Get This Week's Issue of Investmentnews

SPECIAL REPORT MARCH 30 - APRIL 3, 2020

THE TRUSTED RESOURCE FOR FINANCIAL ADVISERS INVESTMENTNEWS.COM $5.00 / $89 YEAR THE NEW NORMAL HOW COVID-19 IS IMPACTING THE FINANCIAL ADVICE INDUSTRY RIGHT NOW AND WILL FOR YEARS TO COME PAGE 8

6 Editorial COVID-19 and Adapting to 8 Special Report the 401(k) market COVID-19 16 On Retirement Fred Barstein offers Scott Hanson shares INSIDE 12 predictions. best practices. MAR. 30-APRIL 3, 2020 Page 17 Page 18 Cover photo-illustration: C.J. Burton

EDITOR’S NOTE Advisers’ SEC makes it New Normal easier for mutual e’ve put all our resources behind a W special section this week that examines the “new funds to borrow normal” that COVID-19 has imposed upon the advice community and society at large. The editorial team has put together a cohesive series of stories that stay true to our core mission and avoid falling into the trap of bombast and overreaction. I’m proud of the effort our President Donald Trump team put forth signs Coronavirus Aid, Relief, to assemble this and Security Act into law issue, and I want to highlight a few of the topics covered. This event GEORGE B. Some advisers skeptical could change MORIARTY everything about BY EMILE HALLEZ the advisory profession, so we delved into several angles. about huge stimulus bill THE SEC MADE it easier last week Bruce Kelly calls out an exis- for mutual funds to borrow money to tential risk faced by all advisers meet a rush of redemptions sparked as markets are roiled by the BY MARK SCHOEFF JR. economy that has ground to by the COVID-19 pandemic – some- pandemic. Ryan Neal explores KEY POINTS a halt during the coronavi- thing the regulator also did during the effect the outbreak has had A MASSIVE BILL designed • President rus outbreak. the 2008 financial crisis. on practice multiples and what to stem the economic hem- Trump signed “That’s the most fiscal The relief was one of several tem- prospective sellers must do. Jeff orrhaging caused by the $2.2 trillion stimulus I’ve ever seen,” porary measures issued Monday and Benjamin answers a burning COVID-19 pandemic se- relief act into said Leon LaBrecque, Wednesday aimed at making life question: Is there still a need for cured bipartisan House ap- law last Friday. chief growth officer at Se- easier for mutual funds, investment advisers to work in an office? proval in a voice vote last quoia Financial Group. “If it advisers and publicly traded com- From Washington, Mark Schoeff Friday, but is getting mixed • Some advisers doesn’t work, I don’t know panies. Among the other measures Jr. examines how regulators are reviews from financial ad- were skeptical what would.” were deadline extensions for public monitoring industry activities from visers. the massive Andrew Schwartz, se- companies to file certain disclosures home. And on the investment The $2.2 trillion behe- legislation nior vice president of Mad- and allowing fund boards extra time side, Sean Allocca weighs in on moth, the Coronavirus Aid, would restart ison Planning Group in to hold their required meetings. the return of active investing. Relief, and Economic Se- the economy. White Plains, N.Y., has had By lifting restrictions, the Secu- I hope this helps you sort curity Act, is slated to send five clients come down with rities and Exchange Commission is through this new reality, and, one-time payments of up the coronavirus. He sup- helping fund providers and invest- while you all find your own to $1,200 to many individuals, boost ports the congressional response. ment managers that have had to workflows, please let us know unemployment benefits, provide loan “It’s something that needs to be contend with liquidity constraints, or what aspects of the new normal guarantees and grants to large and done,” Schwartz said. “If you want an en- might have to deal with them soon. outlined here have most or small businesses, increase health care gine to run, you have to give it fuel. Cash But the measures might have more least affected you as this crisis spending and reduce personal and is the fuel that drives our economy.” to do with assuring investors, said unfolds. business taxes. Todd Cipperman, founding principal We’re looking forward to The Senate approved the measure ADVISERS SKEPTICAL of Cipperman Compliance Services. sharing your reactions in next unanimously earlier last week. The bill Other advisers are skeptical the legis- “Markets really aren’t seized up. week’s issue. Stay safe. then went to President Donald Trump lation will restart the economy. Funds, as far as I can tell, aren’t hav- ,who signed it into law last Friday. “The bill is not going to help corpo- ing trouble selling securities,” Cip- [email protected] The scope of the 883-page bill en- rate earnings,” said Eric Powell, found- perman said. The SEC is “concerned Twitter: @geomoriarty compasses many dimensions of an CONTINUED ON PAGE 22 CONTINUED ON PAGE 22

Contents © Copyright 2020 by InvestmentNews LLC. All rights reserved. Vol. 24, No. 13, March 30, 2020. InvestmentNews (ISSN 1098-1837) is published weekly, except two weeks in July and August, the first week in September and the last week in December. by InvestmentNews LLC. The agent is Crain Communications Inc., 1155 Gratiot Avenue, Detroit, MI 48207-2912. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to InvestmentNews, Circulation Dept., 1155 Gratiot Avenue, Detroit, MI 48207-2912. U.S. subscription price: $89 a year. 2 | InvestmentNews March 30, 2020 InvestmentNews.com mitigate any health risks, and with Finra scraps your safety in mind.” Finra said it will refund regis- tration fees for people who already signed up for the event. 2020 annual The broker-dealer self-regulator said it would encourage attendance at its small firm conference and region- conference al member forums in the fall, if large gatherings of people are once again Fund flows took hit in March allowed by then. It also might schedule BY MARK SCHOEFF JR. one-day conferences on specific topics. Marlon Paz, a partner at Mayer amid turbulent markets FINRA HAS CANCELED its annual Brown, encouraged Finra to resched- conference, which was slated for May, ule the annual conference rather than in response to the COVID-19 pandemic. nix it altogether. BY JEFF BENJAMIN the financial markets related to the The Financial Industry Regulato- “Finra’s annual meeting is an ex- fast-spreading coronavirus. ry Authority Inc. was set to convene tremely important opportunity for THE STOCK MARKET roller coaster According to the Investment Com- the gathering May 12-14 in Washing- member firms to gain useful insights in the midst of the COVID-19 pandem- pany Institute, for the week end- ton, D.C. from Finra and to join small meet- ic continues to test the mettle of finan- ing March 18, investors pulled $135 The meeting typically draws hun- ings – many times one-on-one – with cial advisers and long-term investors. billion from stock and bond funds, dreds of brokerage firm leaders, regis- senior Finra staff,” Paz said. “I hope Data through the end of February, which compared to $27.9 billion in net tered representatives, compliance ex- Finra considers postponing, rather when fears related to the virus were outflows the prior week. gaining traction in the United States While the S&P had only declined and the S&P 500 Index had dropped 1.9% between the end of February “I HOPE FINRA CONSIDERS POST- 9.3% from the start of the year, show and March 18, the decline from the investors were still buying equity and start of the year was in full bear mar- PONING, RATHER THAN CANCELLING.” bond funds. ket territory at 26.4%. MARLON PAZ, PARTNER, MAYER BROWN According to Cerulli Associates, The S&P’s most recent low was on while more than $775 billion in assets March 23, when it registered a 31.3% perts and exhibitors. It features Finra than cancelling, as the benefit to the were being wiped out of mutual fund decline from the start of the year. It executives and staff outlining regula- member firms is significant.” strategies in February, investors add- has since rallied about 14% off that tory priorities. The Finra annual conference is one ed $15.2 billion in net flows into active bottom, including a strong rally last “We apologize for any disappoint- of many financial industry meetings and passive strategies. week, through midday trading on Fri- ment or inconvenience this neces- that have been disrupted by the coro- day, March 27. sary decision causes,” Finra said in an navirus outbreak. MARCH MADNESS announcement on its website. “Your Then came March, and a much more [email protected] wellbeing is paramount, and we are [email protected] dire outlook for the economy and Twitter: @benjiwriter taking the necessary precautions to Twitter: @markschoeff Plan advisers Wells Fargo drops fear fallout $300 fee minimum BY BRUCE KELLY BY EMILE HALLEZ BACKING AWAY FROM a move it an- THE COVID-19 PANDEMIC could nounced at the end of last month, Wells have a lasting effect on 401(k) plans, Fargo Advisors said it will suspend plans and that will have consequences for to impose a maximum $300 account fee retirement advisers. on more clients. In coming months, there will like- Currently, Wells Fargo Advisors ly be fewer 401(k) plans in existence, households can avoid the fee if they have as businesses that sponsor them fold, $250,000 or more in retail brokerage as- advisers said. And for several reasons sets. Wells Fargo Advisors intended to there will likely be a lower level of as- raise the minimum and charge the ac- sets: Negative investment returns will cipal at Cafaro Greenleaf. Some re- business because of that.” count fee to households with $500,000 and erode balances; fewer people will have tirement plan clients that firms serve In the short term, compensation less in retail brokerage assets. jobs, and therefore, retirement plans; are struggling to stay in business, could be affected. Advisers that charge Expanding the households that could and many plan participants could bor- Greenleaf said. fees based on plan assets could see be charged the extra fee was unpopular row from their accounts or take hard- Most clients will stay afloat, but the less income, as assets could be lower. with some of the firm’s reps and advisers. ship withdrawals. service they received from their ad- And those that receive per-participant “We have suspended the household Retirement plan advisers could visers during a tumultuous time could fees could also be hit, as there could waiver threshold, effective immediately,” lose business. And with potentially make or break relationships, she said. be fewer overall participants, given company spokesperson Kim Yurkovich smaller plan balances among their Retirement plan advisers that are new reductions in the workforce and early wrote in an email. “It’s the result of the existing clients, advisers could see to the business, have a limited number cash-outs. current environment and the desire to compensation reductions, depending of clients or have a high concentration Right now, as well as in the months best serve our clients.” on their fee arrangements. of customers in industries hit hard by ahead, plan advisers should be doing The firm allows its 13,512 reps and the pandemic are at risk, she noted. everything they can to assist clients, financial advisers limited discretion on STAYING AFLOAT “There will be some advisers that Greenleaf said. whether or not to charge the fee. “We have to figure out how to pick up don’t survive this,” she said. “Some “If somebody’s not in the office … I the pieces after the shakeout,” said Ja- of us more seasoned advisers might don’t know how they’re going to sur- [email protected] mie Greenleaf, lead adviser and prin- have an opportunity to pick up new CONTINUED ON PAGE 22 Twitter: @bdnewsguy

