News Mentions & Press Releases
Democratic presidential front-runner Hillary Clinton leapt into the fiduciary fight Monday with a New York Times op-ed encouraging President Barack Obama and congressional Democrats to battle Republican efforts to undo a proposal to raise investment advice standards for retirement accounts.
“Hillary Clinton is making a very bold platform statement,” said Sheryl Garrett, founder of the Garrett Planning Network. “She is making a clear statement that not only is she going to uphold the intention of Dodd-Frank, she’s going to go even further.”
The former secretary of state directed Democrats in Congress to “do everything they can to stop” Republican lawmakers from adding language to a government spending bill this week that would effectively dictate parameters of a pending Labor Department rule. Such a measure would kill the plan the agency issued earlier this year, which would require advisers who work with 401(k)s and IRAs to act as fiduciaries, putting their client’s best interests ahead of their own.
Lawmakers are attempting to attach a rider to the omnibus spending bill that would require the Department of Labor to publish its fiduciary rule for another comment period before finalizing the rule.
The Financial Planning Coalition told members of Congress in a Dec. 7 letter, however, that “vigorously advocating for a rider on the year-end spending bill … may sound harmless, but it is not.” Adding another comment period “will run out the clock on this Administration’s ability to promulgate a final rule, which will as a practical matter defeat the rule.”
Meanwhile, House lawmakers said late Friday that they plan to introduce before Congress breaks on Dec. 18 their bill based on a “declaration of principles” that would be an alternative to the DOL’s rule to change the definition of fiduciary on retirement accounts.
How can the financial services industry expect investors to understand and care if their advisor is acting as a fiduciary when many participants don’t even grasp all the implications?
In a recent survey by CLS Investments of 200 independent financial advisors, about 80 percent of advisors surveyed identified themselves as fiduciaries. And yet over a third of respondents said the term fiduciary is “meaningless” because of the general lack of understanding of its function.
According to Investopedia, at its basic core, acting under a fiduciary standard of care requires advisors “to act in the best interest of the party whose assets they are managing. The fiduciary is expected to manage the assets for the benefit of the other person rather than for his or her own profit, and cannot benefit personally from their management of assets.”
About 75 percent of advisors surveyed said acting solely in a client’s best interest defines a fiduciary. Specifically, nearly 70 percent agreed that being a fiduciary is not strictly determined by how you are compensated, or how the standard of care is disclosed.
But many proponents of a standard have argued that acting as a fiduciary prohibits compensation that brings conflicts of interest into the mix. Or, at the very least, fiduciaries are required to mitigate those conflicts as much as possible and disclose any that are unavoidable in a forthright manner to the client.
More than a third of industry players deem the term ‘fiduciary’ meaningless given the lack of understanding surrounding the function, a new report has found.
While the debate rages on in Washington about imposing a fiduciary standard on more advisors, a significant portion of advisors think the term is useless because the public does not understand what it means, a new survey says.
Thirty-seven percent of the 202 advisors surveyed say the term “fiduciary” is meaningless because there is a lack of understanding by the public on what the term means. The survey, released Monday, was conducted by CLS Investments LLC, a third-party money manager and manager of exchange-traded fund (ETF) portfolios based in Omaha, Neb., and MarketCounsel, a regulatory compliance consulting firm.
Eighty percent of the advisors polled identified themselves as fiduciaries, meaning they put clients’ interests first, but a majority of that group (83 percent) says a fiduciary standard is not applied consistently throughout their organization.
Another significant number of advisors (39 percent) feel the regulatory language, definitions and standards that are in place for those held to a fiduciary standard are not clear. The newfiduciary standard being considered by the Department of Labor for advisors who work with retirement plans has been criticized for being too complicated.
Well over a third of advisors responding to a new survey deemed 401(k) fiduciary meaningless—the term, that is.
In what we readily admit is a bit of click bait, a joint survey by CLS Investments and compliance powerhouse MarketCounsel found 80 percent of advisors surveyed considered themselves to be a fiduciary. However, nearly 37% of overall respondents deemed the term “meaningless” given a lack of understanding of the function.
