The Markets June 12, 2012

Only Bond ETFs Saw Inflows in May

U.S. exchange-traded funds (ETFs) saw roughly $2 billion in net inflows in May.
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That brought total ETF net inflows to $60 billion for the first five months of the year—a pace that could result in the sixth straight year of $100 billion or more in annual net inflows to U.S. ETFs, according to Strategic Insight, an Asset International company.   

Bond ETFs were the only major category to post net inflows in May, drawing net nearly $8 billion. Equity ETFs saw an estimated $6 billion in net outflows, with both domestic and international equity products seeing net redemptions. Real estate and gold ETFs also saw significant net inflows.   

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At the end of May, U.S. ETF assets (including exchange-traded notes) stood at $1.13 trillion, down from $1.2 trillion at the end of April.

 

Compliance June 12, 2012

PSNC 2012: The New Fiduciary

Distinguishing between education and advice is among the most difficult issues when updating the definition of fiduciary, according to a Department of Labor (DOL) official.
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Basic education would not be considered fiduciary in nature, whereas advice would fall under the definition, but the distinction between the two is often blurry. “The line between advice and education is among the most difficult we have had to answer,” said Michael Davis, deputy assistant secretary for the DOL, during the 2012 PLANSPONSOR National Conference. “It’s the most difficult philosophical question we are dealing with.”

In October 2010, the DOL’s Employee Benefits Security Administration (EBSA) proposed new regulations to update the definition of fiduciary for purposes of the Employee Retirement Income Security Act (ERISA). DOL Secretary Hilda L. Solis told lawmakers in March 2012 that the agency is not rushing on its re-proposal of the new definition. (See “DoL Not Rushing on Fiduciary Definition Proposal.”)

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Following comments received after its initial proposal last year, EBSA withdrew the proposal and announced it would solicit more information before making a new one. (See “Early Praise for EBSA’s Decision to Re-Propose Fiduciary Definition.”)  

DOL has received more than 360 comments about updating the definition of fiduciary, Davis said. “This has been a very interesting discussion,” he said. “And any time you touch the fiduciary third rail, it’s going to be a passionate discussion.”

In determining what is advice rather than education, Davis said it is sometimes unclear whether an “advice-like” statement was made. In addition, recipients may not understand when they are receiving advice rather than education. “Does a recipient understand being sold a product versus being given broad advice?” he asked.

This will remain an important issue, Davis said, particularly as Baby Boomers continue through the system. “We think it’s a very important issue, and we’re taking all the comments we’ve gotten under serious consideration.”

 

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