Last week’s top conversations were started by APViewpoint’s Ron Rhoades, Scott MacKillop and me, and included comments from our newest thought leader Bruno Stanziale. They generated thoughtful discussions on: the DOL’s new requirements for the sale of fixed-rate annuities (SPIAs and DIAs); trends and changes in the global energy market; and harmful portfolio management assumptions.
Ron Rhoades’s IRA Rollovers into Fixed Rate Annuities, and Impartial Conduct Standards provoked three comments. Rhoades continued his series of posts on the DOL Fiduciary Rule this week by starting a discussion about the requirements for the sale of fixed-rate annuities (i.e., SPIAs or DIAs). Recent announcements by the DOL clarified that when insurance agents undertake an IRA rollover into fixed-annuities, they do not need to comply with the Best Interests Contract Exemption (BICE), but they must adhere to the Impartial Conduct Standards. According to some advisors, the imposition of these standards brings with it major issues because its requirements for reasonable compensation and due diligence are extensive. In contrast, others argued this should not be a major point for concern because “fixed rate annuities are commodity products with low commissions, and not likely to inspire the type of mischief that the DOL is targeting.”
Marianne Brunet’s Trends and Changes in the Global Energy Market, about a talk given by energy expert Amy Meyers Jaffe, generated discussion about the future of oil exploration & production (E&P), and included viewpoints from commodity market specialist Bruno Stanziale. The conversation inspired two comments in which it was widely agreed that “the future of E&P investing will be far more difficult” because of structural changes in the energy sector. Members concurred that E&P investors will no longer be able to rely on upside price exposure, and that “cost containment, concentration of production in basins of company expertise and more predictable returns on capital will become just a few of the accentuated metrics to follow.” However, opinions diverged when members discussed the role that technology will play in future global energy markets. While some argued that technology is driving long-term structural changes in oil and gas markets, others argued that “capital NOT technology will be the new driver of production growth.”
Scott MacKillop’s The Portfolio Management Assumptions that Harm Clients inspired 32 comments as it continued into its second week of discussion. Members discussed detrimental financial advisory practices, and shared techniques they use to account for market uncertainties. Advisors agreed that it is essential to recognize the limits to their understanding of markets, but that there is no way to escape making forecasts. Therefore, members agreed, financial planners should be sure to effectively communicate the underlying assumptions of their forecasts to ensure that their clients’ expectations are properly set.
APViewpoint will be hosting its next CE eligible webinar, No Portfolio is an Island, on Tuesday, June 7, at 4:15PM ET. In this presentation, David Blanchett will show advisors how to achieve a more holistic approach to financial planning and portfolio optimization. Blanchett will review strategies that advisors can use to integrate each client’s wealth elements, including investable assets, human capital, real estate and pensions, into their analysis. You can register for the webinar on the APViewpoint events page here.
Marianne Brunet is a financial market analyst with Advisor Perspectives.
