Headlines you need to know this week

November 12, 2019

SEC to update advertising rules for advisors

The Securities and Exchange Commission is proposing to update the rules that govern advertising practices for advisors. The rule changes would broaden the definition of advertising to include promotional messaging “disseminated by any means.” The report noted that the changes are a recognition of the use of social media and other online communications to advertise. A 60-day comment period will be announced when the proposal is published in the Federal Register.

More than one third of advisors projected to retire

More than one third (37%) of advisors are projected to retire in the next decade, according to a new report from Cerulli. The industry will lose about 1.4% of its advisors by 2023. The majority of retiring advisors currently work at wirehouses, independent broker/dealers, and national and regional broker/dealers, the report noted. About one quarter of those retiring do not have a succession plan.

Industry groups urge Senate to pass SECURE Act

More than 90 companies and several industry groups signed a letter calling on the Senate to pass the Setting Every Community Up for Retirement Act (SECURE Act). The bill, which proposes the broadest changes to retirement savings since the Pension Protection Act of 2006, is stalled in the Senate. On May 23, 2019, the House passed the legislation with a vote of 417 to 3. The bill would expand access to retirement savings plans for millions of workers and make it easier for small businesses to join together and offer multiple employer plans (MEPs).
November 5, 2019

Wealth transfer could be a game-changer for advisors

The transfer of wealth from baby boomers to heirs is expected to have a significant impact on the advice industry. Cerulli estimated that $68 trillion could be transferred between generations over the next 25 years. Additional research noted that 80% of heirs are likely to look for a new advisor after inheriting family wealth. Advisors may want to position their services and relationships to remain competitive.

Financial literacy is a growing issue

In a recent Standard & Poor’s survey, the United States ranked 14th globally in terms of financial literacy. About 57% of adults were deemed financially literate. Other research points to Americans’ struggle with financial knowledge. FINRA’s Investor Education Foundation found that financial literacy has declined over the past decade. The number of adults able to answer four or more questions on a five-question survey dropped to 34% in 2018 from 42% in 2009. At the same time, 71% of respondents reported a high self-assessment of their knowledge. In a separate survey, 89.7% of advisors noted that they have found financial literacy issues among their clients.

Growing Millennial population presents opportunity

While a growing population of Millennials may present an opportunity for financial advice, many advisors are not pursuing these investors. In a recent survey of 400 advisors, only 11% said they were actively marketing to Millennials. The report noted several ways that advisors are reaching out to Millennial clients including experience-based prospecting events, virtual webinars and programs, and content marketing focused on specific topics of interest.
October 29, 2019

Fewer taxpayers receive refunds

Fewer taxpayers received tax refunds last year, a recent report found. Following the implementation of tax reform, 113.4 million taxpayers received a refund for 2018, down from 116 million who received a refund in the 2017 filing, the Internal Revenue Service reported. The report noted that while 80% of those filing 2018 taxes received a tax cut, they received the benefit from it in their paychecks throughout the year due to changes in withholding rates.

Does the advice industry need visibility?

Lack of awareness could be keeping students from becoming financial planners, a recent survey found. Only 37% of students surveyed were aware of the financial planning profession. Among respondents, 63% said they may be interested in a career in financial planning if they learned more about it. In recent years, a growing number of colleges have introduced programs in the field. The report noted that advisors can build awareness by offering internships. About 40% of financial advisors are projected to retire in the next 10 years, Cerulli found.

Most with Medicare plan to review options

The majority of Medicare participants (79%) plan to review their options during this fall’s open enrollment period, according to a recent survey. The survey, which included more than 1,300 Medicare customers, found that 25% of those polled indicated they may switch plans. Most (70%) were interested in learning about new Medicare Advantage benefits, and 32% said that drug costs were a driver in the decision to choose a new plan.
October 22, 2019

Advisors focus on relationship building

Technology, regulatory changes, and market volatility can all pose challenges for advisors. But the growing number of retiring Baby Boomers can become an issue if advisors do not connect with the next generation and develop personal relationships with these potential clients. Many advisors in a recent interview noted that they are optimistic about the future as the demand for advice will continue to be strong. While the rise of robo advice may be seen as a disruptor, advisors note that they can deliver what a robo cannot: engagement with clients as human beings.

Gig workers and saving for retirement

Saving for retirement should be a financial priority among gig workers, according to a recent report. While freelance and contract workers have flexibility in their work life, they often miss out on benefits such as a retirement savings plan at work. Putting off saving for retirement can make it more difficult to catch up later on. Other essential considerations for gig workers include saving in an emergency fund, buying life and health insurance, and creating a plan to pay off student loans.

Succession plan mistakes to avoid

While they may be experts in helping others prepare for the future, financial planners may face difficulties planning their own retirement. A recent study found that 60% of advisors within five years of retirement did not have a formal succession plan. A report outlined some common miscalculations that could create obstacles for advisors seeking to retire. They include over-estimating the value of the business, inability to find a successor who would be the best fit, and lack of sufficient mentoring.
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