InvestmentNews.com March 30, 2020 InvestmentNews | 3 TopNews

peak [at about 28%] until 2010. It has been slowly decreasing since then and had just about returned to pre-2008 levels.” In 2007, about 11% of participants in Alight’s book of defined-contribution business had initiated loans, and that rate increased to nearly 14% in 2010, according to the company. In 2019, by comparison, less than 11% of participants took out 401(k) loans, and less than 24% had loan balances. Statistics from 19% Vanguard’s How INCREASE IN COVID-19 market dive could America Saves report show a 19% RATE OF 401(K) increase in the rate LOANS IN 2009 prompt more 401(k) cash-outs of new 401(k) loans in 2009 and a 14% increase in 2010. BY EMILE HALLEZ ple to have money to save to retire, but Conversely, 2008 saw a decrease of 7% we want them to live long enough to re- over the rate of loans initiated in 2007, Moody’s takes THE 401(K) WORLD is likely to see a lot tire,” he said. “Given the deadliness of this Vanguard’s data show. of borrowing and hardship withdrawals virus, the first order of business is to take It’s not clear whether the COVID-19 very soon, largely by lower-income work- care of your health.” pandemic and market dive will lead to bearish view ers who do not have access to financial the same level of borrowing activity, Aus- advice. ECONOMIC RELIEF tin noted. During market downturns, workers The COVID-19 economic relief package “The immediate reaction, a lot of the are more likely to pull money out of their waives the 10% penalty for early with- time, from retirement plan providers is, of 3 big IBDs as retirement plans early, and the stimulus drawals on up to $100,000 for people who ‘Don’t touch it,’” said Anastasia Krym- legislation signed into law Friday, which are diagnosed with the virus. That provi- kowski, associate director of retirement eases restrictions on accessing the mon- sion would apply to retirement plans and at Cerulli Associates. market falters ey, will almost certainly increase that individual retirement accounts. activity. After the 2008 financial crisis, bor- ‘CONFLICTING PRIORITIES’ “This is a public health cataclysm and rowing from 401(k) accounts increased But for people struggling to pay their BY BRUCE KELLY an economic cataclysm … almost every- by 25% by 2010, though it has tapered off bills, “it’s a matter of conflicting priori- one is going to be financially stressed,” over the past several years, according to ties,” Krymkowski said. “We were seeing THE DOUBLE WHAMMY of said Joshua Gotbaum, guest scholar of data from two record keepers. some of this even before the current pan- a broad sell-off in stocks and economic studies at The Brookings In- “In the years before the financial cri- demic.” sharp declines in interest rates stitution. “They’re going to want to take sis in 2008, roughly 22% of participants Only about 35% of retirement plan led Moody’s Investors Service money from any source they have to pay had an outstanding loan,” Rob Austin, participants have financial advisers, ac- Inc. to revise or cut its outlooks the rent, to buy food, to pay for health head of research at Alight Solutions, said cording to Cerulli’s annual 401(k) survey. and ratings earlier this month care, etc.” in a statement provided by a company Workers who are younger and for three of the largest networks In the current environment, that is ap- spokesperson. “The percentage climbed less affluent are less likely to work of independent broker-dealers: propriate, Gotbaum said. “We want peo- over the next few years but didn’t hit its CONTINUED ON PAGE 21 LPL Financial, Advisor Group and Cetera Financial Group. Moody’s analysis is a har- binger for the entire independent broker-dealer industry. Broker-dealers make money from charging clients fees on Senators can’t pin insider trades on their advisers assets under management, so the sharp 30% decline in the broad market indices from the BY MARK SCHOEFF JR. I have the ability to do discretion- recent highs will have a harm- ary trades, and that’s why it’s out- ful impact on firms’ revenues in LAWMAKERS WHO ARE under sourced to third-party investment the near term. Broker-dealers suspicion of insider trading over managers.” also generate income from the stock sales they made following spreads on client cash in margin briefings about the potential cata- BLIND TRUST or cash sweep accounts, so the strophic impact of COVID-19 can’t But using a financial adviser Fed rate cut of 50 basis points rely on the fact that they use a fi- doesn’t go far enough to escape in- this month is another negative nancial adviser to escape scrutiny, sider trading suspicion, said Thom- for firms’ bottom lines. experts say. as Gorman, a partner at Dorsey Sen. Kelly Loeffler, R-Ga., is & Whitney. A “foolproof” defense JUNK RATINGS one of the members of Congress would involve putting assets into a Moody’s already rated all three who has drawn attention because blind trust or using an automated broker-dealer networks as below she sold and purchased hundreds trading program. investment grade, or junk. Pri- KELLY LOEFFLER RICHARD BURR of thousands of dollars of stock “There’s no real assurance that she vate equity managers used junk following her participation in a Jan. 24 discretionary authority over their ac- had no input” to her financial advisers, bonds to finance and complete committee meeting with administration counts. said Gorman, a former senior counsel their recent acquisitions of both officials. Her market moves, outlined in “I’m not involved in the decisions in the Securities and Exchange Com- Cetera Financial and Advisor a Senate disclosure, were first reported around buying and selling,” Loeffler mission’s Division of Enforcement. “This Group. by The Daily Beast. said in a transcript posted by her staff. suggests that she maintained a modicum In a note March 17, Moody’s In an interview on Fox News last “There’s a range of different decisions of control. If you did, that doesn’t give said that while it maintained Monday, Loeffler said that she and her made every day with regard to my sav- you safe harbor. Not taking the safe ap- LPL’s credit rating at Ba2, it husband, Jeffrey Sprecher, chairman of ings and 401K portfolios that I’m not in- proach raises real questions.” changed its outlook on LPL to the New York Stock Exchange, have no volved in. No longer do my husband and CONTINUED ON PAGE 21 CONTINUED ON PAGE 21

4 | InvestmentNews March 30, 2020 InvestmentNews.com IN012254.indd 1 3/11/20 12:07 PM The Trusted Resource for Financial Advisers Opinion InvestmentNews.com Chief Executive Officer EDITORIAL / LETTERS / OP-ED / GUEST BLOGS Christine Shaw, [email protected]

EDITORIAL Chief Content Officer: George B. Moriarty [email protected] Managing Editor: Paul Curcio Deputy Managing Editor: Sean Allocca Assistant Managing Editor: Susan Kelly Special Projects Editor: Liz Skinner Copy Editor: Anne Marie D. Lee Contributing Editor: Mary Beth Franklin Senior Columnists: Jeff Benjamin, Bruce Kelly Senior Reporter: Mark Schoeff Jr. Reporters: Emile Hallez, Ryan W. Neal The time is now for advisers to Director of Multimedia: Matt Ackermann Senior Multimedia Manager: Stephen Lamb Multimedia Project Manager: Audrey Rose Joseph Special Projects Coordinator: Brittney Grimes

ART DEPARTMENT Executive Art Director: Scott Valenzano Associate Art Director: Pablo Turcios demonstrate their value to clients Senior Graphic Designer: Kyung Yoo-Pursell DIGITAL, CUSTOM AND RESEARCH Senior Research Analyst: James Gallardo he market plunge tors. But advisers will need to make Many of these new customers Research Analyst: Devin McGinley caused by the an effort with this group this time. are being referred by friends and Senior Operations Manager: Gillian Albert Digital Operations Manager: Thomas Markley COVID-19 virus The coronavirus fallout isn’t family, and some are the adult Digital Operations Specialist: Carla Flores has left an ominous likely to create a fundamental children of current clients. Some Custom Content Producer: Jay Cooper cloud hanging over mistrust in the financial system are the same group that was once ADVERTISING Wall Street. Many as was sparked by the financial scared away from the markets Chief Revenue Officer: Scott Miller, [email protected] of the most pressing crisis. Without having to defend the in the previous downturn. The 212-210-0717 questions — like how long the pan- reputation of their very business, prospects are generally investors Business Solutions Manager: Tdemic will last or what the scope of advisers can use the pandemic’s who have not sought out financial Lauren DeRiggi, [email protected] 212-210-0154 the economic devastation will be — impact as more of a lesson in the advice before — meaning they rep- Business Solutions Manager: remain unanswered. value of long-term investing and resent a new chunk of business. Judith Kelly, [email protected] 212-210-0167 Advisers are right to worry financial planning. Business Solutions Manager: about losing clients who decide to Advisers, who missed an oppor- EXISTING AND NEW CLIENTS John Shaughnessy, [email protected] 212-210-0112 run for cover instead of weathering tunity to help young investors during Now is when advisers need to Business Solutions Manager: further market volatility. the last recession, should consider demonstrate and carefully ex- Jason Anciulis, [email protected] Many advisers have drawn par- filling the gap with financial guidance plain to existing and new clients 312-280-3115 Account Executive: Michelle Richard allels to the financial crisis in 2009, and reassurance this time around. the value they bring, along with [email protected], 212-210-0238 which left investors and financial Sadly, the data being collected today their firms. It will require patiently Director of Event Sales: Dan Rubinetti, [email protected] professionals shell-shocked and suggest the need could be great. listening and providing emotional 212-210-0432 hiding under their office desks, at Roughly 30% of respondents support to clients with a lot of con- Business Solutions Manager & U.S. Events: Sabrina Straub, [email protected] least anecdotally. While millions in a recent survey by LendEDU, a cerns in a frightening time. 646-437-7956 of Americans were affected, young student-loan marketplace, said they Appreciating that capital is at a Reprint Manager: Laura Picariello, and inexperienced investors were either lost their job or had their premium for millennials who are [email protected] 732-723-0569 Sales Operations Manager: Letitia Y. Buchan, some of the hardest hit in terms of hours cut partially since the onset often saving for a down payment [email protected] 212-210-0451 the indelible mark it made on their of the coronavirus epidemic. About on a first home or starting a family ADVERTISING OPERATIONS money psyches. 63% of the 1,000 people surveyed will go a long way to understanding Head of Digital Advertising Operations: Young investors saddled with said they were worried that the their particular fears for the future. Berta Franco, [email protected] Sr. Digital Advertising Operations Manager: college debt were unprepared for pandemic would damage their Managing multiple life changes, Valdimir Severe, [email protected] the bottom to drop out in 2009. Digital Campaign Manager: They watched as their investments, Jess Friedman, [email protected] Digital Ad Operations Campaign Manager: along with their home values, Kimberly Hall, [email protected] plummeted as stalwart financial AUDIENCE, MARKETING AND EVENTS entities imploded or were gobbled TODAY’S EVENTS Director of Audience and Analytics: by competitors. George Ortiz, [email protected] Email Marketing Specialist: Nicole Chantharaj CAN SERVE AS A BETTER Audience Data Specialist: Julie Vanderperre STILL SQUEAMISH Marketing Director, Brand and Products: Katie Downey Millennial investors are still LESSON TO TEACH squeamish about entering equity Marketing Director: Sasha Burgansky Director of Event Operations: Tara Means markets — and for good reason. THE NATION’S LESS Events and Operations Manager: Natalie Taylor Researchers cite significant losses Content Producer: Letitia Bow in the financial crisis as a reason EXPERIENCED INVESTORS. Executive Assistant to the CEO: this group tends to stay on the side- Irma Rodriguez, [email protected] lines today and forgoes traditional 212-210-0430 financial advice. Only about 22% of PRODUCTION millennial households worked with retirement savings. young investors have a tremen- Prepress/Production Director: Simone Pryce Production Manager: Paul Vaccari an adviser at the beginning of 2019, As retirement accounts plum- dous need for financial planning compared to 50% of baby boomer meted over the past several weeks, and can benefit from having the op- INVESTMENTNEWS OFFICES Headquarters: 685 Third Avenue, New York, NY 10017-4024 households, according to a Cerulli the markets have become an intimi- portunity of longer time horizons. Bureau office: Washington: 601 13th Street, N.W. Suite study. dating place for the uninitiated. Planners should think of their 900 South, Washington, DC 20005 The pandemic and the financial InvestmentNews retirement report- work as a valuable public service Advertising main number: 212-210-0451 crisis, however, are different in an er Emile Hallez has found that the right now. For advisers reaching important way, and today’s events historic COVID-19 drop actually led out to help folks in our current BONHILL GROUP, PLC Chief Executive Officer: Simon Stilwell can serve as a better lesson to teach some millennial investors to seek climate, don’t forget the clients that the nation’s less experienced inves- out financial advice (Page 14). have the most to gain. Head Office: Bonhill Group, Plc 14 Bonhill Street, London EC2A 4BX

