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
The burning issue for the mutual fund industry is whether the Trump administration will curtail or rescind the Department of Labor’s fiduciary rule. The nomination of Andrew Puzder for Labor Secretary, who is anti-regulation, could mean changes to the fiduciary rule as it currently stands. While it’s meant to remedy conflicts of interest in the provision of commission-based retirement products, opponents fear it could lead to advisors to abandon mass-market clients. Read more
Today’s news declaring Andy Puzder as Trump’s pick for Labor Secretary does not bode well for the short-term prospect of moving the date of the DOL Fiduciary Rule. For the past several weeks, the consensus in our industry was that the date could be moved by the incoming Secretary. The caveat is that the incoming Labor Secretary’s ability to move the date hinges on his/her confirmation by the legislature in a timely manner. Read more
Is Your Firm Prepared?
According to ICI whitepaper regarding the DOL final rule defining “fiduciary,” certain financial intermediaries (and mutual funds in limited circumstances) may choose to resign as Broker-Dealer of Record or both Broker-Dealer of Record and Custodian.
Delta Data anticipates the needs of the parties affected by the DOL Fiduciary Rule change.
The new DOL Fiduciary rule has barely gone into effect, and it is already starting to shake things up. One of the first changes we are starting to see is a new set of mutual fund share classes. American Funds and Franklin Templeton have already announced new share classes to help advisors deal with the new fiduciary rule. Rest assured, there will be more.
These new share classes are what some are calling “stripped down” share classes as they carry no sales load, no 12b-1 fees and no sub-TA fees. Bare bones. Absolutely no compensation from the fund to the distributor. It is up to the distributor to figure out how to charge their clients and in turn compensate the advisor.
The Money Market reforms promulgated by the SEC became effective October 14, 2016. The implications of the reforms go deep and wide, both with the mutual funds that offer money market funds, but also for the firms that offer money market funds on their platforms. One segment of firms particularly hard hit by the reforms is banks. Bank trust accounts receive untold cash items every day, from everything from dividends to rental income. There are just too many of these small transactions to invest individually in mid or long term investments. Banks have used money market funds as sweep vehicles for many years to park this constant flow of cash receipts until ready to invest in longer term investments. Money market funds have been a convenient vehicle to park cash and earn interest while still being considered similar to cash, as the funds always maintained a one dollar per share value. Read more
Ignites recently published an article “Shops Zero In on Fund Pricing Risk Management” about a Deloitte survey that examined what Fund shops are spending time on — keeping their folks up at night. A breakout star this year is business continuity planning (BCP) of their key third party service providers. This topic is near and dear to Delta Data, given we thrive on being an integral part of our client’s execution of their business model. Our view on this subject is to embrace transparency for our clients to understand how we approach the critical need of service delivery. More importantly, we have some thoughts on how to best execute the oversight of the supply chain of services our clients have come to rely on to execute their business. Read more
The last several years have demonstrated an ongoing focus on transparency driven by guidance and rules from the governing bodies of the mutual fund industry. To date, most transparency initiatives have focused on Dealer to consumer transparency (404a and 408b2) and Dealer to Fund transparency that support a myriad of requirements from “Distribution in Guise” prospectus rule compliance including Rule 22c-2. The Department of Labor proposal reveals a new requirement on the horizon for increasing dealer transparency into the DOL’s fee and fiduciary requirements. So why has this become of interest to the DOL now? To understand this drive requires looking at the dealer infrastructure. Read more
The phrase, “knowledge is power,” takes on a special meaning when a paucity of knowledge leads to potential issues that leave a company fumbling around in a dark room, looking for a black cat, only to be saved when someone turns the lights back on. When Mutual Funds companies’ clients started moving away from trading in fully disclosed accounts to consolidated omnibus accounts, they lost their ability to monitor their fund trade activity. Compliance with prospectus defined rules became impossible to monitor and data became the black cat in the black room. However, due to market demand for more than summarized trade activity, transparency has reemerged within omnibus accounts. How this happened, who it impacted and what has been done to remediate the problem is the focus of this week’s journey into the fund industry’s Twilight Zone. Read more
In the last couple of years, FINRA has been taking a hard look at brokers that have been selling A shares to retirement plans to make sure they were waiving the load, if the fund allowed such a waiver. Well, it turns out that a lot of brokers have been selling A shares into retirement plans at POP (Public Offering Price), that is, the participants in the plan paid a front end load when the fund’s prospectus allowed those shares to be sold with no load. What’s the result of this activity? A FINRA investigation into broker dealer firms. So why is this happening now? Let’s take a step back and examine the players in this party. Read more