Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big industry news that asset manager Blackrock is partnering with Microsoft to create a new digital financial planning and retirement platform for consumers, aiming to leverage both Microsoft’s tech prowess and workplace reach to insert Blackrock-created digital advice tools directly into the employer marketplace… for which the software’s recommended solutions will include new Blackrock retirement income products, as Blackrock increasingly focuses on technology, not just as an effective tool to manage portfolios, but literally a distribution channel for its investment products.
Also in the news this week was a surprising “double-header” of fee-only news, as both Ron Carson and Ric Edelman have converted their practices to be entirely fee-only going forward, with Edelman’s firm shedding the last sliver of its commission-based trails (which were down below 1% of revenue anyway) and Carson forming his own limited-purpose broker-dealer to house and sell off his prior commission-based trails to (in order to drop his own FINRA licenses for good).
From there, we have a slew of investment-related articles this week, including: a look at the significance (or not) of the recent inversion of the yield curve; how the U.S. is now reaching the crossover where, for the first time in 75 years, it is now a net exporter of oil, as the country approaches energy independence (albeit still in a globally-interdependent energy marketplace); a deep-dive look at securities lending and its rise as a tool to reduce the cost of ETFs; Betterment’s decision to launch a new “two-way sweep” that shifts client cash into short-term bond funds with higher yield (including automatically transferring and investing “excess” client cash held in outside bank accounts, potentially attracting over $2B in new AUM in the coming year); the shift of ultra-high-net-worth investors towards “direct investing” into businesses in lieu of public market (or even hedge fund or private equity) investing, and what may be underappreciated risks in doing so; and a fascinating study from Riskalyze that finds a substantial relationship between the risk tolerance of clients… and other individuals who live in the same state, providing yet another reminder and affirmation that investing is often a herd behavior.
We wrap up with three interesting articles, all around the theme of looking out to the opportunities and challenges of 2019: the first is a look at the major challenges likely to loom in 2019, from the SEC’s anticipated re-proposal of Regulation Best Interest and the rising risk of a bear market to the industry’s ongoing transition away from an AUM-centric model and the growing availability of “fee-only” insurance and annuity products; the second explores similar industry trends in the UK, which remarkably mirrors the US in everything from the need for succession planning, to the rise of next generation advisors, the emergence of the “second generation” (i.e., non-founder) CEO of advisory firms, and the growing pressure on advisory firm founders to develop business skills to manage their growing advisory business enterprises; and the last is a fascinating discussion around Vanguard’s stated intent to come into the financial advice business and drive away high-cost low-value financial advisors just as they did to high-cost low-value mutual fund managers… even as the firm builds its advisory business on top of its own (admittedly low-cost and popular) mutual fund and ETF business, raising the question of whether Vanguard really represents the future of financial advice or the last remnant of its proprietary-product-centric past?
Enjoy the “light” reading!