For subscription information and delivery concerns, please e-mail [email protected] or call 877-812-1589 (in the U.S. and Canada) or 313-446-0450 (all other locations). WE WANT TO HEAR FROM YOU. Send a letter to the editor with your thoughts about a story we’ve published, and include your name, title, company, address and telephone number for verification. Keep your letter under 250 words, Please recycle and email it to George B. Moriarty at [email protected]. All letters will be edited. this newspaper

6 | InvestmentNews March 30, 2020 InvestmentNews.com MULTI-SECTOR INCOME FUND (JMUIX) TO OVERCOME Overall Morningstar Rating™ based on risk-adjusted returns out of 262 UNCERTAINTY, Multisector Bond funds as of 12/31/19

PURSUE A BRIGHTER DEVELOPED WORLD BOND FUND (HFAIX)

OUTCOME WITH Overall Morningstar Rating™ based on risk-adjusted returns out of 72 FIXED INCOME. World Bond – USD Hedged funds as of 12/31/19 MORTGAGE-BACKED SECURITIES ETF (JMBS) Seeks above-market total returns by modeling inefficiencies in borrower behavior

janushenderson.com/pursue-income

Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus Henderson at 800.668.0434 or download the file from janushenderson.com/info. Read it carefully before you invest or send money.

OBJECTIVE: Janus Henderson Mortgage-Backed Securities ETF seeks a high level of total return history. Exchange-traded funds and open-ended mutual funds are considered a single population for consisting of income and capital appreciation. comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that Fixed income securities are subject to interest rate, inflation, credit and default risk. The bond market is accounts for variation in a fund’s monthly excess performance, placing more emphasis on downward volatile. As interest rates rise, bond prices usually fall, and vice versa. The return of principal is not variations and rewarding consistent performance. The Morningstar Rating does not include any guaranteed, and prices may decline if an issuer fails to make timely payments or its credit strength weakens. adjustment for sales loads. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. Foreign securities are subject to additional risks including currency fluctuations, political and economic The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures uncertainty, increased volatility, lower liquidity and differing financial and information reporting standards, associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. Ratings may vary all of which are magnified in emerging markets. Derivatives can be highly volatile and more sensitive to by share class. changes in economic or market conditions than other investments. This could result in losses that exceed the original investment and may be magnified by leverage. As of 12/31/19, Multi-Sector Income Fund Class I Shares Morningstar Ratings™ in the Multisector Bond category: 5 stars out of 262 funds, 5 stars out of 220 funds for 3-, and 5- year periods, respectively. Mortgage-backed securities (MBS) may be more sensitive to interest rate changes. They are subject to extension risk, where borrowers extend the duration of their mortgages as interest rates rise, and As of 12/31/19, Developed World Bond Fund Class I Shares Morningstar Ratings™ in the World Bond - prepayment risk, where borrowers pay off their mortgages earlier as interest rates fall. These risks may USD Hedged category: 4 stars out of 72 funds, 5 stars out of 57 funds, 5 stars out of 37 funds for the 3-, reduce returns. 5-, and 10-year periods, respectively. Actively managed portfolios may fail to produce the intended results. No investment strategy can ensure © 2019 Morningstar, Inc. All Rights Reserved. a profit or eliminate the risk of loss. Mutual funds distributed by Janus Henderson Distributors. ETF shares are not individually redeemable and owners of the shares may acquire those shares from the ETFs distributed by ALPS Distributors, Inc. ALPS is not affiliated with Janus Henderson or any of its Fund and tender those shares for redemption to the Fund in Creation Units only. subsidiaries. Janus Henderson and Knowledge. Shared are trademarks of Janus Henderson Group plc or The Morningstar RatingTM for funds, or “star rating”, is calculated for funds with at least a three-year one of its subsidiaries. © Janus Henderson Group plc. JNS952 C-0320-29412 04-15-20 166-41-429412 03-20

IN012266.indd 1 3/20/20 4:45 PM The New Normal

The global pandemic caused by the new coronavirus has deeply affected the lives and livelihoods of millions of people over the past few months. InvestmentNews has assembled a series of articles that explore the immediate and long-term consequences of this outbreak for the nancial advice industry and for investors.

Communicate Remote Investing styles Expect Lower or get kicked regulation to will take on an an in ux of valuations a to the curb add new hurdles active approach new clients reality for rms By Bruce Kelly By Mark Schoeff Jr. By Sean Allocca By Emile Hallez By Ryan W. Neal Page 10 Page 12 Page 12 Page 14 Page 14

8 | InvestmentNews March 30, 2020 InvestmentNews.com conferences with more than 250 people on the line. “The nice thing is, because we have a global investment organization, we’ve been able to learn a lot of great lessons and be prepared,” she said. There are also negatives to all this work from home. Anthony Scaramucci, founder and managing partner of SkyBridge Capital, said he thinks “more gets done with face-to-face meetings.” He also expects a painful impact on commercial real estate if companies use remote work as a reason to cut back on of ce space. But Scaramucci also sees the advantages of having people work remotely, which all 52 SkyBridge employees have been doing since early March. “We recognize through WiFi and VPNs, we can get access to work in our homes one step away from our beds,” Scaramucci said. “A negative is everyone is home so we’re learning about the WiFi capacity of Verizon and ATT, while every child in America is home watching Net ix.” Dani Fava, director of product strategy and development at TD Ameritrade Institutional, said that as advisers continue adapting to new ways to work and communicate, they will develop new habits ADVICE FIRMS WILL MOVE and practices. “The biggest behavior change is breaking old habits,” she said. “Now that advisers have no choice, they’re helping clients gure out how to use Zoom — MORE WORKERS HOME and you can’t go back to not knowing how to do that.” While she sees the advantages, Fava said that remote work is still limited when it comes to certain Office real estate will look expensive after firms areas, such as training new employees. A survey last week of 473 advisers who custody discover how many jobs can be done remotely at TD found that 47% don’t believe working from home will become the new normal, while 45% said By Jeff Benjamin it’s the future and are looking forward to it and 8% see it as the new normal but are not excited for it.

PERSONAL INTERACTION NEEDED t some point, ideally in the near Jud Mackrill, chief marketing of cer at Carson Training, camaraderie and the need for personal future, the COVID-19 pandemic Group, where all 250 employees are now working interaction were all cited as downsides of remote will pass and the nancial services from home in response to the pandemic, said the work by John Moninger, managing director and A industry will be faced with the ability of people to work remotely will emerge as head of retail sales at Eaton Vance. question of whether it makes sense one of the “silver linings” of the deadly coronavirus. “I’m just looking at the ow of emails today and to bring all those newly remote it would be dif cult for someone to jump right in workers back into the of ce. EXPANDED EMPLOYEE POOL while working remotely,” he said. “But I do see some After just a few weeks of adjusting to expansive “I de nitely think some of our employees will con- exibility on the back end of this virus, and the work-from-home policies, employees and owners tinue working from home, and this will be a positive acceptance of technology has grown exponentially.” of businesses large and small are realizing that for the way we all work,” he said. Most people don’t expect the nancial services remote work could be part of the new normal in the Mr. Mackrill said that by being more open to the industry to permanently transition from its pre-coro- post-coronavirus world. idea of remote employees, companies will expand navirus remote-work levels of 10% to 20% to current “We are going to see a massive change in society their access to potential employees. levels of between 90% and 100%. But professionals postcrisis, and it will permeate every aspect of are recognizing some advantages and anticipating life,” said Ric Edelman, executive chairman and wider adoption across the industry. co-founder of Edelman Financial Engines. “I believe this crisis has taught us how innova- In addition to anticipating a greater appreciation “WE WILL ALSO tive, creative and resilient we all can be,” said James of things we used to take for granted and speculat- Guarino, managing director at the advisory rm of ing that “handshakes are gone forever,” Edelman SEE BUSINESS Baker Newman Noyes. believes “the idea of working remotely will be huge.” “We have adapted to our new working circum- “Corporations will discover the amount of money TRAVEL CURTAILED.” stances in a relatively short period of time and the they’re spending on expensive real estate can be true leaders of our organizations have emerged and sharply curtailed by remote work,” he said. “We will RIC EDELMAN, EXECUTIVE CHAIRMAN, they are guiding us through these uncertain and also see business travel curtailed now that people EDELMAN FINANCIAL ENGINES precarious times,” he added. “It is my opinion that are rediscovering the bene ts of teleconferencing the nancial services profession will nd a happy and that picking up the phone works just ne.” medium with regard to the choice of working from Mr. Edelman, known for his research into future “This will be a good opportunity for wealth home or being physically present in the of ce.” trends, sees nancial services as one of the indus- management to embrace more diverse work styles,” “Much of what we do has a personal nature to it tries that could bene t from more liberal use of he said. “Just think about how it makes you a better and this relationship is epitomized by face-to-face remote-work habits. recruiter of employees, because certain people don’t contact. This experience is challenging to replicate “No question, the bulk of the American work- want to relocate.” virtually,” Guarino said. “Also, much of our work force will return to normal, but a great many in The adjustment to suddenly being thrust into can be successfully accomplished remotely. I see a the service industry will be working electronically remote work hasn’t been free of glitches, but people healthy mix of both service models going forward,” because their location doesn’t matter,” he said. are generally adapting. he said. “Many employers will discover what they thought At Fidelity Investments, where 90% of the global was essential by having employees in the of ce isn’t workforce is now working from home, Pam Holding, [email protected] as important.” co-head of the equity division, is holding daily video Twitter: @benjiwriter

