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The SEC Is Broken; Evaluating Smart Beta; Where Are the Privately Owned BDs?: December Investment Advisor—Slideshow

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As the main regulator of the financial services industry, the SEC has three important jobs: to protect investors; to maintain fair markets; and to facilitate capital formation. Unfortunately, the agency is facing headwinds that keep it from doing those jobs as efficiently as possible. Melanie Waddell highlights some of the challenges that stymie efficient rulemaking in this month’s cover story.

As smart beta strategies become more popular, more advisors are considering them, but Charles Schwab’s Tony Davidow worries that some advisors aren’t weighing the decision properly. There are many factors that determine how well a strategy will work for a client and they change all the time.

And, the number of top-50 privately owned broker-dealers was cut in half in six years, leaving the survivors in high demand among reps looking for a firm that will have their best interest at heart. Jon Henschen explains why we’re seeing this trend and how it will affect BDs of different sizes.

The SEC Is BrokenThe SEC Is Broken

The Securities and Exchange Commission has three primary mandates: to protect investors; to maintain fair, orderly and efficient markets; and to facilitate capital formation.

However, as the commission has demonstrated in recent years, especially since it took on the massive job of implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act, it is a broken agency that is failing to do its job.

Melanie Waddell spoke with industry insiders to learn more about the inner workings of the financial services regulator.

Read the full article.

Evaluating Strategic Beta StrategiesEvaluating Strategic Beta Strategies

The last several years have seen a proliferation of strategic beta strategies. According to Morningstar Associates, assets under management in strategic beta strategies exceeded $400 billion in the third quarter, growing at a rate nearly double the industry average.

Often referred to as “smart beta” or “alternative beta,” they offer the potential for attractive risk-adjusted returns and can be used in conjunction with traditional market-cap and actively managed strategies to help create a diversified portfolio. However, Tony Davidow of Charles Schwab warns, before investing in such a strategy, investors should understand the weighting methodologies, underlying indexes, sector allocations, market capitalizations and value-growth tilts it uses, and should keep in mind that portfolio characteristics will change over time.

Read the full article.

Are Privately Owned Broker-Dealers a Dying Breed?Are Privately Owned Broker-Dealers a Dying Breed?

With the recent sales of broker-dealers, have you noticed how many BDs in the top 50 are privately owned? Jon Henschen of Henschen and Associates looked into it and found that in 2008, there were 20 broker-dealers in the top 50 that were privately owned. Fast forward to 2014 and that number drops to 10, a 50% decrease.

Read the full article.


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