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2021 News of the Year

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While the influence of the COVID-19 pandemic continued in 2021, other news and trends in financial services came to dominate headlines.

Much of the most significant news of 2021 concerned President Joe Biden — such as his tapping of Gary Gensler to lead the Securities and Exchange Commission — and potential changes in tax rules that aim to raise government funding for different economic and social programs.

But the rising popularity of Bitcoin and other cryptocurrencies also made waves, as the financial markets generally remained robust.

Over the past year, though, prices have risen due to supply chain and related issues. This led to a higher Social Security cost of living adjustment, for instance, and there will be a hike in Medicare premiums, too. There also have been numerous discussions in Congress about the impact of potential tax changes on retirement plans, including Roth IRAs.

Meanwhile, several high-profile criminal cases and other scandals in the broker-dealer space attracted lots of attention on social media and beyond. There also have been lots of shifts tied to the $22 billion Schwab-TD Ameritrade deal of 2020, as well as numerous mergers and acquisitions this year in the rapidly consolidating financial services industry.

The following 2021 highlights reveal several trends and key industry developments that should carry over into 2022 for financial advisors, financial services firms and their investor clients. They also illustrate the rapid pace of change in the industry and the need for advisors to keep up.

Washington News

Hoping to shore up Social Security — at least for a while — House Ways and Means Social Security Subcommittee Chairman John Larson, D-Ct., introduced on Oct. 26 new legislation, Social Security 2100: A Sacred Trust, and planned to hold a hearing on the bill in November followed by a markup.

While the legislation isn’t likely to pass in 2021, it sets up debate over how to strengthen Social Security benefits and the financing of the program in 2022. “It’s been 50 years, let me repeat that, 50 years since Congress has enhanced Social Security benefits and 38 years since it has taken any comprehensive action,” Larson said in introducing the bill.

The bill adopts the Consumer Price Index for the Elderly as the basis of the annual cost-of-living adjustment (COLA), applies the payroll tax to wages above $400,000, combines the Old-Age and Survivors and Disability Insurance trust funds, includes a 2% benefits bump, and extends the depletion date (when a 20% cut to benefits would occur) to 2038.

“Here’s the deal: The majority of Americans, including 75% of independents, 78% of Democrats and 79% of Republicans feel leaders in Washington do not understand how hard it is for Americans to save for retirement,” Larson said during a press conference to introduce the bill.

“People’s skepticism is validated by Congressional inaction,” he continued. “This is compounded by the fact that 10,000 baby boomers a day become eligible for Social Security. And millennials will need Social Security more than any generation before,” he stated, adding that there are 65 million Social Security recipients.

Larson introduced the legislation along with Majority Whip James Clyburn, D-S.C.; House Ways and Means Chairman Richard Neal, D-Mass.; Sen. Chris Van Hollen, D-Md.; and other Ways and Means Democrats.

According to the bill’s fact sheet, adopting a CPI-E formula “will help seniors who spend a greater portion of their income on health care and other necessities. Improved inflation protection will especially help older retirees and widows who are more likely to rely on Social Security benefits as they age.”

The bill also includes a benefit bump for current and new beneficiaries equivalent to about 2% of the average benefit, the fact sheet explains.

Larson’s bill would require millionaires and billionaires to “pay the same rate as everyone else,” the fact sheet states. “Presently, payroll taxes are not collected on wages over $142,800.” The bill would apply the payroll tax to wages above $400,000 and “would only affect the top 0.4% of wage earners.”

Mary Johnson, Social Security and Medicare policy analyst with The Senior Citizens League, said that given the current legislative calendar, passage of the bill this year isn’t likely. “Social Security legislation requires consideration under special rules,” Johnson said. “Thus, I suspect that the provisions of this bill would need to be considered separately” from the spending bill now under debate in Congress.

Johnson added, however, that while Larson’s “entire bill” won’t be wrapped into a spending package, some provisions could make it in.

Larson’s bill, “will certainly open debate over how to strengthen Social Security benefits and the financing of the program in 2022,” Johnson added, “and we intend to continue to work with members of Congress to find the best solutions to improve program solvency and benefits for all beneficiaries.”

The Social Security 2100 bill “not only provides measures that would boost benefits, and provide better protection from inflation, but it would adjust the income thresholds that subject Social Security benefits to taxation, among a number of long overdue changes,” Johnson said.

