More On Legal & Compliancefrom The Advisor's Professional Library
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
James Glassman, a former undersecretary of state and Washington Post writer and television host, and current columnist for Kiplinger's Personal Finance, told the more than 500 attendees at the Insured Retirement Institute's marketing conference in New York on February 22 that while the U.S. economy grew at an annual rate of 3.5% from 1960-2003, moving forward growth will more likely average 2%, or even less. Glassman suggests that growth will be hindered by the country's growing debt--"It's more difficult to move ahead if you've got this big load on your back"--and by changing demographics, most notably the fact that "the young cohort won't be big enough to support the older cohort," as evidenced by the shrinking worker-to-retiree ratio, which stood at 45 workers to each retiree in 1945 and was 5 to 1 by 1960, and which now stands at 3-1, with the consensus projection of there being a two-to-one ratio by 2030.
While admitting that this ratio could change if Americans start retiring later and if immigration increases, and that "history is not a perfect guide to the future," nevertheless Glassman predicted that "we'll never get back to 5-1, much less 16-1."
There's another reason why growth will moderate, he says: lack of political will to force Americans to take more responsibility for their own retirement. He says healthcare reform has been rejected because Americans "think government doesn't do a good job of fixing things," and "because it costs too much."
By contrast, Glassman is "bullish on emerging markets," noting that while their faster growth than developed nations is a "recent phenomenon," those nations are better poised for continued growth because they are, in general, more stable debt wise and demographically, and are not "saddled with the legacy costs" of programs like Social Security and Medicare. Glassman predicted that increasingly, those nations are "going to buy our companies, not just our bonds."
Cathy Weatherford, president and CEO of the Investment Retirement Institute (IRI), formerly known as NAVA, the National Association for Variable Annuities, said there were 530 people preregistered for the two-day conference in New York, including some 50 advisors for whom a special track was created for the first time.