The Investment Industry Regulatory Organization of Canada (IIROC) recently approved amendments to the Universal Market Integrity Rules (UMIR) pertaining to short sales. The following changes will become effective on September 1, 2012: The new rules repeal the “tick test” — a test that prohibits short sales at a price lower than the last sale price of a security. IIROC decided against implementing a circuit breaker like the SEC’s Rule 201. It should be noted, however, that IIROC has since 2008 had the authority (not yet exercised) to designate “short sale ineligible securities.” In addition, IIROC can trigger single-stock circuit breakers that halt trading for a … Continue Reading →

Constituting roughly 80 million individuals born in the 1980s and 1990s, the Generation Y population is estimated to be as large as that of the baby-boom generation. Of Gen Yers, approximately 50 million are of investing age. Capturing this large group is critical for wealth management firms that want to see assets continue to grow once their baby-boomer clients hit retirement. What characterizes these young investors? A December 2011 Aite Group survey of 1,000 investors (240 Gen Y investors) that hold a minimum of US$25,000 in investable assets reveals the following: Half are entirely self-directed and state that they “look into investments … Continue Reading →

Last week, the Canadian Securities Administrators (CSA) opened for comment the latest in its series of consultation papers on the regulation of over-the-counter (OTC) derivatives. CP 91-404 explores issues, considers alternative solutions, and sets out proposals for the segregation and portability of customer accounts and collateral associated with OTC derivatives transactions cleared through a central counterparty (CCP). The protection of customers’ collateral is an important topic; indeed, Aite Group wrote about account segregation (as well as CCPs) in Top 10 Trends in Institutional Securities & Investments, 2012. We have come to expect the CSA’s Derivatives Committee to explain complex matters clearly and develop regulatory … Continue Reading →

Anyone who has noticed how bond demand since Q1 2007 has kept the U.S. retirement fund industry’s asset acquisition in the black will understand that retail investors have not stopped clamoring for safe-harbor instruments. A similar move is afoot in the exchange-traded funds (ETF) world, where bond ETFs now compose 14% of all ETF assets — up from 5% at the end of 2006. Wait a minute — are we not entering a growth stage that should favor stock demand? I have discussed in other blog posts how macro events are setting the stage for continued investor concern, but one … Continue Reading →

I use the term “legisgulator” as proxy for “legislator and regulator,” but also perhaps because it has a nice guttural ring to it. Legisgulators are modern-day emperors unable to appreciate their nakedness, or, in other words, unable to see that their well-meaning rule-making is, to put it bluntly, worthless. Legisgulators on both sides of the Atlantic are busy dotting the i’s and crossing the t’s on derivatives regulations, oblivious to a vortex of collapsing capital markets headed their (our) way. This crowd firmly believes in creating its own climate, and this has historically resulted in success — just not today. Maybe legisgulators … Continue Reading →

A flurry of articles have been written this year on the poor track record of U.S. high-net-worth families in successfully transferring their family fortune to the next generation, and on the attempts of top advisors and firms to reverse this phenomenon (see this American Banker article on merging wealth and psychology). This is a timely topic as firms and advisors endeavor to retain the US$ trillions in assets that are expected to transfer to the next generations over the next four decades. According to the Institute for Preparing Heirs (IPH), 70% of high-net-worth-family heirs lose control of their assets after an estate … Continue Reading →

Earlier this week, EISI, the largest North American provider of financial-planning software by number of advisors, announced its sale to Zywave, a provider of employee benefits and property & casualty insurance software solutions. This deal was most likely brokered between the two private-equity firms that own EISI and Zywave. While it is common for private-equity firms to sell companies in their portfolio after a five-year ownership period, what is atypical about this transaction is the profile of the acquirer: Past acquirers of financial-planning software firms were either large wealth-management technology providers or financial institutions looking to extend their existing middle- and back-office wealth into the … Continue Reading →

I am eager to get a closer look at PNC’s new online tool, Wealth Insight, which the bank will launch on September 19 for clients who hold US$1 million or more in assets. While other banks are focused on building online tools and apps for their mass-market clients and the young, PNC stands out with an exclusive online tool for high-net-worth clients. Many high-net-worth wealth management services are defined by face-to-face, white-glove service delivered by a team of experts. While these clients have traditionally been able to access balance information and statements through a website, online personal financial management capabilities for … Continue Reading →

Big banks have always managed their consumers’ accounts separately, almost forgetting that consumers have multiple product relationships. Payment products are managed separately from checking relationships, which are separate from mortgage relationships, which are separate from investment relationships. These different forms of customer business have traditionally been run as discrete profit-and-loss centers. Profit margins have now been cut on debit cards, and banks are raising fees on the cards and checking accounts; the rise in checking and debit card fees will further alienate customers at a time when consumer trust in banks is at an all-time low. For the sake of … Continue Reading →

Taxes, entitlements, and the national debt limit are not the only controversial topics in Washington this summer. The Securities and Exchange Commission’s proposal to apply a uniform fiduciary standard to investment advisers and broker-dealers alike has created a ruckus in the retail investment industry. The Securities Industry and Financial Markets Association (SIFMA) and the National Association of Insurance and Financial Advisers (NAIFA) are lobbying vigorously against the SEC proposal.* What’s behind this brouhaha?  We are not qualified to offer legal advice, but here is a layman’s account. As with so many other regulatory issues these days, the debate originated with the Dodd-Frank … Continue Reading →