Gary Gensler took the helm of the Securities and Exchange Commission in April 2021 and brought with him a long to-do list. With Gensler’s arrival, industry officials are holding out hope that a Bitcoin ETF finally will be approved.

Since taking charge, Gensler has aired his views on everything from the regulation of cryptocurrency, the agency’s Regulation Best Interest, as well as problems he sees with digital engagement platforms.

In remarks at the Securities Industry and Financial Markets Association’s annual conference, held virtually in October, Gensler reiterated his views that what’s important for the SEC now regarding crypto trading and lending platforms is ensuring that the investing public is protected.

In this new crypto area, Gensler stated, “there’s a lot of hype and investors reaching for yield who are hoping to have a little bit better future; but these platforms generally have not come in to either the CFTC or SEC [oversight] to be within an investor protection framework.” The SEC, Gensler said, is “going to be very active trying to bring this [crypto] market into what I’ll call the investor protection framework.”

Gensler this year also has questioned when design elements and psychological nudges associated with digital engagement platforms, or DEPs, “cross the line” and become recommendations.

“The answer to that question is important, because that might change the nature of the platform’s obligations under the securities laws,” Gensler said at the Practising Law Institute’s SEC Speaks event.

“Even if certain practices might not meet the current definition of recommendation, I believe they raise a question as to whether there are some appropriate investor protection guardrails to consider, beyond simply the application of antifraud rules,” Gensler said.

These modern DEP features, Gensler continued, “go beyond game-like elements, or what is sometimes called ‘gamification.’ They encompass the underlying predictive data analytics, as well as a variety of differential marketing practices, pricing and behavioral prompts.” Gensler told lawmakers this year that he remains committed to continuing to implement Reg BI as it’s “written down.”

On Aug. 25, Gensler appointed Barbara Roper as his senior advisor. Roper, the former director of investor protection for the Consumer Federation of America, has been a vocal critic of Reg BI.

During a question-and-answer session with Rep. Ann Wagner, R-Mo., at an SEC oversight hearing held by the House Financial Services Committee, Wagner stated that “the benefits of Reg BI to the capital markets are abundantly clear, and there’s little doubt that investors are better off today than they were previously … You have brought on staff with a clear public record of opposing Reg BI. You can understand how that would give the investing public the impression that the SEC under your leadership is not committed to Reg BI.”

She reminded Gensler of his previous comments during his confirmation hearing that he was committed to working with SEC staff to ensure Reg BI “’lived up to its best-interest label.’” Wagner asked Gensler: “Do you still commit to fully supporting the continued implementation of Reg BI?”

Gensler responded: “That is as true today as when I said it. This will ensure that our regulations, Regulation Best Interest, and others, live up to what is written down on the page.”

During his confirmation hearing, however, Gensler also stated that the agency will “constantly evaluate” how Reg BI is serving investors and that it could be modified. “If the rule doesn’t work, ultimately, we are going to look to make sure that brokers ensure that the investing public truly gets best interest,” Gensler told lawmakers.

Investment advisors will face major changes in how they can advertise and market their services next year thanks to a new Securities and Exchange Commission rule that went into effect in May.

Former SEC Chairman Jay Clayton said when the rule passed that the new “comprehensive framework for regulating advisors’ marketing communications recognizes the increasing use of electronic media and mobile communications and will serve to improve the quality of information available to investors.”

The new rule, Clayton said, provides for “an extended compliance period intended to provide advisors with a sufficient transition period, including to enable consultation with the Commission’s expert staff.”

Registered investment advisors view the new marketing and advertising rule as the “hottest” compliance topic in 2021, according to an Investment Adviser Association poll.

The SEC’s advertising and marketing rule has been in effect since early May, but compliance experts are cautioning advisors to tread carefully when using testimonials and endorsements before the rule’s Nov. 4, 2022, compliance date.

The use of testimonials and endorsements “before the firm is fully compliant and updating its compliance [policies and procedures] … that is a huge risk to the firm,” Amy Lynch, founder and principal of FrontLine Compliance, said on a webcast held by ThinkAdvisor.

Daren Domina, a partner in the Investment Management and Private Equity Practice Groups at Haynes and Boone in New York, who also heads the Broker-Dealer Regulatory Practice Group, added that “because of the Marketing Rule’s permissibility of use, I expect to see more advisor arrangements and presentations with testimonials and endorsements, including increased use of social media.”

