December Reading Round-up

Dec 21, 2023 | Blog Posts

The end of the year is upon us, and folks are looking ahead to what’s happening in 2024. It will be an exciting year for financial advisors, with potential rate cuts leading to economic growth and a national election on the horizon. 

Here are some of the top stories for December. 

New Rules and Regulations for Financial Advisors

Broadening the Definition of a Fiduciary

Ballotpedia News

The Biden administration’s proposed labor rule, released on November 3, seeks to broaden the definition of a fiduciary to include insurance agents, brokers, and other financial advisors in specific circumstances. The rule mandates that these professionals act in the best interests of individual investors, avoiding conflicts of interest, and applies when investors reasonably trust the financial services provider. Supporters argue it protects investors, while opponents claim it overregulates and hinders access to quality advice. The Department of Labor is accepting public comments on the proposal until January 2, 2024.


Expanding the Definition of What Constitutes Financial Advice


A September proposal by the North American Securities Administrators Association (NASAA) to revise its model rule on business practices has triggered concerns among wealth management companies and brokerage firms. The proposal aims to update regulations in line with the evolution of the wealth management industry and the Securities and Exchange Commission’s Regulation Best Interest (Reg BI). However, critics argue that the definition of a recommendation in the proposal is overly broad, potentially encompassing a wide range of communications and conflicting with Reg BI, which ties recommendations to clear investor calls to action. Wealth management firms fear the proposal may hinder investor education efforts and lead to regulatory fragmentation, while some supportive comments suggest minor modifications for clarity. NASAA is currently reviewing the feedback received without a set timeline for a decision.


The Growing Utilization of SaaS Technologies by Financial Professionals


The finance industry continues to adopt Software-as-a-Service (SaaS) models to enhance operational efficiency, achieve faster time-to-market, improve risk management, enable continuous innovation, and adhere to international standards. The deployment of SaaS allows market operators to leverage cloud technology, reduce capital expenses, and benefit from continuous peer innovation, ultimately laying the groundwork for modernization to address the challenges of unprecedented volatility and volume in financial markets. Nasdaq’s SaaS-delivered exchange technology is highlighted as an example that enables market operators to establish a scalable trading infrastructure quickly.


Take Advantage of Volatility with SVOL ETFs


The Simplify Volatility Premium (SVOL) exchange-traded fund (ETF) from Simplify Asset Management offers investors a way to potentially gain stock performance with reduced risk and a steady income stream. By selling volatility, the fund makes a bet that catastrophic stock market events won’t occur, relying on the willingness of global central bankers to mitigate risks by cutting interest rates. The SVOL portfolio primarily consists of U.S. Treasury bills, high-quality short-term notes, and liquid income-oriented financial tools, aiming to generate income while limiting potential losses if volatility unexpectedly rises. As of its current share price of $22.57, SVOL has seen a 3.1% year-to-date increase and offers a 16.1% annualized dividend yield through September 30. However, the article cautions investors about the risks associated with selling volatility, referencing the “Volmageddon” event of February 5, 2018, which saw a surge in the Volatility Index (VIX) and significant losses for short volatility funds.

New Research Suggests ditching Bonds completely

Wealth Management

New research challenges traditional investment advice that advocates a diversified portfolio of stocks and bonds, suggesting that going all-in on stocks could be a more lucrative strategy. The study, covering three dozen countries over 130 years, found that a mix of half-domestic and half-international equities outperformed blended portfolios in both returns and capital preservation. The researchers argue that, as long as equity investors can endure short-term market fluctuations, an all-equity approach may offer higher returns compared to diversifying into bonds.

Charlie Munger – In His Own Words

Somebody once asked Warren Buffet what he considered his best investment decision. His reply - “Recruiting Charlie.” The sixty-year-long friendship and later partnership between Charlie Munger and Warren Buffet turned a New England textile company into one of the...

Financial Advisor Reading List: November 2023

Thanksgiving is almost here! As we all look forward to taking some time off, visiting family, and eating way too much, here are some must-read content and ideas your clients will thank you for sharing. Something to keep us company while traveling and/or taking up...

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