Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that the SEC has adopted a new ETF Rule 6c-11, adding new formal disclosure requirements about daily holdings, bid/ask spreads, and trading premiums or discounts… but also eliminating the requirement for all new ETFs to obtain costly and time-consuming exemptive relief to be launched, which is anticipated to even further accelerate the pace of new ETF launches in the coming years (though inverse and leveraged ETFs, and non-transparent ‘active’ ETFs, will still remain with the slower high-scrutiny exemptive relief process).
Also in the news this week is a new joint initiative from the Foundation for Financial Planning along with the CFP Board, FPA, and NAPFA, to promote pro bono financial planning services, and notable internal compliance review underway at Merrill Lynch on advisors who are using Merrill’s home-office-created model portfolios, which happen to be the same as the portfolios offered directly to consumers in their Guided Investing and broker-facilitated Merrill Edge programs, and create an interesting microcosm of the challenge for advisors to justify exactly what value they’re providing over and above what a direct-to-consumer offering provides (especially when it’s your firm providing the side-by-side offering).
From there, we have a few more investment-related articles, including a look at the recent turmoil in interbank lending and the overnight repo market that may be signaling the end of banking excess reserves fueling economic growth, a discussion of the new “FedNow” system being developed to facilitate truly “instant” bank-to-bank payments (which may entirely eliminate overdraft fees, payday lending, and check-cashing services in the coming decade), and an early warning for mutual fund holders that a 10-year bull market coupled with rising outflows from mutual funds (as investors increasingly shift towards ETFs) could trigger very sizable mutual fund capital gains distributions in 2019 (far beyond what the funds themselves have appreciated this year).
We also have a number of articles on health insurance, including one that finds Affordable Care Act (ACA) marketplace plans may finally be “stabilizing” with premium increases slowing and some insurers increasing their options and competing in more state markets, a study that finds overall health insurance costs continue to march higher in the employer marketplace (with family coverage up 5% in 2019, leading the total cost of coverage for family plans for employers to top $20,000 in 2019), and a look at some of the behavioral finance research about why people have such difficulty choosing the right health insurance plan even when one is ‘clearly’ dominant (a combination of complex math, overwhelming choices, and a strong aversion to deductibles even when they may be cost effective).
We wrap up with three interesting articles, all around the theme of what motivates advisors themselves: the first looks at a recent Financial Planning Review study finding that women who have entered the profession find more career satisfaction going independent than working in large corporate environments; the second explores a new Morningstar study around practice management and the conflict between advisors who started firms because they want to serve their clients but have trouble finding and attracting them; and the last exploring the importance of avoiding peer pressure, including as a financial advisor, and creating the firm that is most fulfilling to you personally (and not just what the “industry says” you should be building towards).
Enjoy the ‘light’ reading!