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April 5, 2010

 Past Issues

Mutual Funds

Show Some Sympathy For Retirees: Schwab to Fed

In an opinion piece in The Wall Street Journal, Charles R. Schwab, chairman of Charles Schwab Corp., spelled out the grave danger that the near-zero fed funds rate poses for senior citizens. With their purchasing power effectively eviscerated by 76%, retirees are "financially starving," Schwab said. The Schwab founder explained that even with the inflation rate effectively at zero, an investment in a one-year CD today pays a mere 1.3%.

Week in Review

SEC May Put Cap on Derivatives Exposure, Fidelity to Advertise on iPad, Rep-as-Adviser SMAs Up 29% Since 2007, Technology Advances UMAs for High-Net-Worth, Fidelity Helps RIAs and B/Ds With Cost-Basis Reporting, and Fiduciary Standard Seen Solidifying Client Relations.

Regulation & Compliance

Market Makers See Great Opportunities in Short Sale Rules

NEW YORK -- Designated market makers are disappointed the Securities and Exchange Commission didn't grant them an exception to the new rule banning short sales on plummeting stocks, but they are already anticipating lucrative trading opportunities just before a stock hits the rule's sweet spot. "There is plenty of room to get creative," said Ross Moore, an industry veteran and the former CEO of market maker LaBranche Structured Products LLC, speaking at a morning conference on the implications and ambiguities of the SEC's new short sale rule.

Supreme Court Dumps Fund Fee Case

The U.S. Supreme Court's recent rejection of the fund fee case Jones v. Harris Associates will make it easier for shareholders to sue mutual funds for excessive fees, but it won't make it easier for them to take an excessive fee case to trial, let alone win. In a unanimous ruling March 30, the high court rejected the conclusions of the U.S. Seventh Circuit Court of Appeals and determined that for the time being, the 1982 precedent Gartenberg v. Merrill Lynch Asset Management was sufficient. The court sent the case back to the Seventh Circuit to try again. Interestingly, both sides hailed the ruling as a victory.

Sales & Marketing

ING First to Register Indexed Annuity

ING is launching a registered indexed annuity, called Select Multi-Index, in May, which it is voluntarily registering the indexed annuity with the Securities and Exchange Commission. While ING says the move to register the product has more to do with marketing the product to wirehouse reps leery of unregistered products, the SEC has been trying to bring indexed annuities under its remit for some time now. Indexed annuities have proved tricky for regulators to define, since they sit squarely in between fixed annuities and variable annuities in terms of design. Currently, anyone with an insurance license can sell an indexed annuity, just as that person could also sell a fixed annuity-but not a variable annuity, which is considered a securities sale by regulators.

High Time for New Tools

Not long ago, I asked a group of advisers who read my newsletter, Inside Information: Given all the recent market turmoil, what future, after-inflation market returns are you using in your retirement projections and Monte Carlo simulations-and why? The collective median and average numbers were a bit surprising. But far more interesting was the way that advisers are thinking these days. Ten years ago, if asked a similar question, most advisers would have confidently said that the historical returns over the last 40 or 70 years were X and that there was no good reason to think we could outwit history, so X was their number. The only main difference between one adviser and another would have been how far back they looked.

Executive Moves

Executive Moves

Franklin Promotes Bolt to Chief Operating Officer, Recruiter FPL Seeks Talent in Asset Manager Push, and Elliott Joins ConvergEx as SVP, Plan Sponsor Sales.