InvestmentNews.com March 30, 2020 InvestmentNews | 9 THE 2020 ADVISER TECHNOLOGY STUDY SHOWS THE RATES OF ADOPTION FOR CLIENT-FACING TECH PRODUCTS THAT WILL BE MOST RELEVANT COMMUNICATE OR GET TO FIRMS WORK- ING REMOTELY AS KICKED TO THE CURB COVID-19 DISRPUPTS BUSINESS PRACTICES. Whether it’s a call, text or email, checking in with your clients during this crisis could save your job 73% By Bruce Kelly 69% 69%

“Communicate, communicate and then communicate some more,” said Mark Casady, the former CEO of LPL Financial and now the general partner at Vestigo Ventures, an early stage venture capital shop focused on fintech. “Advisers can do this in calls, texts or emails.”

‘SMALL CHECK-INS’ “Customers want to know what their advisers think and why,” Casady said. “They want to experience their advisers’ confidence in the world returning to a more normal time. And small check-ins, like a simple message, count.” “It’s not more complex than that,” he said. “That’s how advisers build the relationship with clients and become their trusted adviser.” Casady said the situation in 2008-2009 was similar to the current problems. “The banking system was hat we’ve got here is failure to failing and the fundamentals were poor coming into communicate,” Strother Martin, the crisis,” he said. “But this crisis is scary enough as it playing a prison captain, tells an threatens our way of life and our mortality.” unruly inmate, played by Paul “I believe advisers have to get to this point with 26% “W Newman, in the great 1967 drama their clients,” Casady said. “Sure, it’s about their equity “Cool Hand Luke” right after portfolios dropping but it’s even more about their way Newman’s character steps out of of life changing. Engage your clients at this deeper line and gets whacked into a ditch. level and you will have a raving fan of your services.” As the health and financial crisis caused by Firms that work behind the scenes for advisers 20% COVID-19 continues to unspool, that’s the same — the custodians and broker-dealers who execute message both financial advisers and the bro- trades and send out account statements — also must ker-dealers and custodians that work with advisers be proactive, promptly taking calls from advisers and should heed. Or risk getting whacked. executing their orders. Custodians and broker-deal- If, at this critical point, communication breaks ers can’t put their advisers on hold and expect to re- down between an adviser and client, the adviser tain their business once the coronavirus crisis passes. will get fired. And if there’s a meltdown in the back A dozen years ago, the goal at LPL was to help office or service center of a B-D or custody shop, financial advisers face their concerns and also keep those firms will be kicked to the curb as advisers their spirits up, said Casady, who retired from the take their business elsewhere. industry’s largest independent broker-dealer in 2017. It really is that simple, and that critical, to “Back then, the advisers would often call into LPL advisers and firms right now. No one knows how exhausted from the daily calls and constant energy this crisis will end. So pick up the phone. Listen. drain of reassuring clients,” he said. Communicate. Execute the plan. Repeat. Management owes it to their teams and advisers to lead by example and communicate during HAPPENING IN REAL TIME dire times, such as now. The financial advice market knows this failure to “Clearly this is a difficult time for the clients we communicate is happening in real time among its serve, between the violent markets, COVID-19 and constituents. It happened 12 years ago during the the future unknowns,” said John Hyland, managing credit crisis and market meltdown of 2008. director of Private Advisor Group, which is affiliated Client-facing portal There’s plenty of anecdotal evidence. Back in Sep- with LPL and has more than 600 advisers. “That has Electronic signature tember 2008, when the last crisis was in full eruption created tremendous levels of concern. Our executive after Lehman Brothers collapsed into bankruptcy, a team has been working hard to connect with our Fully digital account opening

colleague of mine fired his adviser when it became advisers to make sure they are OK, personally and Video conferencing software

clear he was dodging his phone calls. A feisty soul, professionally.” Social media management tool my teammate pulled multiple accounts from the bro- Source: InvestmentNews Research ker and his firm, a major Wall Street bank, and never [email protected] considered bringing his business there again. Twitter: @bdnewsguy

10 | InvestmentNews March 30, 2020 InvestmentNews.com IN012246.indd 1 3/5/20 3:00 PM INVESTING STYLES WILL TAKE ON AN ACTIVE APPROACH Advisers will need to refresh their picking skills as industry REMOTE REGULATION moves away from passive management TO ADD NEW HURDLES By Sean Allocca

Inspectors and advisers will depend more on digital s the COVID-19 virus upends global markets, advisers have documents and online discussions to prove their points adapted quickly to new realities A like teleconferencing with clients By Mark Schoeff Jr. and increased market volatility. The next transformation, however, may be a larger one: from buy-and-hold f securities regulators and advisers to gauge how serious the firm is about compliance. index funds to a more active style of portfolio work from home for an extended “The intangible of getting the sense of the cul- management. period, it will change the look and ture is difficult, if not impossible, to replicate over As broad indexes slump, advisers could I feel of oversight and create draw- the phone,” said Junaid Zubairi, a partner at Vedder look to a more hands-on approach to selecting backs for both groups. Price and a former senior attorney at the SEC. equities and also fully utilize techniques like Over the last couple of weeks, rebalancing and tax-loss harvesting to garner headquarters staff at the Securities and Exchange DEFENSE CHALLENGES additional returns for clients. Commission and the Financial Industry Regulatory Mounting a defense during a remote enforcement Picking winners in a down market, however, Authority Inc. have been performing their duties case also could become tougher for advisers be- is a skill advisers haven’t had to rely on in more remotely as a result of the COVID-19 pandemic. cause they potentially lose some atmospherics that than a decade. Both regulators have posted statements on their come from sitting across from investigators. “Bull markets make investment pros out of websites saying they are fully operational. “You won’t be able to have the in-person human everyone,” said Nick Hofer, president of Boston With many financial advisers and most regu- touch to it,” Zubairi said. “Not having that contact Family Advisors. lators working from home, a regulator will most can be a disadvantage to the registrant.” likely not be shuttering any financial firms. The Regulators are trying to move away from over- CUSTOMIZATION SEC Office of Compliance Inspections and Exam- sight being a binary choice — in-person or off-site One major advantage to active portfolios is that inations said last week it “has moved to conducting — and shift to a combination of the two, said Valerie they can be customized to limit downside po- examinations off-site through correspondence, Mirko, a partner at Baker & McKenzie. tential, he said, something that’s much harder unless it is absolutely necessary to be on-site.” So far, the SEC is doing “an incredible job” to accomplish with index funds. As they move toward remote operations, regu- of adjusting to remote regulation while ensur- “Clients hate losses more than they love lators are likely to rely more on email, telephone, ing markets operate smoothly and investors are gains,” Hofer said, adding that active man- video and online communications rather than protected, said Daniel Gallagher Jr., a former SEC agement will become the new norm in a bear face-to-face interactions with advisers. Although commissioner. As an SEC member, he observed market. “Complacency snuck up on a lot of they have been working for years to be more firsthand the problems the agency experienced advisers, and clients now realize the impor- streamlined and targeted in examinations and during another turbulent time. tance of proactive advisement — whether with enforcement activities, operating remotely creates “As someone who lived through the financial investments or otherwise.” logistical complications. crisis in ’08, on the ground floor as an SEC staffer, I That could prove a boon for actively man- For instance, if a document needed in an wish we had been so deft back then in our handling aged investment products that have waned in examination is missing, an SEC staffer can’t just of things,” said Gallagher, a partner at Wilmer Hale. popularity compared with cheaper index funds. ask an adviser to retrieve it from their office down Perhaps the most important question facing the Financial service firms, like the wealth the hall. In an enforcement investigation, it could SEC is whether it can catch the next Bernie Madoff management platform Oranj, already started become much more difficult to arrange for an while conducting business from home. “Today, with pumping out more active management prod- adviser and their attorney to be in the same room the custody rule and other post-Madoff reforms in ucts. It recently expanded its model market- for an interview. place, the Madoff fraud could be caught in a remote place with active strategies offered by Allianz “There are inherent inefficiencies in working exam atmosphere,” Gallagher said. “It’s not ideal, but Global Investors. remotely,” said Julie Riewe, a partner at Debevoise the SEC staff is resourceful and determined.” & Plimpton and former co-chief of SEC Enforce- If it’s difficult for SEC enforcement to show up at ARE ADVISERS READY? ment’s asset management unit. “It’s not the same a place where a rip-off is occurring, they’ll reach out Clients may soon ask for actively managed as being there in person. Those inefficiencies all to local authorities, Riewe said. strategies to beat slumping markets, but will add up over time.” advisers be ready? If they’re not in the same room as leaders of [email protected] “Advisers have not seen a significant market financial firms, it could diminish regulators’ ability Twitter: @markschoeff pullback since the financial crisis,” said Gene

12 | InvestmentNews March 30, 2020 InvestmentNews.com Goldman, chief investment officer at Cetera Financial Group. The uncer- tainties created by the coronavirus are increasing as the headlines get grimmer, he said, which means there’s potentially more downside to come. “The market is waiting for clarity on the virus,” Goldman said, adding that a reemergence of active products could take place through the end of the year. Actively managed mutual funds have performed well in recent downturns. About 52% of active U.S. equity funds beat their benchmarks during the recent drop-off, for example, compared to about 29% that beat their benchmarks during the rally ending Feb. 19, according to Morningstar data. From the start of the downturn on Feb. 20 through March 16, a period in 14TH ANNUAL which the S&P 500 Index experienced a 29.3% decline, 42% of all active funds tracked by Morningstar outper- INVEST IN OTHERS AWARDS formed their respective indexes. A considerable upside in a market plunge is the ability to take advantage of asset allocation, said Charles Failla, a principal at Sovereign Financial Group. Moving funds from the less impacted sectors, like fixed income, into beat- en-down sectors like equities is one way to buy at bargain-basement prices.

