Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big news that now Fidelity is throwing its hat into the “robo” ring, with a new automated investment advice solution called “Fidelity Go” that, like Schwab’s own effort, will function as a distribution channel for Fidelity’s own proprietary mutual funds for a portion of the investment assets. Also in the news this week was a settlement between Vanguard and the state of Texas driven by a whistleblower allegation that the company may be setting its costs at a below-market rate as a tax avoidance scheme (and raising the question of whether further tax-related lawsuits may eventually force Vanguard to raise its fees).
From there, we have a few technical financial planning articles this week, from a look at the ongoing rise of Deferred Income Annuities (also known as Longevity Annuities) and why advisors should consider them, to a discussion of why factor investing strategies (e.g., a value-tilt or a small-cap tilt) continue to persist despite the fact they are “known” and theoretically should be arbitraged away, a look at the “investment portfolio of the future” as advisors increasingly shift to “core” investing with index funds and “satellite” positions with an ever-widening range of alternative investments, and discussion of a recent EBRI study that found while retirement spending declines by more than 20% for nearly 1/3rd of retirees in the first 6 years of retirement, a material number of retirees increase their spending early in retirement (and not just those who are affluent).
We also have a couple of practice management articles this week, including: the latest Cerulli data, which finds that despite prior predictions, the number of financial advisors actually increases last year (albeit by just 1.1%) as large firms increasingly hire junior advisors to deepen their teams and formulate succession plans; a look at the importance of really asking your clients what they truly value, recognizing that what we think clients appreciate may not really be what they value most; and the last looking at how financial planning may change in the coming decade as technology increasingly impacts the way advisors do business and serve clients.
We wrap up with three interesting articles: the first looks at how the coming Department of Labor fiduciary standard could actually become a disruptive threat to RIAs (even as it benefits consumers), as RIAs simultaneously lose their differentiating fiduciary factor and face an onslaught of new competition from sales-oriented fiduciary advisors who may prove more capable at gathering clients and assets; the second is a cautionary note from former SEC Investment Management Division director Norm Champ about the problems that may arise if the SEC proceeds with its anticipated proposal to outsource RIA exams to a third-party examiner; and the last raises the interesting question of whether the entire retirement paradigm of “work now for financial freedom later” is the wrong approach, and whether a series of periods of work followed by periods of “mini-retirement” may ultimately be the more fulfilling “retirement” approach of the future.
Enjoy the reading!