Data & Research February 21, 2017

Conservative Investors More Likely to Say Trump Presidency Will Help Portfolios

More than half of all investors say the administration will likely benefit their retirement portfolios.
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While the country remains divided in its reaction to Donald Trump being elected president, the same is true for investors, E*Trade found in its latest quarterly survey of investors.

Nearly 70% of conservative investors think the new administration will benefit their portfolio, but only 30% of liberals think so. However, both are nearly equally likely to make changes to their portfolio in reaction to the new president (57% of conservatives and 64% of liberals).

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More than half of all investors think the new administration will benefit their retirement portfolio. This is slightly higher for Boomers and Millennials (56% and 55%, respectively), but true of only 50% of those among Generation X.

Overall, 60% of investors are excited about personal tax cuts, but this jumps slightly to 64% of liberals and declines modestly to 58% of conservatives.

Despite their adverse reaction to Trump, nearly 70% of liberals like his infrastructure plans, while only about 30% of conservatives are enthusiastic about these plans.

Younger investors are more excited about the new presidency; nearly 70% of Millennials are most excited about personal tax cuts, compared to about 60% of Gen Xers and just over half of Boomers.

“We know that politics and passion go hand in hand, and are seeing that these factors are influencing investing decisions,” says Mike Loewengart, vice president of investment strategy at E*Trade Financial. “While deep-seated political beliefs may be difficult to curb, we always caution against emotional investing, urging investors to be guided by their head and not their heart.”

Compliance February 21, 2017

DOL Fiduciary Defenses Prevail In District Courts, But Does It Matter?

A series of recent district court decisions show strong deference for the DOL’s right to promulgate a more aggressive fiduciary standard—how relevant the decisions will remain under President Trump is still anyone’s guess. 
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Much remains uncertain about the future of the Department of Labor (DOL) fiduciary rule—crafted and adopted by former President Barack Obama’s administration but left to current POTUS Donald Trump to implement.

Will the new president, who is an outspoken critic of government regulation of financial markets, make it a priority to halt the rulemaking before the first deadlines in early April, now just weeks away? What would the impact on client relationships be if the new administration only successfully halts the rulemaking later in 2017, or if it takes them until 2018 to do it? Is it possible the rulemaking will stand even after a review by the new DOL leadership? Even experienced attorneys and industry executives admit they are perplexed as to just what could happen next.

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One fact that is increasingly clear, however, is that federal district courts across the U.S. are ready to give broad authority to the DOL in enforcing its agenda, demonstrated by simple fact that the courts have so far been wholly unwilling to pull the teeth out of the aggressive DOL rulemaking that would turn pretty much anyone giving advice to retirement savers for compensation into a full-fledged fiduciary. Obama administration officials are no doubt feeling vindicated by the court victories, which confirm at least preliminarily that the DOL has sufficient regulatory authority to go after conflicts of interest in the defined contribution (DC) advisory marketplace.

It may not mean much in the end that the DOL has now posted a fourth district court victory related to the fiduciary rule, this one coming in the U.S. District Court for the District of Kansas in a case filed by annuity firm Market Synergy Group. In this particular case, plaintiffs argued unsuccessfully that they would never be able to make the Best Interest Contract Exemption (a key mechanism underlying the new fiduciary rule) workable given the commission-heavy distribution arrangements traditionally used for fixed-index annuities. They wanted the DOL to be forced by the court to allow annuity providers to work under the 84-24 exemption. Their claims were stated under the Administrative Procedure Act and Regulatory Flexibility Act.

Plaintiffs’ arguments failed outright, with the judge essentially just rehashing the same conclusions reached in a previous denial of a motion for preliminary injunction filed by Market Synergy. That initial decision led many to predict (successfully) the lawsuit would ultimately fail.

When all this is added to the news emerging last week that the Trump White House had submitted an order for the DOL to review the fiduciary rule, and to the fact that the DOL has actually now started asking for stays in fiduciary-focused litigation still outstanding in other district courts, it all makes for quite a confusing picture. As several Employee Retirement Income Security Act (ERISA) attorneys have suggested, at this point only time will tell what’s in store for advisers’ fiduciary future.

The full text of the most recent Kansas court decision is here. 

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