TIME TO REBALANCE After the record bull market, asset classes that performed strongly, like equities, may have grown to represent Nominatean Advisor a disproportionate share of the portfolio, Failla said. Portfolios created for a certain risk level may have taken on Do you know a ﬁ nancial advisor giving back different risk profiles. Rebalancing is key during sell-offs, he said. to a nonproﬁ t in their community?

“SERVICE THE Nominate them by April 17! HELL OUT OF Winners can receive up to $50,000 YOUR CLIENTS.” for their favorite charity! MINATIO DENNIS NOLTE, VICE PRESIDENT, O N SEACOAST INVESTMENT SERVICES N investinothers.org/nominate

As discount brokerage giants Extended to April 17 embrace zero commissions, clients Categories: will also benefit as advisers find new D E E ways to manage portfolios — without • Catalyst A DLIN having to worry about racking up additional fees. Cheaper approaches • Community Service mean advisers can spend more time • Global Impact rebalancing portfolios or harvesting tax losses. • Volunteer of the Year Dennis Nolte, vice president at Sea- coast Investment Services, said advis- • Lifetime Achievement ers’ most important job is to weather the storm and prepare client portfolios for when money gets back in motion. “Service the hell out of your clients and retain their confidence, as much 2020 Top Sponsors: as possible,” Mr. Nolte said. “Position clients for the inevitable pent-up demand after the bottom is in and folks feel safe to emerge from the darkness.” [email protected] Twitter: @theseanscoop Connecting, Recognizing & Supporting the Philanthropic Passions of Financial Advisors and Firms.

InvestmentNews.com March 30, 2020 InvestmentNews | 13 EXPECT AN INFLUX OF NEW CLIENTS LOWER VALUATIONS Spooked investors are seeking out financial A REALITY FOR FIRMS advice for the first time The coronavirus outbreak is By Emile Hallez impacting the structure of M&A deals By Ryan W. Neal he COVID-19 pandemic and a volatile stock market have wreaked financial havoc on countless ust a month ago, advisers nearing “You’re going to want to do business with people T people — meaning many investors retirement looked to cash in on you believe created good foundations with clients,” are seeking out financial planners. record-high firm valuations and Titus said. Especially as a market correction makes That’s according to financial J record-level merger and acquisi- investors more willing to change firms, buyers will planners who said they have seen an influx tion activity. be looking beyond just price. “You’re going to care a of new clients as investments and retirement Independent broker-dealers lot about that client relationship and loyalty.” accounts tanked over the past several weeks. and registered investment advisers completed 139 The coronavirus outbreak also is impacting how The new customers are generally people who transactions representing $781.1 billion last year, a M&A deals are being structured. Sellers can no lon- have not sought out financial advice before, and 43% increase in the number of transactions and a ger expect to see the same level of upfront cash as therefore represent a new chunk of business. 38% increase in assets compared to 2018, accord- many deals in recent years. And with more leverage “There has been an increase in prospective ing to data from Fidelity Investments. There was than they’ve had in years, buyers are looking for clients reaching out to advisers,” said Evelyn every indication the rapid pace would continue more protections against downside risk. Zohlen, president of Inspired Financial and through 2020, with seven RIA transactions total- That doesn’t mean advisers should accept a national chair of the Financial Planning Associa- ling $6.2 billion in February. permanent price reduction tion. “Folks who initially thought that they might Then COVID-19 came to for what will likely be a like to manage their own finances and their own the United States, bringing temporary situation for investing are reconsidering the advantage of with it a stock market crash “IT DOESN’T buyers, said Advisor Leg- having a professional walk alongside them.” and voluntary self-quaran- acy director of M&A Todd That includes younger workers who have nev- tines. NEED TO LOOK Doherty. Sellers can struc- er experienced a full market cycle and those who The M&A market flipped ture a deal to capture upside have lived through multiple bear markets. upside down in a matter of LIKE A FIRE SALE.” as the market returns. “It Roughly 30% of respondents in a survey by weeks, and would-be sellers doesn’t need to look like a product comparison website LendEDU said they face a market they haven’t TODD DOHERTY, DIRECTOR OF M&A, fire sale,” he said. either lost their job or had their hours cut partially. seen in nearly a decade. ADVISOR LEGACY There is opportunity to Sixty-three percent of the 1,000 people surveyed in The most obvious impact show a firm’s value beyond March said they were worried that the pandemic is compressed firm valua- AUM and revenue. A firm would damage their retirement savings. tions. With most firms’ value tied to assets under that successfully shifted to working from home can When markets are up, many do-it-yourself in- management, the 23% drop in the S&P 500 Index is prove to buyers it has a modern technology infra- vestors become too comfortable in their own abil- forcing some advisers to accept lower firm valua- structure, DeVoe said. ities and begin to think of themselves as experts, tions. Even though client assets aren’t completely “The power to be flexible and agile and respond Zohlen said. That includes “self-starter indepen- tied up in equities, DeVoe & Co managing director to unexpected situations … that’s an asset,” he said. dent technical types” like engineers, she noted. David DeVoe said many advisers already are staring For many of these new clients, there will be at up to 20% drops in revenue, and the situation may MERGER MANIA a need for financial planners and advisers to still worsen. While advisers may worry about the optics of carefully explain the range of benefits in working The pace of M&A is also expected to slow. Not selling a firm during a market downturn, Doherty with professionals, she said. only are buyers holding onto assets, but advisers believes it can be an opportunity if it’s presented “There is a chance to do good old financial are busy working with clients these days, said as a merger that brings additional resources to planning for someone who only thought of it as Scott Slater, vice president of practice manage- clients during a volatile time. investments,” she said. It also means patiently lis- ment at Fidelity Clearing & Custody Solutions. Even if valuations are no longer at all-time highs, tening and providing emotional support, as these He also expects some advisers will stick it out there are still more buyers than sellers, low interest new clients will likely have a lot of concerns in a a few years longer than planned to help get clients rates allow for more purchasing, and the technology frightening time, Zohlen said. through the downturn, just like many did following and compliance outlook isn’t getting any easier, said “We are definitely seeing an influx,” said Evan the last global financial crisis. Advisory Legacy CEO Anthony Whitbeck. Beach, director of wealth advisory at Campbell “Every year you wait, your client base is a year Wealth Management. “People are definitely scared.” PROLONGING RETIREMENT older, and client age plays a significant impact on Planners should think of their work as a public The difference is fewer advisers have the luxury of practice value,” Whitbeck said. service right now, Zohlen said. That can mean tell- sticking it out as they did in 2009, DeVoe said. The The coronavirus pandemic could trigger more ing existing clients that they are available for any average age of firm owners is older, and many can’t baby boomer financial advisers to finally retire, friends or family who are struggling, she said. wait years for valuations to return to 2019 levels. which could result in a dramatically smaller pool “That is a very soft pitch to somebody, and it Beyond forcing some advisers to stick in the of attractive buyers in a few years. “There’s almost falls on ears favorably,” she said. business longer than perhaps they wanted to, more risk in delaying,” Whitbeck added. Smart Concepts Group founder and CEO Tom Titus [email protected] said adviser character and client engagement will [email protected] Twitter: @emilehallez become more important than in the past. Twitter: @ryanwneal

14 | InvestmentNews March 30, 2020 InvestmentNews.com NOMINATIONS OPEN Recognizing individuals, advisory rms, industry partners and institutions creating work 2020 Awards environments that inspire • Lifetime Achievement people to bring their true • See it, Be it Role Models selves and a diverse range • Rising Star of perspectives to the • Outstanding Practices nancial advice industry. • Diversity Champions

NOMINATE TODAY

Go to investmentnews.com/nominatediversity PRESENTED BY to submit your nomination and to learn more.

IN012250.indd 1 3/6/20 12:31 PM “THE CORONAVIRUS CRISIS IS A 9/11 MOMENT FOR THE FINANCIAL ADVICE INDUSTRY. OUR INDIVIDUAL AND COLLECTIVE RESPONSE WILL BE REMEMBERED FOR YEARS TO COME BY CLIENTS AND COLLEAGUES.” Planning — STEVE GRESHAM, MANAGING PRINCIPAL, THE EXECUTION PROJECT RETIREMENT / SOCIAL SECURITY / INSURANCE / TAX / MEDICARE / COLLEGE / TRUST & ESTATE / PHILANTHROPY

cording to George Walper, president of the Spectrem Group. My best friend, a retired nurse who expects to be called back into service to administer COVID-19 tests, texted me that her daughter, a single mother of two young children, was just laid off from her hotel job. My older son, a DJ, had trav- eled to Texas to perform at several events that were cancelled after the South by Southwest festival in Austin was shut down, meaning he didn’t get paid or get reimbursed for his travel costs. He’s just one more victim of the gig economy. “A FINANCIAL ADVISER’S LEAD- ERSHIP IS NOT JUST HELPFUL, IT’S CRITICAL.” KEN UNGER, FOUNDER, ACADEMY OF PREFERRED FINANCIAL ADVISORS