Nearly 75 percent of respondents say acting solely in a client’s best interest defines a fiduciary. Further, 39% felt that regulatory language, definitions, and standards are not clearly defined.
“While a clear definition around the term is needed to move forward, the core of the issue is larger than the industry’s lack of regulatory clarity around the term fiduciary – the real issue is that the retail customer doesn’t understand what that term really means,” said Todd Clarke, CEO of CLS Investments. “Until we can help the lay investor understand what it really means to be served by a fiduciary and why they should work with one, I think we will continue to see these inconsistencies and feedback industry-wide. Without demand from the investor, we will maintain the status quo.”
Inflation — and how to outpace it — should always be a top concern for investors. Over the last several years though, it really hasn’t.
Inflation, as defined by the Consumer Price Index, has been falling for about four years and has now essentially flat-lined, with 0% year-over-year changes. Other inflation measures, such as the Producer Price Index and import prices, have recently had negative year-over-year changes, and the Personal Consumption Expenditures Price Index (PCE) has lagged Federal Reserve targets for more than three years. No wonder investors aren’t all that worried.
Nonetheless, advisers and investors should remain vigilant. Investing really isn’t about beating benchmarks so much as meeting long-term objectives and liabilities. For long-term investing to be successful, long-term returns need to outpace inflation. For example, what good is getting a 4% return when inflation is 5% (which would be a -1% real return)? It’s better to have a 3% return when inflation is 1% (for a real return of +2%).
The financial planning industry has found itself under fire once again. Same song, different verse. However, while the enemy is new, the battlefield is not. Over the years, financial advisors have been attacked by no-load mutual funds, discount brokerage houses and day traders, all of whom are trying to replace the client’s need to interact with advisors. This time, the threat is robo-advisors.
Once again, in order to survive, financial advisors will need to reinvent themselves. To do this, it is critical that advisors stay agile and change their value proposition to remain competitive and relevant.
CLS Investments, LLC (“CLS”), a third party money manager and a leading manager of exchange traded funds (“ETFs”) portfolios, has announced the launch of their new interactive website www.clsinvest.com. The site’s redesign reflects the firm’s outcome-based investing approach that communicates global, risk managed strategies for investors seeking to accumulate wealth, generate income, protect their assets, and mitigate tax consequences within their portfolios.
“CLS has put a lot of thought into creating this education and marketing tool that outlines our outcome-based approach. We want to put clear, tangible, and actionable information at the fingertips of the end user,” said Todd Clarke, CEO of CLS Investments.
Value stocks have been getting less valuable.
Based on a comparison between the S&P 500 value index and the S&P 500, value stocks are actually underperforming the broad market by the widest margin since 2000.
Value stocks have been getting less valuable.
Based on a comparison between the S&P 500 value index and the S&P 500, value stocks are actually underperforming the broad market by the widest margin since 2000.
“This is a trend that goes all the way back to 2007, and it’s gotten much worse,” Eddy Elfenbein, editor of the Crossing Wall Street blog, said Friday on CNBC’s “Trading Nation.”
“Value’s supposed to be safety during the storm, and the policies of the Federal Reserve have made the benefit of taking on growth a lot more attractive for investors than the safety of value, and that’s left a lot of stocks behind,” he said.
Value, of course, is a relative term. But S&P Dow Jones Indices generates the value index by selecting those stocks in the S&P 500 that have some combination of a high book-value-to-price ratio, a high earnings-to-price ratio and a high sales-to-price ratio.
This brings up a more prosaic reason why value may be lagging. The opposite index, S&P 500 growth, is largely composed of information technology stocks, with a healthy showing from the market-leading consumer discretionary sector, and hardly any energy names. Meanwhile, energy stocks make up 12.5 percent of the S&P 500 valueindex. Indeed, the single-largest weighting is enjoyed by Exxon Mobil.