In October, the SEC announced that investment advisors can no longer rely on a host of SEC staff letters that provided guidance on how to comply with the agency’s current advertising and cash solicitation rules.

The SEC’s Division of Investment Management recently issued an update on its new Marketing Rule, amended Rule 206(4)-1, stating that it was rescinding a bevy of SEC Staff Letters that provided guidance.

“Many of the positions taken in those guidance documents have been incorporated into the rule and others have been modified or rejected,” the SEC’s IM division said.

Retirement News

On Oct. 13, the annual cost-of-living adjustment, or COLA, for Social Security benefits in 2022 was announced by the Social Security Administration: 5.9%. This will be the largest increase since 1982.

“This would be the highest COLA that most beneficiaries living today have ever seen,” said Social Security and Medicare policy analyst Mary Johnson of The Senior Citizens League, noting that inflation patterns caused by the COVID-19 pandemic are “unprecedented” in her experience.

The COLA was based on third-quarter inflation data, and spotlighted rising inflation. The Consumer Price Index, announced that morning by the Labor Department was up 5.4% in September versus the year prior and up 0.4% from August. (The CPI includes food and energy.)

Key components of the increase included the energy index, which rose 1.3 % from the previous month, mainly due to the gasoline index, which rose 1.2%, and fuel oil, which rose 3.9%. The food index rose 0.9%, and new vehicle prices increased 1.3% from the previous month.

“Over the past 21 years, COLAs have raised Social Security benefits by 55% but housing category costs rose nearly 118% and health care costs rose 145% over the same period,” Johnson said. In other words: A Social Security benefit that grew to $1,262.40 per month in 2021 from $816 in 2000 should have grown to $1,671 to keep up with rising costs, according to the advocacy group.

However, Stephen Goss, SSA chief actuary, during a panel discussion held by the Bipartisan Policy Center directly after the announcement, warned that people shouldn’t expect big annual COLA raises to become a trend.

Further, he said that just as important as the COLA was the average wage index or AWI, as it affects how benefits are calculated at retirement age. “That’s significant because individuals becoming newly eligible for benefits in 2022 will have their benefit formula adjusted by the average wage index,” Goss said, adding that a year or so ago before the pandemic took hold, many didn’t expect the AWI to rise.

Although many factors are affected by this increase, he said, one is the taxable maximum dollar amount that will be adjusted, up to $147,000. Goss made clear the AWI, which is based on actual 2020 W-2 forms from all U.S. wage earners, increased 2.8% from a year earlier. Regarding the current COLA, Goss stated that “anybody who is currently in receipt of benefit obviously should take a look at what their benefit is and imagine what a 5.9% increase will do to that benefit level.”

Goss also explained that in 2008, during the third quarter “we had this large increase in fuel prices that really created, largely, that 5.8% COLA by December of that year, and then prices dropped back pretty substantially. And because of that drop back … there was a much lower CPI over the next couple of years,” he said.

However, for now, he says indicators show in the future “we’re not likely to have a dramatic correction down … we’ll probably have COLAs but [they] might be smaller than we would otherwise expect.”

The September release of the Social Security Trustees report — long in coming as it is typically released in April — had potential bad news: The projected date that the Old-Age and Survivors Insurance Trust Fund, which pays benefits to retirees, was to be depleted by 2033, one year earlier than reported in 2020.

The Disability Insurance Trust Fund will pay benefits until 2057, eight years earlier than last year’s report. Once the funds are depleted, the OASI should be able to pay 76% of scheduled benefits, while the DI will pay 91% of scheduled benefits.

But this is better than some retirement experts feared at the height of the pandemic. “The news from the new report was definitely less dire than many thought could be possible,” Wade Pfau, professor of retirement income at The American College of Financial Services, told Investment Advisor. ”Last year’s report projected that the combined OASDI funds could be depleted by 2035. During the pandemic, there was analysis circulated that this date could be moved to as early as 2029. In the end, it’s only one year sooner at 2034.”

The depletion date isn’t written in stone. But Congress will have to take action.

“[Last year] saw a reduction in payroll taxes collected, but also an increase in expected mortality among Social Security recipients,” Michael Finke, professor and Frank M. Engle Chair of Economic Security Research at The American College of Financial Services, told Investment Advisor.

