The Fiduciary Rule...
With a new administration occupying the White House, investors have been pleased to see the stock market continue to rally, after the Presidential election, with the Dow climbing to over 20,000 for the first time. Although President Trump has clashed with the media, and the new administrations’ actions have caused liberals to protest, nearly shutting down airports, the stock market has been little effected. Economist Larry Summers pointed out that although President Trump’s policies have caused frustration, they have not yet affected trade. Translation: The Presidents’ bark is worse than his bite, for now at least. Since the global markets are not immune to U.S. policy, and with commodities prices increasing in volatility, investors sentiment is down from 46.20% at the beginning of the year to 31.58%. The chart below shows the near perfect, negatively correlated relationship between the market, and the price of Comex Gold, which has seen a slight bump over the last few days.
With the consumer sentiment index seeing a 5.4% decline in bullish sentiment over the previous week, it is no surprise the VIX, has seen increased activity, further strengthening our case for the addition of Alternative Investments (AI) to help dampen portfolio volatility. With tech CEO’s from Apple, Facebookand Google coming together to protest the new administrations policies on immigration, it is unclear what is in store for the markets in the first quarter, as the President works to fill 657 positions of 690 key positions requiring Senate confirmation.
As a result, the large wire-house brokerage firms have been using this time to prepare for changes in way advisors interact and invest client assets. Since the beginning of the year, financial advisors have been receiving lists of client name, clients whose investment portfolios conflict with the Department of Labors Fiduciary Rule. The new legislation expected to come into effect in April, has a lot of advisors worried about clients they may lose after contacting them. Since these clients have investments, the Department of Labor has ruled do not align with the best interests of these clients, the advisor now has to offer the client another investment option which will compensate the advisor less, and could potentially result in the advisor losing the client altogether. This is where the plot thickens: investors should ask themselves, we’re these investment options not available when the client initially invested? Suggesting these advisors were not doing the right thing by their clients, and alternatively selecting investments that were in the best interest of the advisor, and not of the client, compromising the fiduciary duty advisors have to their clients.
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Samra Wealth Management, A Member of Advisory Services Network, LLC