Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the interesting announcement that TD Ameritrade is raising its revenue-sharing agreements for its advisor referral network, as the DoL fiduciary rule looms along with the assimilation of hundreds of Scottrade retail branches that could soon turbocharge the advisor referrals coming through the network… and both raising questions about whether this will kick off revenue-sharing increases at other custodians as the struggle for advisor growth becomes more widespread, and also raising concerns about how abruptly TD Ameritrade distributed the news and made the change (giving advisors barely two weeks to agree to a substantial change in terms or be kicked off the referral platform). Also in the news this week is an emerging trend that advisors are getting more political in their communication with clients – what was traditionally a third rail never to be touched in client meetings – and whether doing so is really bad for business, or might actually be good to help attract like-minded prospective clients with similar beliefs.
From there, we have a few articles about regulatory trends, including: a deeper look at how the DoL fiduciary delay until June 9th (and delay of the full Best Interests Contract Exemption until the end of the year) may still not be enough to really deter the fiduciary rule from taking effect; the trends in the 401(k) marketplace for more advisors offering 3(38) services instead of operating as just a 3(21) fiduciary; and an interesting list of other regulatory battles for financial advisors that may be looming (including a potential “fiduciary lite” proposal that could come from the SEC on the titles that advisors use when holding out to the public).
We also have a number of investment-related articles this week, from a look at the rise of “evidence-based” investing, to a theoretical exploration of why it is that stocks continue to persistently outperform bonds (even when we “know” they’re going to outperform, which theoretically means an efficient market should bid up their prices until they don’t outperform anymore), a fascinating new study that shows how incredibly skewed stock returns really are with the entire wealth creation of the US stock market actually coming from just 4% of all stocks (and half the wealth creation from just 0.3% of them!), and a retrospective look at how TIPS have done for the past 20 years since they were first introduced in 1997.
We wrap up with three interesting articles: the first is a look at how the recent United Airlines incident is an example where having “too many” rules to manage behavior actually caused a breakdown in the system (which has significant implications regarding how many fiduciary rules should or shouldn’t be prescribed for advisors); the second is an important reminder that advisors should not market themselves as being “conflict-free” just because they’re independent, because all advisory models still have at least some conflicts of interest; and the last is a good reminder of why at least some regulation is necessary in most industries, because otherwise it’s just too easy for marketers to take advantage of low barriers to entry and communicate in a way that misrepresents their products (but lets them profit before anyone realizes the profit that has been caused), and thus why smart and ethical marketers (and financial advisors?) should recognize that some level of regulation is actually a positive (both for consumers, and in providing clear guardrails to practitioners).
Enjoy the “light” reading!
source https://www.kitces.com/blog/weekend-reading-for-financial-planners-apr-15-16/?utm_source=rss&utm_medium=rss&utm_campaign=weekend-reading-for-financial-planners-apr-15-16
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