“Neither had a big impact on solvency projections, since they largely canceled each other out, and you see that the modest projected reduction in the actuarial balance is the result of using different and more accurate methodology,” Finke explained.

“The bottom line is that we’ve known for years that either taxes collected will need to rise, benefits will need to be reduced, or inflation adjustments will need to be more modest,” he added. “It’s more than likely that politicians will wait as long as possible before making the hard choices, but the alternative of a 24% benefit cut is a political death sentence.”

Jamie Hopkins, managing partner of wealth solutions at Carson Group, said in a tweet: “I’m happy SS report was better than expected but I wonder if the full impact is still a year away.”

In 1999, budding investor Peter Thiel used $1,700 in his new Roth IRA to buy startup shares of the firm he co-founded, which would later become PayPal. That account now is worth more than $5 billion — with no tax bill awaiting Thiel upon withdrawal of the assets, as long as he waits until six months before his 60th birthday.

In June, ProPublica, an investigative news outlet, reported this story in an article, “Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank.” The article sparked debate over Thiel’s use of a Roth IRA as a massive tax shelter — and how other investors and the government might respond.

Indeed, the expose ignited an array of actions from Congress, which has included an ongoing threat to the usage of the so-called mega backdoor Roth IRAs in various legislation.

The retirement planning provisions that were approved in the House Ways and Means Committee’s Build Back Better bill in mid-September were excluded from President Joe Biden’s Build Back Better framework, released on Oct. 29. However, the elimination of backdoor Roth IRA conversions made it back into the latest version of House Democrats’ tax and spending bill, which was released on Nov. 3.

In mid-November, House lawmakers were drawing close to a vote on Biden’s Build Back Better bill. But Greg Valliere, chief U.S. policy strategist for AGF Investments, said that the “growing public anxiety over inflation will become an obstacle for proponents of more federal spending.”

Senate Finance Committee Chair Ron Wyden, D-Ore., said in late July, however, that data released by the Joint Committee on Taxation showed “it’s long past time to crack down on mega-IRAs.”

The new JCT data provided an update to a 2014 Government Accountability Office report requested by Wyden. The GAO report, which used 2011 tax data, showed nearly 8,000 taxpayers had aggregate IRA balances of $5 million to $10 million. A total of more than 9,000 taxpayers had $5 million or more.

“The new JCT data show a threefold increase in aggregate IRA balances of $5 million or more,” the lawmaker said.

As of the 2019 tax year, nearly 25,000 taxpayers had aggregate IRA balances of $5 million to $10 million. In total, more than 28,600 taxpayers had more than $5 million, including 497 taxpayers with aggregate IRA balances of $25 million or more, the JCT found. The average aggregate account balance for these 497 taxpayers was more than $150 million.

“It is shocking, but not surprising, to see how the use of mega-IRA accounts by mega-millionaires and billionaires has exploded,” Wyden said at that time. “IRAs were designed to provide retirement security to middle-class families, not allow the super wealthy to avoid paying taxes. This is the perfect example of what I’ve long called the tale of two tax codes.”

Thiel’s purchase of founders’ shares and hedge fund investments within his Roth IRA might not have been a prohibited transaction when initiated, but the way those shares were valued could draw the attention of tax authorities, said Buckingham Wealth Partners Chief Planning Officer Jeff Levine, CPA and CFP.

“It wasn’t a prohibited transaction when he made the initial purchase,” Levine told Investment Advisor at the time. “[However] I could see some potential prohibited transaction concerns when he had a liquidity event and may have used some of that [Roth IRA] money to invest in his own hedge fund.”

He noted that “there is more to unpack there, and unfortunately we don’t have all the details.” But “there are several strong pieces of evidence that the shares [Thiel bought] were not valued properly,” Levine said.

The key evidence was a PayPal filing with the Securities and Exchange Commission stating that these shares were undervalued when Thiel bought them. He paid, according to ProPublica, a fraction of one cent for each share.

“He bought significant amounts of the company for $1,700 when the company later said that it undervalued those shares and sold them at less than fair market value, and then within weeks [PayPal was] bringing in large investments,” Levine explained.

The tax expert doubts that the Internal Revenue Service will go after Thiel because the agency has such limited resources. But if it did, it would focus on valuation issues, he said. “That’s a bigger issue than the initial investment in the IRA,” Levine explained.

