question has nagged for the majority of the show's run: Just who is this Night King guy?We know a few things. The signature villain was once human. He has ominous horns jutting from his head. He doesn't talk much. He has glowing blue eyes. He reanimates scores of dead folk into murderous zombies, all with a nonchalant half-raising of his arms. Oh, and he wants to kill everyone in the Seven Kingdoms and create an "endless night."But we don't know much else of substance about the Night King or his back story. I repeat, who is he?Well, folks, we now have our answer. It's Alexander Acosta. The secretary of Labor is the Night King, and he's bringing something back from the dead: the DOL fiduciary rule. The Department of Labor's rule, an Obama-era regulation that raised investment-advice standards in retirement ... Read full post

May 1, 2019

Asset managers preparing to launch nontransparent ETFs

By Jeff Benjamin

Financial advisers would be wise to start boning up on the ins and outs of nontransparent exchange-traded funds, because they might be coming soon to a platform near you.For years, asset managers have been trying to quietly nudge the concept of an ETF that discloses its portfolio holdings on a delayed basis, like a mutual fund, through regulatory approval. The three-quarters nod of approval earlier this month from the Securities and Exchange Commission is as close as these ETFs have gotten to reality.Even though the SEC's preliminary approval applies primarily to Precidian Funds and a handful of asset managers that have already entered into licensing agreements for its new ActiveShares, the industry has a distinct appetite for the products.A Cerulli Associates survey of 35 asset management firms found that 46% would build out nontransparent ETF capabilities if they receive SEC approval. And 55% of respondents said they would launch a... Read full post

Apr 12, 2019

Who benefits the most from non-transparent ETFs?

By Jeff Benjamin

After years of scrambling and determination, it looks like the actively managed mutual fund industry might finally get its wish to manage exchange-traded funds without having to publish daily investing positions like all other ETFs.The question now is, who benefits from this much-coveted nontransparent ETF structure?The short answer is, it could be investors.The preliminary nod of approval by the Securities and Exchange Commission earlier this week for a new type of ETF by Precidian Funds has been interpreted by some as an opening of the flood gates for big brand-name fund complexes that haven't yet climbed aboard the fast-moving ETF bandwagon.It has long been argued that concerns over exposing portfolio positions through traditional active ETFs have kept such major active managers as T. Rowe Price and Capital Group from entering the ETF space.(More:​ Demand for growth stocks produces record inflows for ETF)That fear of... Read full post

Apr 10, 2019

Will Merrill Lynch plan to add fresh advisers to offices be a boon — or a bust?

By Bruce Kelly

Merrill Lynch's plan to seat up to 300 young advisers in branch offices with its most experienced and profitable financial advisers could be a boon to business, with referrals flying back and forth, or it could backfire and add unnecessary friction among its sales force, according to industry observers. Merrill Lynch has long been the financial advice industry's leading trainer of young brokers. Along with two key competitors, Morgan Stanley and UBS Financial, the firm has said in the past couple years that it was going to reduce its effort to recruit experienced financial advisers from rivals, which is expensive and risky. Instead, those firms want to focus on organic growth, push advisers to use new technology and, in Merrill Lynch's case, reward advisers for selling products from its parent, Bank of America. Now Merrill Lynch is taking those initiatives one-step further. It said on Monday it intends to hire 300 young advisers, who... Read full post

Apr 2, 2019

What's keeping advisers from using investment model marketplaces?

By Ryan W. Neal

Investment model marketplaces were one of the advice industry's buzziest trends in recent years, hyped as a potential disruptive threat to turnkey asset management platforms (TAMPs). About a half-dozen of these marketplaces launched in 2017 and 2018, offering a digital platform for independent advisers to select third-party investment models. Fintech vendors including Orion Advisor Services, Riskalyze and Oranj all produced their own offerings, as did some major custodians.(More: NorthStar Financial acquires $10 billion TAMP)But in 2019, it's unclear how much traction these platforms really have with advisers. I was unable to find a single adviser using a model marketplace to select third-party investments, and the firms won't say how many advisers are actually using the platforms. "Have you seen any press releases come out about the raving success of any of those model marketplaces? Yeah, me neither," wrote Kyle Van Pelt, a strategist ... Read full post