These examples may offer a glimpse into the new realities for retirees: Dis- cretionary funds they had earmarked for visiting bucket-list travel destina- tions, temporarily off-limits as a result of the worldwide pandemic and international border closures, could be shifted to support newly unemployed A dispatch from my bunker: family members. PUT LOSSES INTO CONTEXT While current and near-retirees may feel most vulnerable to both the health threats of the coronavirus and the steep losses to their retirement savings, it’s im- Coping with the pandemic portant to help them put their losses in context. It is unlikely that their portfolios are invested 100% in equities, so their ot too long along, I was traveling I know we are luckier than many high-level advisers through his Acade- personal paper losses are much smaller around the country nearly every people, including public safety and my of Preferred Financial Advisors. “At than the overall stock market decline. N week to present educational sem- health care workers who continue to this time, a nancial adviser’s leader- In addition, those collecting Social inars about Social Security and Medi- report to work on the front lines of the ship is not just helpful, it’s critical.” Security have been assured by the care to nancial advisers and consum- coronavirus pandemic, and the many Mr. Unger noted that clients need agency administrator, Andrew Saul, ers. I remember thinking I would love hospitality, retail and restaurant indus- leadership, guidance and comfort in that their bene ts will continue unin- a break in my hectic travel schedule so try workers who suddenly found them- times like these. terrupted despite the closure of local I could focus on my writing deadlines selves without a job or a paycheck. “Retirees need to know their cash of ces to protect both the agency’s em- and other projects. Talk Thanks to technology, ow needs will be met and savers need ployees and bene ciaries about answered prayers! my colleagues and I can to know that someday they will be able to There is a difference between fear, Like many of you, I am work remotely, starting our retire,” he wrote in an open letter to the - which is a natural reaction to this scary con ned to my home and mornings off with a video nancial advice industry. “We are not clair- situation, and panic, which can trigger practicing “social distanc- MARY BETH conference. My computer voyants, but we can be hand-holders,” he irrational and possibly irreversible ing.” It’s not a hardship for FRANKLIN screen looks like an epi- added. “We can share with clients that we decisions. A valuable nancial advis- me. I have been working sode of The Brady Bunch or are doing the best we can to communi- er will address their clients’ fears and from home for nearly a de- Hollywood Squares lled cate and understand their situation.” hopefully prevent them from hitting cade, so being homebound ONRETIREMENT with the faces of report- the panic button. is not a major change to ers and editors working at WHAT’S NEXT? (Questions about new Social Se- my routine although my daily exercise home from New York to Michigan and So what are you doing to guide, com- curity rules? Find the answers in my classes have been replaced with Jazzer- Maine to Maryland. Business casual fort and reassure your clients? Are you ebook at InvestmentNews.com/mbfe- cise videos in my basement, and my tops meet pajama bottoms and sweat- being proactive or merely responsive? book.) retired husband is getting his workout pants. Babbling toddlers and barking What you do — or don’t do — today can Mary Beth Franklin, a certi ed - by hauling 40-pound bags of mulch. We dogs provide background noise. have long-term rami cations for your nancial planner, is a contributing edi- take long walks around our neighbor- “Investors are concerned and business. During the previous nancial tor for InvestmentNews. hood where the streets are empty and scared and they should be,” said Ken crisis in 2008, clients made decisions to the bike trails are full, waving to neigh- Unger, a 40-year veteran of the nan- switch advisers and nancial providers [email protected] bors that we haven’t seen in years. cial services industry who coaches 18 to 24 months after that crisis, ac- Twitter: @mbfretirepro

16 | InvestmentNews March 30, 2020 InvestmentNews.com 12 ways COVID-19 could change the 401(k) market

fter the 2008-2009 financial melt- What changes to the DC market can down, there were massive changes we expect as a result of the current cri- Ain the 401(k) and 403(b) industry. sis? More wealth managers began to see the Much depends on the market fallout defined-contribution market as a hedge and economic impact. But it’s hard to for business as their individual clients imagine that we have seen the worst of pulled money out of the market. it because businesses in many sectors, even beyond the obvious ones, such as travel and energy, will be affected. GUESTBLOG Here are a dozen predictions: FRED BARSTEIN 1. Active managers that have done a good job preparing for a downturn will see a resurgence as investors shy away They earned less from DC plans from index strategies and active tar- than from wealth management clients – get-date fund managers that have taken with more liability. And DC assets, and too much risk. therefore revenue, were down 40%. But 2. More wealth managers who have people kept contributing to their DC ac- been looking to expand to or enter the counts because of automatic deductions DC market will focus on DC plans as a from payroll and because savers were hedge to their individual investor busi- reluctant to stop funding their retire- ness. ment. The financial crisis showed the value of professional management, with prod- BONUS ucts such as target-date funds proving their mettle over investors’ homemade PREDICTION: portfolios. And some, though not all, active managers fared better than in- THERE WILL dex target-date funds. The crisis also coaches and mentors to participants, 11. PEPs will be more attractive to highlighted the fact that target-date BE LESS HAND- not just to help with retirement plan- plans, regardless of size. There’s safety funds were not created equally, expos- ning but with overall management of in numbers, and the desire to outsource ing 2010-vintage funds that were loaded SHAKING. finances and benefits. The current “eat work and liability will become more with equities to boost returns and then what you kill” cold-calling model is un- attractive as companies are forced to fell below the indices. 3. The move to flat-fee payments will attractive to most younger workers. streamline all processes and cut costs. Yes, plan sales dried up for a while, accelerate as a hedge against drastic 7. Specialists will take business from but retirement plan advisers used the market downturns. Yes, flat-fee advisers DC plan dabblers, especially from those FURTHER CONSOLIDATION crisis as an opportunity to reach out to lose the upside when markets improve, who have grown during this historic 12. Look for further consolidation. Mon- clients and participants more than usu- but the argument that fees should rise bull market. Savvy dabblers who are ey managers will buy up competitors, al. RPAs prospected new plans where with assets is getting harder to make. not willing to focus on DC plans will in line with Franklin Templeton’s re- an adviser, at worst, had been absent, either partner or sell their DC practice cent acquisition of Legg Mason. At the and at best had been silent during the MORE FOCUS ON PARTICIPANTS to specialists, while protecting their same time, more money managers will crisis, dealing instead with wealth man- 4. The focus on participants will in- wealth management and IRA opportu- look to participate in the even more at- agement clients. crease. Workers will have more money nities. tractive and sticky retirement market. in the market than ever, and they will 8. Managed accounts will expand Record-keeper consolidation will also FEWER FIDUCIARIES need guidance and advice. Because of dramatically, especially among older accelerate, as retirement plans move to In 2009, fewer advisers were able or that, RPAs who already have a partici- workers or anyone with a significant RPA specialists, who will continue to in- willing to act as fiduciaries, which pro- pant advice model will benefit. That will account balance. More plans will use herit record keepers when they take over vided more opportunities to specialists. also lead to more RPAs affiliating with managed accounts as their default. plans. Those specialists have the resourc- RPAs continued to focus on high fees, or selling to aggregators. Further, wire- 9. More plans will use target-date es to consolidate their books of business especially those charged by firms that houses and broker-dealers that have funds. Currently, less than half of small- or at least limit the record keepers they only dabbled in DC plans. been creating tools to serve participants er employers offer them, according to sell going forward. After the crisis, there was a surge of will retain current advisers and even at- the most recent Society for Human Re- Bonus prediction (and my personal wealth managers who began to focus tract some specialists. source Management benefits survey. favorite): There will be less handshaking. on DC plans. Today’s elite RPAs – who 5. With more people working re- 10. Benefits firms, which might not were all blind squirrels at one point in motely during the crisis, many will con- be hurt as much as those that charge as- Fred Barstein is founder and CEO of their careers – saw their DC business tinue to do so, at least part-time. As a re- set-based fees, will continue to aggres- The Retirement Advisor University blossom in part because of the longest sult, there will be more opportunities to sively buy and build retirement practic- and The Plan Sponsor University. He is bull run in history. And those plan par- access and interact with them digitally. es. They might even look to start their also a contributing editor for Invest- ticipants who stayed the course saw 6. Savvy advisory firms will hire own pooled-employer plans (PEPs) for mentNews’ Retirement Plan Adviser great dividends. younger advisers to act as financial their brokers. newsletter.

InvestmentNews.com March 30, 2020 InvestmentNews | 17 AMOUNT OF CAPITAL RAISED $146 BY ICAPITAL NETWORK TO EXPAND ITS CAPABILITIES YourPractice MILLION AND FUNCTIONALITY. TECHNOLOGY / BUSINESS DEVELOPMENT / MARKETING / NEXT-GEN / CLIENTS / EMPLOYEES

Here’s what your clients need from you, right now

How advisers can adapt to COVID-19

ith major changes and chal- ernet phone cables were backlogged lenges occurring daily, the GUESTBLOG online, we found them readily avail- W past two weeks have felt like SCOTT HANSON able at local supply stores. months for most of us. At Allworth Concurrently, we were focusing on Financial, which has 209 associates software. All laptops needed to have and locations in 17 cities across the an internet browser, of course, but country, we’ve been adapting and worst-case scenarios. they also needed to be set up to work pivoting on the y. The task force distilled our goals as a “soft phone” (a “soft phone” sys- ight now, we are going through I’m sure you have, as well. down to a handful of crucial endeav- tem enables the computer to function some of the toughest times inves- I’m going to outline some of the ors. like a ground line) so our clients could R tors and advisers will ever see. In a steps we’ve taken in the hope that it First, to keep our workforce safe. have the same phone routing system short period of time we’ve moved from helps other RIAs adapt and meet the Above all, we wanted to do everything they’re accustomed to. (During busi- an 11-year bull market to a swift and needs of their staffs and clients during in our power to ensure that every one ness hours, we don’t allow clients to dangerous equity market downturn that this incredibly dif cult time. of our team members was not only as be placed into voicemail.) was hard to anticipate. Many experts On Friday, March 6, when the talk safe as we could make them, but also of possible worst-case coronavirus felt safe. VIDEOCONFERENCING scenarios rst began to emerge, we Second, every team member need- In addition, all laptops had to have the GUESTBLOG reviewed our continuity plan. (All ed to be out tted so they could work video communications software Zoom KEN UNGER RIAs are required to have one.) While from home. This, of course, includ- installed and ready to go. We use vid- it contained some key elements, it was ed full integration with our portfolio eoconferencing via Zoom for every- clear it wasn’t detailed enough to pre- systems, customer relationship man- thing from business-to-business com- felt equity markets were overextended, pare us for what might unfold in the agement system, accounting system, munications to client appointments to but they were not providing guidance days ahead. phone system, video conferencing department, such as, say, marketing, that called for this extreme a downturn. By the following Tuesday, March and more. Our advisers already had appointments between locations, and Investors are concerned and scared, 10, we’d assembled and held the rst access to much of our system remote- now, team members’ homes. and they should be. Their wealth has meeting of our rm’s new coronavirus ly, but most of our service members Next, we created a plan to get ev- been reduced and that’s never enjoyable. task force. By then, primary and sec- did not. eryone trained in all pertinent appli- At this time, a nancial adviser’s leader- ondary schools and universities had Third, in spite of the dif culties cations, processes and software by the ship is not just helpful, it’s critical. begun to close. everyone was facing (at work, yes, following Friday. So what are the best advisers doing? but also in their private lives), we of On Sunday evening, March 15, we They are calling clients and having TOTAL LOCKDOWN course had to continue to protect cli- held a remote meeting with the task personal conversations. They are mak- It was during this initial meeting that ent data and privacy. We realized we force and made two key decisions. ing sure that their clients and those our chief technology of cer asked couldn’t let expediency cause us to be First, we announced to clients and po- around them are OK. The coronavirus is what we would do if we were in total negligent, especially in this area. tential clients that, for the time being, a serious health issue, and people need lockdown. Though this was a mere While most of our employees had we were moving all advisory appoint- to rst and foremost make sure they are two weeks ago, looking back, I re- laptops, 36 did not. The rst thing the ments to either phone or Zoom. healthy and safe. member thinking that he might be task force needed to do was to conduct Second, all employees who had the joking. At that point, I had never con- an inventory of our hardware, laptops ability to work remotely would imme- EQUITY MARKETS sidered the entire country might be and headsets. We immediately began diately be asked to do so. As for equity markets, whether it was asked to undertake such drastic mea- to repurpose older, unused laptops On Monday, March 16, six Bay 1929, 1987, 2000 or 2008-2009, they sures. Yet even though most of us felt and then ordered 15 more, along with Area counties issued a “shelter-in- were horrible, but they survived and that a total lockdown was unlikely, we 180 headsets. When it became obvious place” order. This order exempted cer- life moved on. Economic conditions decided then and there to prepare for that important items such as long eth- CONTINUED ON PAGE 20 CONTINUED ON PAGE 20

