The Markets August 23, 2017

Adviser-Sold Fund Data Shows Strong Sales at Independent B/Ds

Intermediary-sold fund distribution data from Strategic Insight shows taxable bond strategies led mutual fund demand during the second quarter of 2017. 
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Long-term mutual funds in total attracted roughly $30 billion of net deposits via intermediaries during the second quarter of 2017, according to Simfund data shared by Strategic Insight.

Within that total, active funds encompassed approximately $18 billion of new investment.

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The Strategic Insight data encompasses asset and net flow information, updated monthly, for roughly $11 trillion of open-end stock and bond mutual fund and exchange-traded fund (ETF) assets across more than 900 distributors and nine distribution channels.

During the second quarter, Strategic Insight finds taxable bond strategies led mutual fund demand within the intermediary space, attracting $29 billion of net inflows. Independent and regional broker/dealers (B/Ds) led net deposits to such funds, SI reports, contributing roughly $15 billion.

Beyond mutual funds, Strategic Insight reports exchange-traded fund (ETF) demand was dominated by adviser-sold avenues during the second quarter. Registered investment advisers (RIAs) contributed $30 billion of net inflows to ETF exposures and the broker/dealer channels, both wirehouses and independent/regional B/Ds, each deposited roughly $25 billion. International equity led ETF demand within each of the RIA, wirehouse and private bank channels.

Previous research from Strategic Insight shows ETFs hold only a small fraction of defined contribution (DC) retirement plan assets, but the ETF vehicle has finally found a point of entry into the DC market as an underlying investment within other vehicles, such as target-date mutual funds (TDFs). Strategic Insight researchers say the trend has been building for the last six to eight years, and among all 39 TDF providers analyzed, 17 now use ETFs as an underlying vehicle in some capacity. Still, overall ETFs account for only approximately 2% of the assets invested in the TDF market.

Looking forward, newer entrants and smaller managers are significantly more likely to include ETFs in their TDF funds, in trying to combat the scale-based pricing advantages of larger managers. Using ETFs in this way has not caught on with established retirement plan investment providers, however, as they have the capacity to create their own highly efficient indexed mutual funds and utilize them for core asset classes.

Compliance August 23, 2017

Seniors at Risk of Financial Fraud

State securities regulators say most senior financial fraud goes undetected before it becomes a serious problem, according to a study by NASAA.
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A survey of state securities regulators by the North American Securities Administrators Association (NASAA) found that there is much more that can be done to protect seniors from investment fraud.

“It is imperative that we detect and prevent senior financial fraud before criminals who prey on our most vulnerable citizens steal from and devastate them,” says NASAA President and Minnesota Commissioner of Commerce Mike Rothman. “The clear message from our NASAA members, who are the securities regulators on the frontlines, is that we need everyone to step up and apply greater resources to stop financial fraud against seniors.”

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The survey found that 97% of the regulators say that most cases of senior financial fraud go undetected before they cause serious problems. However, ninety-seven percent also said there is greater awareness of senior financial fraud today than a year ago. Twenty-nine percent said their agency has seen an increase in senior fraud cases.

Seventy-five percent of the state securities regulators said broker/dealers and investment advisers can do more to prevent senior financial fraud, and more than three-fourths said their jurisdictions enforce laws like NASAA’s Model Act to Prevent Vulnerable Adults from Financial Exploitation and that in many cases, the laws prevented fraud. The regulators said that people age 70 and older are at the greatest risk of financial fraud.

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