FA insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
The impact of negative yields (PIMCO)
According to PIMCO, negative yields could be 1) “a consequence of active monetary policy (with the expressed goal of stimulating economic activity) in a world where bond supply and demand is not balanced; 2) “correctly forecasting a sharp economic slowdown”; 3) “a consequence of the ecology of current market participants” ; and 4) the result of “certain investors who have a preferred investment horizon [which] may require a meaningful risk premium to buy bonds with maturities outside their preferred habitat.”
PIMCO suggests if rates go negative even further “an asset allocation of long equity risk versus underweight core government bond duration remains attractive.”
When a Traditional IRA is more beneficial (Financial Planning)
Roth IRAs are particularly attractive because of their tax free nature. However, sometimes they are not the best option.
Michael Kitces notes, “A client who leaves a Roth IRA as an asset to inherit will have paid taxes to get money into the account — either through systematic after-tax Roth contributions spanning many years or through Roth conversions. Which means the benefit of inheriting a Roth IRA is actually more nuanced. If the original IRA owner has paid too much in taxes to create the Roth, the beneficiaries might be better off inheriting a traditional IRA and paying the taxes themselves.”
SEC considers ‘venture exchanges’ (Bloomberg)
The Securities and Exchange Commission is considering ‘venture exchanges’ to make it easier for smaller companies to raise capital. SEC Chairman Mary Jo White noted, “Clearly what we are looking at is how do we improve or deepen the liquidity of the securities of small companies?”
Obama looks to increase regulation on financial advisors (Investment News)
President Obama is expected to call for sweeping changes to investment-advice standards for financial advisors. According to a fact sheet released by the president, the Department of Labour will seek public opinion on “the best approach to modernize the rules on retirement advice and set new standards, while minimising any potential disruption to good practices in the marketplace.”
Parents should inform their kids about their estate (Wealth Management)
Wealth Management suggests parents should be transparent with their kids regarding their estate. At the very least parents should share “where the documents are located, who are the key advisors (lawyers, accountants, financial advisors) and what immediate steps they might need to take if an unexpected death occurs.”
However, parents want to avoid giving too much specific information as they want to keep expectations in check and preserve their resources.
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