Although Thiel might claim the statute of limitations ran out on any actions tied to this 22-year-old investment, Levine doesn’t see that argument panning out. That’s because the IRS requires Form 5329 to be filed by IRA owners to report penalty taxes they may owe, for example in the case of an early withdrawal or “Roth stuffing,” which includes the practice of putting shares of early-stage companies into a Roth IRA at very low valuations.

If that form isn’t filed — and it usually isn’t, Levine says — then there is no statute of limitations, and there could be penalties on failure to pay a tax. Still, Levine doesn’t believe much will happen to Thiel and other wealthy investors who have taken advantage of the Roth IRA.

Levine predicts that “these stories represent the greatest threat to Roth IRAs,” because despite these products being “universally loved” by investors and politicians, anger at billionaires like Thiel who find back doors might spur Congress into making changes.

That said, the IRS hasn’t been clueless about these types of actions. In 2014, a report from the Government Accountability Office stated that Congress initially created IRAs to “prevent the tax-favored accumulation of unduly large balances. But concerns have been raised about whether the tax incentives encourage new or additional saving.

The GAO noted that “founders of companies who use IRAs to invest in nonpublicly traded shares of their newly formed companies can realize many millions of dollars in tax-favored gains on their investment if the company is successful.” In 2020, the GAO issued another report looking at high-risk IRA asset types associated with abusive tax schemes.

Levine predicts the hubbub around the ProPublica story will cause a greater workload for advisors who will need to answer questions from clients about how they, too, could score a huge payout using a Roth IRA, particularly a self-directed one. He warns that clients should avoid investing IRA money in their own businesses, as they could run into prohibited transaction concerns.

“As a planner, we want people to take the right steps,” he said. “[The ProPublica story] will spur questions, but we aren’t all Peter Thiels.”

Broker-Dealer/RIA News

Although Charles Schwab’s $22 billion acquisition of TD Ameritrade was finalized in October 2020, the integration of TDA into Schwab’s operations extended into 2021 and still has a ways to go before it’s expected to be completed.

In 2021, Schwab made additional job cuts at TDA, announced updates on the timing of the completed integration and provided more details on what TDA platforms and technology will survive the integration.

In February, Schwab CEO Walt Bettinger said during the firm’s Winter Business Update webcast that his firm remained upbeat about its ongoing integration with TDA this year, but was reviewing some of the decisions it’s made on that front as part of its efforts to improve client service.

“We’re carefully reviewing some of the decisions around the TD Ameritrade integration, because we want to ensure that we don’t take steps that would risk any further degradation in our service quality,” he said. “As part of that, we’re examining locations that we might have previously thought we wouldn’t maintain” that Schwab may opt to keep open, Bettinger said.

However, he was quick to add: “We remain as committed as ever to saving the $1.8 [billion] to $2 billion of expenses that would otherwise come from our combined run rates” through the completion of the integration with TD Ameritrade.

This year, the “same three strategic initiatives are guiding our efforts,” Bettinger also said, noting they include increasing scale and efficiency, which includes making continued progress on the TDA integration and adding new digital capabilities.

Only a few days later, Schwab disclosed it slashed another 200 or so jobs as part of its ongoing integration with TDA. The job cuts are in addition to the more than 1,000 jobs that the company already said it was eliminating across the two firms following the finalization of that deal.

The latest job reductions are “part of our continuing efforts to reduce overlapping or redundant roles across the two firms,” a Schwab spokesperson explained at the time. The company did not specify how many of the jobs cut were at Schwab vs. TDA. Nor did it specify what departments the cuts were made in.

In March, Schwab said it was dropping the TDA Retirement Plan business that serves RIAs and integrating it into the Schwab Retirement Network for Advisors.

A few days later, Tom Bradley, a senior vice president at Schwab and head of TD Ameritrade integration, said the companies were “aggressively” hiring advisor service staff to keep up with the heavy trading volumes seen in recent months.

In April, Schwab disclosed it started the process of integrating the Schwab and TDA advisor referral networks as part of an initiative that would result in a decrease in the number of participating RIA firms to 175 from 298. TDA’s AdvisorDirect referral program was being integrated into the new Schwab Advisor Network, Schwab said.