18 | InvestmentNews March 30, 2020 InvestmentNews.com 5TH ANNUAL AWARDS LUNCHEON

NOW TAKING PLACE ON NOVEMBER ,

Ziegfeld Ballroom | New York City womentowatchaward.com

IN012269.indd 1 3/26/20 5:31 PM YourPractice

videos, podcasts, written market up- statement. But our firm is 100% opera- several weeks, or more, of remote work, ADAPTING TO COVID-19 dates and other communication pieces tional. We are holding meetings via vid- adapting to an entirely new sense of CONTINUED FROM PAGE 18 to our clients. eoconferencing, and we continue to be in normal along the way. tain industries, including our own, but Simultaneously, our investment de- consistent contact with our clients. Make no mistake, it’s during times we soon realized that some of our office partment has been digging deep into like these that your clients need you parks were entirely shutting down. By our portfolios to see what new invest- more than ever. that evening, two of our physical offices ment risks might be lurking that were WE NEEDED were temporarily closed. unforeseen only a few weeks ago. (Most DEMAND WILL ONLY INCREASE of our portfolios are in passive strate- TO PREPARE After 12 years of a bull market, some ex- GOING VIRTUAL gies, but we utilize some managers in perts were scoffing at the notion of asset The following morning, we notified our the fixed-income space.) Even though TO BECOME A allocation and the value that personal entire organization that we needed to we had moved to a defensive position financial advisers provide. But looking prepare to become a 100% virtual com- in fixed income several months ago, we 100% VIRTUAL ahead, I find it likely that the demand pany. wanted to be sure. for our services will only increase in the On Tuesday, March 17, Sacramento Lastly, we instructed the post office COMPANY. future. County (where we are headquartered), and other carriers to forward all mail How you respond to, and commu- issued its own guidance on travel and and deliveries to our Sacramento head- Admittedly, it’s a little hard to be- nicate with, clients and staff right now gatherings. (As I’m writing this, that quarters. lieve all that has transpired in the past will define your practice going forward. guidance has now been upgraded to the two weeks. Above all else, get ready for a lot of more restrictive “shelter in place.”) FULLY OPERATIONAL While I can’t predict what the com- “new normal” in the coming weeks. While the above was happening op- After a whirlwind two weeks, by the ing days and months will bring, I can erationally, we made a major pivot with week of March 23, all our employees and certainly read the various reports out Scott Hanson is co-founder of Allworth our education and marketing. We put to- most of the country had been ordered to there and it doesn’t look good. Aside Financial, formerly Hanson McClain Ad- gether a client communication team and, shelter in place — at home. Obviously, from what’s happening in the markets, visors, a fee-based RIA with $8 billion in one week, produced and delivered to call this a “fluid situation” is an under- and to the economy, we may be in for in AUM.

Although this may turn into a cyclical Advisers are resources, not daily ceed with caution,” it is a good time to WHAT CLIENTS NEED downturn, it seems to be caused by an news sources. We understand that when remind them of that. CONTINUED FROM PAGE 18 event, the spread of the coronavirus (al- clients’ accounts go down, they get frus- Growing up, my dad always would eventually will change. Human behavior though the simultaneous oil price drop trated. Your job is to listen to clients, say,“Life is tough but so are you.” These during difficult times is always a major has not been helpful). understand their situation and provide are tough times, but the world is not concern. All downturns are serious and should ideas. For many advisers, that may in- coming to an end. The best advisers are not be taken lightly. The toughest part volve rebalancing clients’ assets. That those who are prepared, not scared. The 3 TYPES OF DOWNTURNS of an event-driven downturn is it can be means you may be selling some fixed best advisers are those who are helpful, If you look at market downturns, one the- sudden and sometimes unforeseen. income at higher prices to buy some not clairvoyant. The best advisers add ory is that there are three major catego- So what do clients need? equities at lower prices. Isn’t that what value. ries: structural, cyclical and event-driv- They need leadership, guidance and people want? Over my almost 40-year Things will get better, and many of en. Structural are those in which the comfort. Retirees need to know that their career in financial services, I was taught you will be stronger. Now is the time to financial system is failing; 1929 or cash flow needs will be met. Savers need that “selling high and buying low” is a reach out and have those targeted con- 2008-2009 were examples of structural to know that someday they will be able to good thing. versations with all of your clients. downturns. Cyclical downturns occur retire. Obviously, we are not clairvoyants, when the economic cycle breaks down but we can be hand-holders. We can share ‘PROCEED WITH CAUTION’ Ken Unger is a 40-year industry leader and earnings are dismal. Event-driv- with concerned clients that we are doing Top advisers are stewards of their cli- and founder of the Academy of Pre- en downturns can be caused by events the best we can to communicate and un- ents’ life savings. If you have been tell- ferred Financial Advisors. He can be like a war or an extreme oil price drop. derstand their situation. ing clients for some time now to “pro- reached at [email protected].

RETIREMENT PRESENTED BY INCOME SUMMIT WESTIN CHICAGO RIVER NORTH

NOW TAKING PLACE ON AUGUST 17-18, 2020 theretirementincomesummit.com

20 | InvestmentNews March 30, 2020 InvestmentNews.com TopNews

control of their finances while in office. fees,” according to Moody’s. “The SENATORS “Members of Congress could easily MOODY’S negative outlook also reflects the el- CONTINUED FROM PAGE 4 sidestep these questions of potential in- CONTINUED FROM PAGE 4 evated debt level and the increasing Other lawmakers have also gener- sider trading if they placed their funds in stable from positive, “reflecting our probability of deterioration in debt ated controversy with investment sales a qualified blind trust,” he said. expectation that lower interest rates servicing capacity now that interest that occurred after they talked to admin- Holman, who was a leading advocate and asset prices will slow the pace of rates and market levels have de- istration officials about the coronavirus of the Stock Act, thought the measure revenue growth at LPL.” clined.” outbreak that has devastated financial would curb legislators’ participation in Moody’s also noted that LPL had “We are pleased that Moody’s re- markets. The Center for Responsive Pol- portfolio decisions. But he said one-third lowered its debt levels since they affirmed our rating and like all in the itics first reported on market activity of the Senate continues to buy and sell peaked in 2015. financial services sector right now, by Sen. Richard Burr, R-N.C., that has securities. “Our firm’s financial strength we understand their caution with the drawn criticism for potential misuse of “Much to my surprise, there are a and stability remain a differentiator overall economic environment,” Jeff insider information. number of senators who seem uncon- in our industry, and we remain con- Buchheister, Cetera’s chief financial cerned about the appearance of insider fident in our ability to serve as our officer, wrote in an email. WRONGDOING DENIED trading,” Holman said. Burr and the other legislators have de- The SEC likely will look into the in- ADVISOR GROUP DOWNGRADE nied wrongdoing. But Craig Holman, a sider trading allegations on Capitol Hill, “COMPANIES On March 19, Moody’s downgraded government affairs lobbyist at Public Gorman said. Advisor Group to B3 from B2 with a Citizen, a watchdog group, said that if “This will get on the SEC’s radar,” he ACROSS MANY negative outlook. they made investment decisions based said. “You’re supposed to be doing the “Although Advisor Group’s rev- on “nonpublic information,” they violat- public’s business, not making yourself INDUSTRIES ARE enue has benefited from macroeco- ed a 2012 law known as the Stock Act, money.” nomic tailwinds between 2017 and which prohibits insider trading by mem- BEING PUT ON 2019, including higher interest rates bers of Congress. [email protected] and strengthened levels of client as- Holman said lawmakers should cede Twitter: @markschoeff CREDIT WATCH.” sets, Advisor Group has also engaged JOE KUO, SPOKESPERSON, in debt-funded acquisitions, delaying ADVISOR GROUP its organic deleveraging during this favorable period,” Moody’s noted. “In this economic and market en- volatility than those don’t receive advice, advisers’ long-term partner,” an LPL vironment, companies across many 401(K) CASH-OUTS Krymkowski said. spokesperson, Lauren Hoyt-Wil- industries are being put on credit CONTINUED FROM PAGE 4 “When we surveyed households last liams, wrote in an email. watch, or being downgraded, and with advisers, the survey found. About year, a third of them were fully expecting Also on March 17, Moody’s said as expected, the entire financial 29% of plan participants who have less a recession in 2020,” she said. People who that while it was reaffirming the services sector is not immune,” said than $100,000 saved work with advisers, were prepared for that likely have emer- credit rating for Cetera’s parent Joe Kuo, spokeperson for Advisor versus 51% among those with $500,000 to gency savings and a long-term financial company, Aretec Group Inc., at B3, Group. $2 million in retirement assets, according plan, she noted. it changed the company’s outlook to “Thankfully, we are of sufficient to Cerulli. About 30% of people younger However, “not everyone can go negative from stable. size and have the financial resourc- than 30 have advisers, compared with around and shop for an unbiased advis- “Aretec’s negative outlook re- es to continue to invest” in the com- about 52% of those who are in their 70s. er,” Krymkowski said. flects a challenging macroeconom- pany, Kuo added. People who have relationships with ic environment which will weigh financial advisers are probably reacting [email protected] on the firm’s revenue in the form [email protected] much differently to the recent market Twitter: @emilehallez of lower asset-based and advisory Twitter: @bdnewsguy

