Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with a slew of major industry news, including details of the SECURE Act that just passed the House and may implement a number of significant changes to retirement accounts (including an increase in the RMD age to 72 and the elimination of stretch IRAs), an updated agenda from the SEC stating that it will release an updated version of Regulation Best Interest for a vote of the SEC Commissions in two weeks, and an announcement that the Department of Labor is working on its own re-proposed fiduciary rule that will be out later this year as well (likely after the SEC’s rule is finalized so the DoL can make its own fiduciary rule conform to it).
Also in the news this week is the revelation that Vanguard is looking to build out an RIA custody platform on the back of its internally-successful Personal Advisor Services platform to compete with Schwab, Fidelity, TD Ameritrade, and Pershing, and the announcement that LPL has bought a small employee-model broker-dealer called Allan & Company that is viewed as a major shift from LPL to get into the captive-employee broker-dealer model alongside its existing independent model (akin to Ameriprise and Raymond James, and anticipated as a pathway both to attract employee-style wirehouse advisors and potentially to even acquire and roll up other smaller employee-style broker-dealers).
From there, we have several investment-related articles, from the SEC’s approval (finally!?) of the first non-transparent actively-managed ETF (that may lead to a huge wave of other asset managers offering active ETFs in the coming year), to some of the emerging risks of “free” no-fee ETFs, how “core” bond holdings are actually not very effective diversifiers of traditional stock portfolios (and why government bonds, even at today’s low interest rates, are better), and a look at the looming rise of “Direct Indexing” as the next big thing that could disintermediate ETFs (and as ETFs continue to disrupt mutual funds).
We wrap up with three interesting articles, all around the theme of ongoing industry and regulatory change: the first looks at how, even as regulators continue to propose fiduciary rules that drive the industry towards fee-based accounts, there is concern that some investors may be getting shifted to fee-based accounts with ongoing AUM fees when, as buy-and-hold investors, they would be better served to simply remain in traditional commission-based brokerage accounts (and pay nothing since they’re not trading anyway); the second looks at some of the research on conflicts of interest being discussed in Australia as regulators there consider the next steps to expand the fiduciary duty of Australian advisors; and the last looks at the looming choice coming for CFP professionals at broker-dealers, who will become subject a CFP-Board-based fiduciary duty on October 1st that not all broker-dealers may be willing to tolerate, and raising the question of whether an industry recruiting battle will be ignited if certain broker-dealers ban their advisors from using the CFP marks after October 1st, where suddenly CFP certificants at those firms will have to agree to either drop the marks they worked so hard to earn and stick with the broker-dealer, or instead simply drop their current broker-dealer and switch to alternative platforms who recruit them with the promise of being more supportive of financial planning and letting them keep their CFP certification.
Enjoy the “light” reading!