At the same time, Schwab said the total revenue synergies of the merger with TDA would reach $4.3 billion to $4.8 billion, up $800 million from Schwab’s original estimate.

In May, Schwab eliminated more jobs at TDA, including at least three of its executives, as part of the ongoing integration of the two firms, an industry source told Investment Advisor. In July, Schwab eliminated more jobs at TDA, including at least another two of its executives, as part of the ongoing integration of the two firms, according to the source.

In October, John Tovar, managing director of wealth management services for TDA Institutional, said Schwab was preparing to bring TDA clients to its platform, and the completion of the integration of TDA into Schwab’s business was still on track to be completed within 36 months.

“As far as the actual conversion date … when we will be moving the accounts and assets from TD Ameritrade over to the Schwab platform, we’re still targeting that second half of 2023,” he said.

Keith Patrick Gill, who had been registered as a broker with MassMutual, drove video game retailer GameStop’s stock price up early this year through his recommendations on Twitter and YouTube under the name “Roaring Kitty” and on Reddit under the name “DeepF***ingValue.”

In February, Massachusetts’ top securities regulator, William Galvin, said he was looking into the actions of Gill in relation to the trading frenzy surrounding GameStop and other stocks a week earlier.

The trading frenzy caused headaches for several firms. A class-action lawsuit filed Feb. 4 in U.S. District Court for the Northern District of California alleged that brokerages, fund companies and clearinghouses “conspired” to prevent retail investors from buying stocks like GameStop, thereby “stripping them of their rights to control their investments.”

The brokerages named in the suit included Robinhood, Schwab, TDA, Interactive Brokers, Morgan Stanley, E-Trade and Ally Financial; the clearinghouses named included Apex Clearing Corp. and the Depository Trust & Clearing Corp.; and the fund firms named were Citadel Securities and Melvin Capital Management.

That same month, Gill and Robinhood Markets CEO Vlad Tenev testified before the House Financial Services Committee on the Reddit GameStop Squeeze.

“Robinhood Securities put… restrictions in place” on certain stocks “in an effort to meet increased regulatory deposit requirements, not to help hedge funds,” Tenev told members of the House Financial Services Committee.

Although he was registered as a broker with MassMutual, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website, Gill told lawmakers that in 2019, he accepted “a marketing and financial education job” at MassMutual.

“My job was to help develop financial education classes that advisors could present to prospective clients. I’m not a stockbroker or financial advisor. I did not talk to clients and I did not recommend stocks for them to buy,” Gill said.

Another proposed class action complaint was filed against Gill Feb. 16, this time in U.S. District Court for the District of Massachusetts, that alleged he misrepresented himself as an amateur investor and profited by artificially inflating the price of GameStop stock. In March, Galvin ordered MML Investors Services LLC, a subsidiary of MassMutual, to overhaul its social media policies and pay a $4 million fine over the company’s failure to supervise agents, including Gill.

Anthony Duwayne Turner, the former boyfriend and co-worker of slain Bank of America executive Michelle Avan, pleaded not guilty to her murder in August, according to the Los Angeles district attorney.

Avan served as a managing director at Merrill for 22 years before being promoted in June to head of BofA’s global women’s and underrepresented talent strategy, according to her LinkedIn profile.

The cause of her death was unknown, but she “appeared to have suffered trauma to her face,” according to the Los Angeles Police Department. Avan’s son discovered her body a week earlier, and a member of her family contacted police and Los Angeles Fire Department paramedics.

“Family members became concerned when they could not contact Avan,” police said. West Valley Patrol officers arrived at Avan’s home and found Avan unresponsive, police said, adding that paramedics pronounced her dead.

“We are devastated by the news,” BofA said in a statement provided to Investment Advisor in August. “Michelle was a valued member of our company for more than 20 years and will be greatly missed. We extend our deepest sympathies to her family.”

In 2019, the Los Angeles Sentinel named Avan one of Los Angeles’ Powerful and Influential Black Women Leaders. The award recognized her for her leadership and commitment to the community in addition to her work mentoring others, especially Black women and girls.

“Ms. Avan was a leader in our community, and this senseless act of violence has resulted in a significant loss to us all,” Los Angeles County District Attorney George Gascón said.

Turner, 52, of Westchester, California, was arrested in August and bail was set at $2 million, police said. Turner was charged with felony murder and first-degree residential burglary in his former girlfriend’s death, according to Gascón.

