Exchange-traded funds in the U.S. (ETFs) could be getting a lift from three rules that will make the funds more accessible to new types of investors. The new DOL fiduciary rule and new insurance guidelines will enable retirement savers and insurers to raise their exposure to ETFs.
New DOL Fiduciary Rule
The number of people saving for retirement is expected to lift ETFs. In June, the DOL fiduciary rule that took partial effect is designed to improve the quality of investment advice and could help more than triple U.S. ETF assets. According to a recent report by Bank of NY Mellon Corp. the number is expected to rise to $10 trillion over the next five years.
The U.S. Department of Labor requires financial advisers to act in the best interests of their retired clients—as fiduciaries, in other words—and to disclose any commissions paid to the advisers by investment funds. Because of the rule, many financial advisers are switching to flat fee business models instead of commission-based business models.
The rule was supposed to take effect in April, but President Donald J. Trump intervened, and only a partial version of the DOL fiduciary rule took effect in June. Other parts of the rule have been postponed until July 2019.
New Regulatory NAIC Guidelines
New U.S. regulatory guidelines will allow insurers to invest in ETFs. The National Association of Insurance Commissioners (NAIC) worked with BlackRock to create an accounting treatment—the so-called systematic value method—that allows insurers to measure ETFs based on underlying cash flows of the securities. The guidelines will help insurers account for ETFs similar to the way they account for bonds, whereas previous guidelines treated ETFs like equity funds.
The measure, which will be implemented next year, could move $300 billion into debt products over the next five years. Before implementation, NAIC must approve each fund by ETF issuers, so it will take time to see the benefits. Since the cash flow of bonds is more straightforward than ETFs, advisers expect there may be some pushback from investors.
Have You Lost Money Investing in ETFs?
If you believe you have lost money investing in ETFs or have been the victim of stockbroker misconduct, you may have certain legal rights that require your immediate attention.
Call an Investment Fraud Attorney Today
If you are looking for an securities fraud attorney to review your rights and options, the investment fraud lawyers at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million from banks and brokerage firms for their wrongful actions.