Automated Customer Account Transfer Service (ACATS) burst onto the scene in the early 2000s and revolutionized the ability for investors to move entire portfolios between financial institutions. The technical capability and usage far exceeded the expectations set forth, and it has reached ubiquity within Capital Markets for asset transfers. But the technology’s support for Mutual Funds, like so many other technical advances geared towards Capital Markets, falls short.
Here are the 4 reasons where we regularly see ACATS fail Mutual Funds, as well as some simple ways to improve the execution. Read more
The Trump administration has been clear in stating its objective to reduce individual and corporate tax rates. But to fund the reduction in tax revenue, one of the items they are looking at changing is the deductibility of employee 401(k) deferrals. The Joint Committee on Taxation, which acts as an advisor to Congress with research on the tax code, has shown that tax-preferred treatment of defined contribution plans will cost 583.6 billion in foregone revenue between 2016 and 2020. This could be very tempting for congress as it looks at ways to fund the tax cuts. Choosing to change the 401(k) tax rules by doing away with the tax deferral benefits of employee 401(k) contributions would be shortsighted and very harmful to the retirement system in the US.
Will You Be Ready If FINRA Calls? Brokers Are Running Out of Time for Mutual Fund Fee Waiver Remediation
Investment companies have long allowed some retirement plans to buy Class A mutual fund shares with no up-front commission, so investors can benefit from investing with no commission as well as benefiting from lower management fees. But during routine audits in 2014, the Financial Industry Regulatory Authority (FINRA) discovered that a lot of broker-dealers hadn’t been reading (and/or complying with) all the fine print on fund prospectuses. Because of inadequate supervisory controls and training, investors entitled to sales charge waivers were either paying the sales charge, or being sold Class B or C shares with back-end sales charges and higher ongoing fees and expenses, even when A shares were available. Read more
Oversight is a hot topic in the mutual fund asset management industry. With the SEC stepping up its monitoring and enforcement of fund distribution and fee allocation, third-party due diligence has to be rigorously documented. As a result, it’s become critical to use technology to manage your distribution networks. It’s the only way to make the allocation of services provided to each investor truly transparent. This matters because manual oversight involves mismanaged data and simple human error that can have long-lasting consequences for your brand. Read more
Almost a year ago I posted a blog entitled SEC, Dodd Frank, Money Market Reform and FSOC: Connecting the Dots Between the Acronyms. In the post, I expressed my dismay with the passing of the Money Market Reform (MMR) laws, and how it seemed to me that the cure was worse than the disease it was trying to cure. Typically, the SEC does an OK job at assuring us with cost/benefit analysis of its rules. However, something about the MMR rule did not feel right, so I decided to do a little research on how the MMR rule came to be. Read more
A never ending series of new regulatory and compliance mandates means that the broker-dealer community is continually having to adapt to change. In response, it’s investing in enterprise software that can handle large volumes of data, and integrate with “data as a service” solutions.
While it was the need to satisfy regulators’ demands for transparency that initially spurred the mutual fund industry to upgrade its back office technology and IT systems, the best data management utilities are now prized for their ability to provide real-time insight and analytics, and speed up decision making. Read more
Congress still on the “outs” with DOL pick ─ who, in turn, has undisclosed Nanny Baggage to resolve. Meanwhile, Donald still has commitment issues …
If you thought this was going to be a political piece, sorry to dismay but it is not. This is the actual update from the past few days of our lives. Politics aside, the viewing audience has been kept on their seats in deft fixation on the outcome. The cost to the industry of the seesaw of the last four airings of this melodrama has to be in the Billions of dollars. The winners? The lawyers and consultants. The losers, the Investors. Read more
The SEC, as part of their initiative around the new liquidity rule, has given the green light for funds to implement Swing Pricing. For those not familiar with the Swing Pricing concept, basically it allows a fund to bump up or down their end of day NAV to help cover their increased transactional costs when market volatility causes higher than normal purchases or redemptions. It will be voluntary for a fund company if they want to implement Swing Pricing. Funds are prohibited from implementing it until November 19, 2018, in order to give those funds that do not have experience with Swing Pricing time to implement needed system changes. Swing Pricing is popular in Europe and those funds with a presence in Europe would perhaps have an advantage in being able to implement earlier than other funds, hence the delayed date.
Whatever happens to the Department of Labor fiduciary rule, the mutual fund industry is moving into a “fiduciary era.” For one thing, investment advisors hope to capitalize on investors’ heightened awareness of the role of a fiduciary. For another, the backlog of regulatory change that must be implemented is large and there are many processes in place that were implemented with time to market not efficiency of execution that need to be addressed.
Besides demanding ever-greater levels of transparency, regulators are also beginning to turn their attention to RegTech, to ensure investment firms have the systems to manage compliance workloads. As we look ahead to a future dominated by financial technology, it’s becoming clear that when it comes to data management, only the fittest will survive. Read more
Friday’s bill on the House floor to delay the DOL fiduciary rule may result in a 24-month delay of pending arduous legislation. The largest providers of services to investors in our industry set sail for the April 10th destination months ago. In our blog just after the election we noted that anything less than immediate clear guidance would allow for structural and maybe irreversible changes to go forward in our industry. I am not aware of any large platform that has a ‘Plan B’ whereby a coordinated roll-back exists.
The deadlines outlined in the initial rule were so tight that the companies affected only had time to prepare a “plan to comply.” I believe the DOL’s rule will be delayed, but this will actually increase the expense of doing business for the industry. Read more
— STAY AHEAD OF THE CHANGE —
Cutting Through the Noise
DOL Fiduciary Rule and Impact on Advisors & Product Selection
On-demand webinar — 35 minutes including Q&A
The DOL is requiring Brokers to act in the best interest of the client. What is the most effective and efficient way to do this with product selection?
How do you devise controls to manage the universe of securities that advisors choose from?
What are the product attributes you want your financial advisors to focus on?
In this webinar, we discuss how to leverage technology to satisfy the Advisor’s legal obligations and learn to:
In light of the upcoming DOL Rule, the SEC recently issued guidance to funds on disclosure issues and certain procedural requirements with offering variations in fund sales loads and new share classes. The SEC IM Guidance Update appears to be an attempt by the SEC to not only provide needed guidance to funds, but to also to alleviate for SEC staff what could become an avalanche of new filings. Read more