On Aug. 3, Turner allegedly entered Avan’s home, and he killed her before leaving Aug. 4, the district attorney said.

Turner had been with Merrill since 2004, and his registration with FINRA shifted to BofA Securities in 2019, according to his report on FINRA’s BrokerCheck.

Although Avan and Turner had been involved in a romantic relationship, she had considered seeking a restraining order against him, NBC4’s I-Team reported, citing law enforcement sources.

A preliminary hearing is scheduled for Dec. 1 at Los Angeles Superior Court in Van Nuys, California, for Turner, according to the court’s website.

LPL Financial was “deeply concerned by the statements attributed to” a registered representative for the firm, the company said in August in a statement provided to Investment Advisor after videos posted on TikTok and shared across social media sites alleged she told her staff she didn’t want to interview Black applicants for an open position at her office.

In a video, Denise Bradley, who goes by the name auntkaren0 on TikTok and has more than 1 million followers, branded Eileen Cure, a registered broker and advisor at LPL-affiliated Cure and Associates in Nederland, Texas, the “racist of the day” after somebody on Cure’s staff forwarded Bradley an image of a statement allegedly made by Cure after interviewing a Black candidate for the position.

According to Bradley’s video, which had been viewed more than 542,000 times, Cure allegedly told her staff in a Skype message: “i wanted to tell you i specifically said no blacks.

I’m not a prejudiced person, but our clients are 90% white and i need to cater to them…so that interview was a complete waste of my time…so please don’t second guess me or go against what i ask…listen to me and give me what i ask for please.”

LPL has “seen the video alleging discriminatory comments by Ms. Cure,” the firm said in a statement at the time. “We immediately launched an internal investigation to review the matter and a decision is forthcoming this week regarding Ms. Cure’s relationship with the firm. We will not tolerate discrimination of any kind in our LPL community.”

Cure was registered with LPL since 2018, according to her report on the Financial Industry Regulatory Authority’s BrokerCheck website.

Indeed, only one day after saying it was investigating that Cure refused to hire Black applicants for an open position at her office, LPL ended its affiliation with her, according to the firm.

“Following our process for review of advisor conduct, Ms. Cure is no longer a client of the firm,” LPL said in a statement provided to Investment Advisor.

Cure did not respond to a request for comment about LPL’s decision to end its relationship with her.

However, prior to LPL’s decision, Cure emailed a comment to Investment Advisor about the controversy, saying: “The entirety of this situation is based upon a TikTok video published by an unrelated individual without press credentials or affiliations using an unauthenticated photo of an alleged internal office chat without validation or context of any content.”

Portfolio News

The U.S. stock market has demonstrated tremendous resilience in 2021. Year-to-date through Nov. 16, the S&P 500 has gained 25% — far more than most strategists were projecting in late 2020 — despite the COVID-19 pandemic, rising inflation, sharply slower second half GDP growth and reduced fiscal stimulus. The Jan. 6 U.S. Capitol riot, dysfunction in Congress and more violent storms and fires around the country also had little effect, if any, on the broad stock market.

Moreover, this year’s gains in U.S. large-cap stocks follows two previous years of strong gains — 32% in 2019 and 18% last year. The odds of such strong showings three years in a row is just one out of 10, based on data going back almost 100 years, according to Nicholas Colas, co-founder of DataTrek Research.

As of the market close on Nov. 16 — almost six weeks before year-end — the S&P 500 had soared above the 4,700 year-end target of the most bullish stock market forecast among Wall Street institutions, Goldman Sachs. The S&P 500 closed at record highs in 65 trading sessions this year.

The rally has persisted despite the surge in inflation and slowdown in economic growth in the second half of the year compared to a year ago. Inflation soared to a 30-year high of 3.6% in September, as measured by the core Personal Consumption Expenditures index, which is the Federal Reserve’s favorite inflation indicator. The PCE index advanced 4.4% overall, with energy and food prices included). The comparable rise in the consumer price index (CPI) was even higher — 4% (core) and 5.3% (overall).

Those numbers didn’t appear to have hurt financial markets for much of the year. But that changed after the October CPI report. The report showed a 6.2% surge in consumer prices over the past 12 months, pushing the 10-year Treasury yield, which had been hovering near 1.5%, above 1.6% by Nov. 15. The idea that the rise in inflation was transitory as the Federal Reserve had maintained seemed to be fading.