Mar 8, 2019

Advisers can beat out firms like Fidelity with this marketing approach

By Ryan W. Neal

Independent advisers may not have the budgets to match what a company like Fidelity Investments can spend on advertising, but they can take advantage of what may be an even more effective tool for generating business leads for them — using paid search engine results. They just have to get a little creative. According to research from Kantar Media, a firm that measures advertising across media, Fidelity led the way in spending on television ads from Oct. 24 to Jan. 21, costing the firm about $11.7 million. Following Fidelity was Pacific Life and Voya Financial, which spent $7.3 million and $6.5 million, respectively, to air their brands on TV. Yet these same firms aren't doing particularly well when it comes to sponsored search. Kantar Media tracked clicks to advertised Google results of 65 keywords that are relevant to the financial planning and retirement industry. On mobile searches, Fidelity earned 3.4% of clicks for those... Read full post

Feb 27, 2019

Are the economics of active management becoming unsustainable?

By Greg Iacurci

When one of the world's largest money managers calls the economics of a major fund platform into question, it raises a few eyebrows. Fidelity Investments, which manages $2.5 trillion for investors, said the ongoing movement to low-cost mutual funds presents "unsustainable economics" for its FundsNetwork platform, the business model of which is "broken," according to a company document from 2017 detailed in a story published Wednesday in the Wall Street Journal. Fidelity is being investigated by the Department of Labor for a hidden fee it supposedly charges fund companies whose products are available on the platform, which holds $1.5 trillion in customer assets, according to the Journal. That fee could be passed on to investors and make up for reduced revenue elsewhere, the report said. A lawsuit filed last week also attacked this so-called "secret" 401(k) fee, calling it a "kickback" that's undisclosed to investors and employers. The... Read full post

Feb 21, 2019

Insurers create pain points for advisers and clients

By Greg Iacurci

The insurance industry hasn't done itself any favors when it comes to earning the trust of financial advisers and their clients.Insurers have repeatedly frustrated these stakeholders by making business decisions that are seemingly contrary to their interests, whether it's raising costs for owners of universal life insurance policies, hiking premiums for long-term-care policyholders or, in the case of variable annuities, trying to wriggle out of costly promises they made to investors via buyout offers.These are systemic issues that create an environment of mistrust, of being constantly on one's guard to ensure that a client's financial plan isn't upended. "You'd have to have your head in the sand to not acknowledge that the interest of many of the insurance companies is directly opposed to the interest of the consumer," said Scott Witt, a fee-only insurance adviser. The decade of rock-bottom interest rates that began around the time of... Read full post

Feb 4, 2019

Cetera new facial recognition technology to improve risk questionnaires

By Ryan W. Neal

Financial planning technology took center stage at this year's T3 Adviser Conference, but it was Cetera Financial Group's demonstration of new facial recognition technology that really stood out in terms of a "wow" factor." For my money, Cetera's Decipher platform was the coolest piece of adviser fintech I've seen in four years of attending T3. Not just for the actual software, but in demonstrating how exactly advisers can utilize it in their day-to-day practices. Decipher is a new take on client risk assessment, combining a traditional questionnaire with psychological metrics and facial recognition technology. The software analyzes facial expressions to pick up on emotional changes as the person fills out the questionnaire. It then combines this data with the answers and a behavioral analysis to produce a unique report for each person.... Read full post

Jan 29, 2019

Estate tax pretty much 'optional,' but GOP still trying to kill it

By Greg Iacurci

The estate tax isn't relevant to the vast majority of advisers, their clients or America at large. And estate planners say the tax is largely optional for the wealthy, since there are plenty of ways to dilute it greatly or avoid it outright. However, there's still a movement by some groups to end what they call the death tax, as demonstrated Monday when about 30 Republican senators sponsored a bill to permanently end it. "It's the government's final insult to force grieving families to visit both the undertaker and the IRS on the same day," said Senate majority leader Mitch McConnell, R-Ky., a co-sponsor of the Death Tax Repeal Act of 2019. However, the push to overturn the tax isn't necessarily founded in reality. First, hardly any families pay the tax, a 40% federal levy. There were 11,300 estate-tax returns filed in 2018, and only half of those were taxable, raising $20 billion in revenue. The recent tax law greatly reduced the... Read full post

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