Give your business a boost We’ve got the brand, technology and people to help you stand out

Become a Voya Financial Advisor 855.698.4900 | JoinVoyaFA.com

Call: 888-868-4809 Email: [email protected] CN0922-37305-1019D Web: investmentctr.com/inc

InvestmentNews.com March 30, 2020 InvestmentNews | 21 TopNews

And unlike the 2008 financial cri- FALLOUT sis, the current market volatility is not CONTINUED FROM PAGE 3 due to a systemic flaw in the financial Northwestern University wins appeal vive this,” she said. “As we come out of system, he said. the rubble, people are going to start to “We’ll get through this,” he said. INVESTMENTNEWS that Northwestern was required to address the value that their plan advis- “It’s that moment in history we’ll all seek a sole record keeper to satisfy its er provided during this time.” remember.” A FEDERAL APPEALS court has fiduciary duties, and found Northwest- Advisers who are communicating ruled in favor of plan fiduciaries at ern’s decision to maintain two record PROPOSAL REQUESTS UP well with plan clients will benefit, re- Northwestern University in a case that keepers “prudent,” and “to the extent Some advisers have indeed been busy, gardless of whether those plans end charged university representatives plaintiffs alleged Northwestern should said Aaron Schumm, CEO of Vestwell, up being terminated, he noted. For with failing to negotiate a better deal have selected TIAA as its sole record which provides digital record-keeping those plan sponsors that stay in busi- for the school’s 403(b) plan partici- keeper, that assertion also fails to state services to about 5,000 plans. ness, the relationship with the adviser pants. a claim for relief,” he wrote. Because of remote work and a will be reinforced. For small business- The original suit, filed in 2016, “ERISA does not require a sole re- standstill in new plan sales, advisers es that are forced by economic pres- was dismissed with prejudice in 2018, cord keeper or mandate any specific are probably more accessible than sure to close, a strong tie to the plan which meant that the plan participant record-keeping arrangement at all,” ever. “We’re seeing a high volume of adviser could lead to a wealth-man- plaintiffs could not file another com- the court wrote. advisers wanting to create proposals agement relationship, he said. plaint in a lower court. The suit ar- Of the roughly 20 universities that for existing clients.” After the pandemic subsides, plan gued that the Evanston, Ill., school had have been sued over fees and invest- About 5% of plans in Vestwell’s sales will start to pick up again, and eliminated “hundreds of mutual funds” ment options in their retirement plans business have inquired about making some sponsors will consider changing from the plan and had not consolidat- since 2016, there have been six an- changes, such as stopping contribu- advisers, said Scott Buffington, CEO ed record keepers until 2012. nounced settlements, according to a tions or terminating their plans entire- of 401kplans.com, which issues pro- In an opinion written by Judge Mi- story on napa-net.org. ly, Schumm said. posals and does due-diligence work chael B. Brennan, the appellate court Universities other than Northwest- The company has pushed back on for plan advisers. disagreed with the plaintiffs’ theory ern that have prevailed in similar cases. plan terminations, as the delays and “You might see a lot of fund chang- costs associated with starting them es. You might see record keepers get- back up can outweigh the cost savings ting replaced,” Buffington said. “Those that employers might see in the near advisers who don’t meet with partic- term, he said. ipants or don’t have a strategy to an- gations to investors.” “When you get down [market] swer questions on the [market] volatil- MUTUAL FUNDS The SEC’s order allows registered trends, there are some businesses that ity will certainly struggle.” CONTINUED FROM PAGE 2 open-end funds and insurance compa- aren’t going to make it,” he said. But, about a liquidity crisis or crunch and a ny separate accounts to borrow from “I don’t think it’s going to be a huge [email protected] raft of redemptions … or maybe it’s as affiliates. That can mean tapping into percentage.” Twitter: @emilehallez simple as [a way of] assuring investors money held in the investment adviser’s that their money is not locked up.” corporate account, borrowing assets One fund manager, Fidelity Invest- from a different fund sponsored by the ments, noted that its “mutual funds and same firm or getting money from a re- other investment vehicles continue to volving line of credit, Cipperman said. — over three years. Another provision operate without interruption for our Part of the SEC’s order permits inter- ADVISERS REACT would increase the ceiling on loans clients,” a company spokesperson said fund lending for mutual funds that had CONTINUED FROM PAGE 2 against a retirement plan to $100,000 in an email. not received exemptive relief for that er of RightPlan Financial in Lakeland, or 100% of a plan, whichever is smaller. Another fund firm, Vanguard, said practice in the past. Fla. “This money may not be utilized Another provision would waive that given the importance of people’s The relief is in effect through June to boost the economy as a whole by required minimum distributions this health and safety, “Vanguard supports 30, though the SEC could extend it. [consumers] buying products. Instead, year for certain 401(k) and individual the SEC taking action to extend regu- But just because mutual funds can the money is being used to pay rent, retirement accounts. The distributions latory relief and reporting deadlines.” borrow money to meet redemption re- mortgages and things of that nature.” would have been required for those 72 quests doesn’t mean they should, at The stimulus bill is the third mea- and older. REDEMPTION REQUIREMENT least not proactively, Cipperman said. sure Congress will have approved Under the Investment Company Act Fund boards are required to approve over the last several weeks to address of 1940, mutual funds are required such measures and notify the SEC. And health care and other challenges “PRINTING MONEY to meet shareholders’ redemption re- the funds themselves are affected, be- presented by the virus. The Federal quests in seven days or less. Those cause they must pay interest on the bor- Reserve has also cut interest rates DOESN’T LEAD TO requests are generally settled much rowed money, he noted. during that time. more quickly, but a high volume of re- That one-two punch is misguided MORE GOODS AND demptions that required some funds to SEC EXTENDS DISCLOSURES because it will diminish the value of the sell less-liquid holdings could poten- In the separate order issued Wednes- dollar, said Mike Caligiuri, founder of SERVICES.” tially cause delays. day, the SEC gave publicly traded Caligiuri Financial in Columbus, Ohio. “[The SEC] learned some lessons companies a 45-day extension to file “It’s an illogical economic fallacy MIKE CALIGIURI, FOUNDER, CALIGIURI from ’08, and they don’t want to exac- disclosures, such as proxy statements, that just printing money is going to FINANCIAL erbate the market [dive] with a run on that had been due between March 1 solve our problems,” Caligiuri said. funds,” Cipperman said. And by calm- and July 1. “Printing money doesn’t lead to more ing investors’ nerves about fund liquid- That order also includes guidance goods and services for everyone. This Schwartz likes the RMD change ity, the regulator could help to avoid on timely reporting of financial im- is just a massive bailout. It’s ultimate- because it will allows retirees to keep that, he noted. pacts caused by COVID-19, “while ly going to lead to hyperinflation … money in their plans rather than tak- But the SEC could also be antici- recognizing that it may be difficult to and everyone’s going to be worse off.” ing it out in a market hammered by pating requests from fund companies. assess or predict with precision the the coronavirus. The agency had implemented a similar broad effects.” RETIREMENT SAVINGS “You’re able to reinvest that money measure in 2008, after numerous fund The SEC had relaxed Form ADV The stimulus package makes several now,” Schwartz said. providers had individually applied for filing requirements on March 13 for changes to retirement savings policy Some advisers expressed worries exemptive relief around liquidity, Cip- investment advisers, though it re- that allow participants to access cash that Congress is foisting a $2.3 trillion perman said. quired them to provide justification to for emergencies. Similar steps have measure on top of a deficit that is al- “Today’s temporary action will the SEC for any requested delays. The been taken in the past in response to ready hovering around $1 trillion. provide an additional tool that funds order issued Wednesday removed that hurricanes and other natural disasters. LaBrecque shares those qualms can use to manage their portfolios for requirement, though it requires any in- The measure would waive the 10% but said this is a unique moment. the benefit of their investors in the vestment advisers that are relying on penalty on early withdrawals from re- “This isn’t the time to be a deficit current market environment,” SEC the order to notify the SEC about de- tirement plans for people who have hawk,” he said. Chairman Jay Clayton said in a state- lays in filing. been impacted by the coronavirus and ment. “This action provides funds with allow them to put the money back into [email protected] additional flexibility to navigate vola- [email protected] the plan — and pay taxes on the gains Twitter: @markschoeff tile markets while meeting their obli- Twitter: @emilehallez

22 | InvestmentNews March 30, 2020 InvestmentNews.com 2020 Events Calendar

EVENT DATE LOCATION

May 14* Huntington Beach - NOW VIRTUAL August 19* Chicago August 25* Boston October 1 Denver October 20 San Francisco November 17* New York City

August 17-18* Chicago

September 15 New York City

October 27* New York City

AWARDS November 16* New York City

SUMMIT & AWARDS November 18* New York City

November 19 New York City

December 2-3 New York City

FOR SPONSORSHIP OPPORTUNITIES PLEASE CONTACT: Dan Rubinetti at [email protected] | 917-294-9517 or Sabrina Straub at [email protected] | 646-437-7946

PRESENTED BY * New dates for events

IN012270.indd 1 3/26/20 5:32 PM We made the move to full independence with $45 million in AUM. Here’s Why.

“I left my broker-dealer because I wanted the freedom and control that only comes with being an RIA. Now we’re at $120 million in AUM. When you do the right thing for your clients, it just works.”

Laurie Nardone–Shira Ridge Wealth Management

Charles Schwab is proud to support more independent advisors of all sizes and their clients than anyone else.

Learn more at advisorservices.schwab.com or call 877-687-4085

Results may not be representative of your experience. Shira Ridge Wealth Management is not owned by or affiliated with Schwab, and its personnel are not employees or agents of Schwab. This is not a referral to, endorsement or recommendation of, or testimonial for the advisor with respect to its investment advisory or other services. Schwab Advisor ServicesTM serves independent investment advisors and includes the custody, trading, and support services of Schwab. Independent investment advisors are not owned by, affiliated with, or supervised by Schwab. ©2020 Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC. (1019-9894) ADP108445-00

IN012168.indd 1 1/2/20 10:34 AM