The stock market stayed strong, even though GDP growth, adjusted for inflation, slowed from an annualized rate of 6.3% and 6.7% in the first and second quarters, respectively, to 2% in the third quarter. Stocks seemed unfazed by supply-chain problems, the economic impact of the more infectious Delta variant and rising consumer prices.

This year’s headlines also were dominated by the continued growth in the popularity of ETFs, not only among investors and advisors, but also among asset managers who bring ETFs to market.

Asset flows into ETFs through the third quarter of 2021 were $630.5 billion — almost twice the flows into open-end mutual funds, which collected $323.4 billion, according to Morningstar. Though mutual funds still account for three times the assets of ETFs — $20 billion vs. $6.6 billion — the gap between the two fund types continues to narrow as mutual funds lose assets and ETFs gain them.

There were 380 net new ETF launches in 2021 as of Sept. 30 — 25% more than launched for all of 2020, according to Todd Rosenbluth, head of ETF and mutual fund research at CFRA. Almost two-thirds (63%) of the new launches were actively managed ETFs while 49 were focused on environmental, social and governance factors.

More asset managers who were not involved in the ETF market at all or in any substantive way introduced new ETFs in 2021, in part to stem the outflows and cater to financial advisors who preferred the ETF structure to mutual funds for myriad reasons including tax efficiency. Dimensional Fund Advisors converted six open-end mutual funds to ETFs (20% of DFA’s assets are now in ETFs); Putnam Investments launched its first-ever ETF; Vanguard introduced its first actively managed bond ETF; and Schwab announced plans to introduce its first active ETF — also its first ESG-focused ETF — in mid-November.

In addition, T. Rowe Price, which added its first ETFs in 2020, launched its first bond ETF in 2021. Many of the active ETFs are semi-transparent, meaning they don’t disclose their actual holdings on a daily basis to protect against front-running, according to the fund companies, and they publish a proxy-like portfolio instead.

The growing number of ETF launches is not surprising given the increased flow of assets into ETFs. Through the third quarter of 2021 asset flows into ETFs were $630.5 billion — almost twice the flows into open-end mutual funds, which collected $323.4 billion, according to Morningstar.

Among the new launches is a growing number of environmental, social and governance ETFs, continuing a recent trend to match investor demand. Forty-nine ESG ETFs launched over the first three quarters — compared to 41 for all of 2020, according to Rosenbluth.

One example of the popularity of ESG ETFs: almost one-third of flows into iShares ETFs, or $32 billion of $98 billion, were directed into ESG ETFs during the third quarter, marking a quarterly record.

The increasing popularity of ESG investments often is cited by asset managers and others as an example of a values-oriented approach to investing, which, in other words, aligns investors’ values with their investments.

Also growing in popularity in 2021: direct indexing. With direct indexing, a portfolio is constructed to replicate an index of securities by purchasing the underlying equities instead of an ETF or mutual fund. Cerulli Associates projects that direct indexing assets, which currently total over $300 billion in separately managed accounts, will grow at a 12.4% annualized rate over the next five years, topping even the growth rate for ETFs, projected at 11.3%.

The portfolio is customized to fit an investor’s priorities, stressing stocks that align with their values and omitting those that don’t. Major asset managers including Vanguard and Morgan Stanley acquired firms specializing in direct indexing in 2021. BlackRock bought a minority interest in one.

In addition to those portfolio-linked developments based on traditional assets in 2021, cryptocurrency assets became one of the most talked about — and most volatile — asset classes. Prices of Bitcoin, the most popular cryptocurrency, reached a record high topping $67,000 on Oct. 20 and remained above $60,000 through early November.

Much attention — some would call it hype — has been paid to the possibility of a spot Bitcoin ETF coming to market as over a dozen applications from asset managers to trade a spot Bitcoin ETF are pending before the SEC.

The agency has 240 days from the day an ETF application is submitted to issue a final decision. On Nov. 12, the SEC rejected the application for the VanEck Bitcoin Trust, the first spot Bitcoin ETF to come up against the 240-day deadline in the latest batch of Bitcoin ETF applications before the agency.

The SEC said the listing exchange, which is the Cboe, failed to demonstrate it had sufficient means “to prevent fraudulent and manipulative acts and practices.”


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