In Practice October 18, 2023

Retirement Advisor Council Launches Financial Literacy Program FinLitFuture$

The council is calling on advisers and the retirement industry to help provide financial education to underserved students in underserved communities.

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The Retirement Advisor Council has launched a new financial education volunteer collaboration initiative for underserved middle school and high school students called FinLitFuture$, according to an announcement October 10.

The council started the program to inspire youth financial literacy volunteer efforts generally and to specifically reach communities traditionally underserved for retirement plan access and engagement, says Lisa Buffington, a Retirement Advisor Council member who also serves as the chair of the RAC Financial Literacy Committee. The FinLitFuture$ program will include a curated online resource library of vetted financial literacy program materials to support advisers and other members of the retirement industry who want to teach financial literacy to students in their communities. 

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“Underserved communities or diverse communities are already tracking behind [others] relative to plan coverage or access to retirement plans,” Buffington says. “There are disparities with compensation and pay that also show themselves from a retirement savings success standpoint, and we know that these communities have expressed some concern about outliving their retirement savings. Starting with financial literacy education will help people start off with stronger footing.”

The RAC initiative provides advisers and others with educational resources and nonprofit partner connections to foster “collective volunteer and advocacy efforts,” according to the announcement. The program is seeking to work with advisers, service providers, asset managers and retirement industry associations.  

“We want key stakeholders to be aware of opportunities in their local communities. Urban and underserved communities absolutely represent a prioritized focus, certainly, [as well as] schools and community programs,” Buffington says. “The key target audience age is in middle school, high school, but not limited to that.”

Buffington says advisers can get involved by connecting with the Retirement Advisor Council through its website and by sharing updates on any financial literacy education they are doing in their communities.

“Go to our website, sign up, let us know what you’re already doing to support youth financial literacy, because we want to, No. 1, shine a light on your efforts that you’re leading with, and, No. 2, track the progress and collective impact made across the industry,” she said.

Financial advisers can also leverage FinLitFuture$ by accessing a curated repository of educational resources and vetted programs, Buffington says. The resources are free of charge, separated by topic and grade level and are available in both English and Spanish.

The organization also recommends reaching out to local organizations like the Boys & Girls Club, YMCA, YWCA or Rotary Club, or local boards of education for volunteer opportunities.

Buffington says her committee will continue to partner with nonprofit programs and groups focused on financial literacy initiatives. The committee is also aiming to get involved in financial literacy advocacy efforts through the retirement council’s government affairs committee.

“I think our biggest opportunity is to leverage the connective tissue we represent, not only as financial advisers, but across the whole industry, thinking about how to inspire financial literacy volunteer efforts across your specific communities or networks,” she said.

Formed in 2009, the Retirement Advisor Council is a national organization that advocates for successful qualified plan and participant retirement outcomes.

Compliance October 18, 2023

SEC Proposes Partial Ban on Volume-Based Discounts for Brokers

The ban would prevent exchanges from offering volume-based pricing schemes to brokers for agency trades, a practice the SEC sees as benefitting larger broker/dealers.

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The Securities and Exchange Commission proposed a new rule Wednesday that would prevent exchanges from offering preferential volume pricing or rebates for large orders from brokers, which the regulator sees as benefitting larger broker/dealers.

An SEC release stated that the proposal would “prohibit national securities exchanges from offering volume-based transaction pricing in connection with the execution of agency or riskless principal.” Riskless principle or agency trades are trades in which an exchange couples buy and sell orders together between different customers in offsetting trades.

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Exchanges that offer volume discounts for other trades must maintain anti-evasion and disclosure policies. Among other items, such exchanges must disclose “the number of members that qualify for each transaction pricing tier that the exchange offers,” and these disclosures would be made public on the SEC website.

The proposal would only cover trades executed on behalf of clients. Broker/dealers trading on their accounts would be exempt and could therefore still benefit from volume-based pricing schemes.

SEC Chairman Gary Gensler explained in the announcement that the proposal is intended to increase competition and allow smaller brokerages to better access trading markets. Gensler stated, “We have heard from a number of market participants that volume-based transaction pricing along with these market practices raise concerns about competition in the markets” because “mid-sized and smaller broker-dealers effectively pay higher fees than larger brokers to trade on most exchanges.”

Xiaoxiang Zhu, the director of the SEC’s division of trading and markets, noted at the SEC’s October 18 hearing that the proposal could reduce conflicts of interest by disincentivizing brokers from timing or bundling orders to get bulk pricing when it might not be in the best interest of their client.

SEC Commissioners Hester Peirce and Mark Uyeda both opposed the proposal. They argued that bulk pricing is a part of many markets because it incentivizes more efficient behavior, especially for transactions with fixed costs that are high relative to their unit costs.

 “When wholesalers give volume discounts to retailers, they generally do not do this out of generosity or charity; they do it because moving items in bulk may be more efficient, and the volume discounts reflect that efficiency,” Uyeda said in a statement. “In competitive markets, customers benefit from these volume discounts.”

The American Securities Association stated via email that it has “long been concerned about concentration in the equity markets and ending the discriminatory incentives that disadvantage small and mid-size market participants over larger ones, and this issue is particularly acute with volume-based rebates.”

The industry association wrote that the SEC has an obligation to “put an end to the exchanges’ monopolistic rent-seeking practices that harm America’s working families, savers, and retirees.”

The proposal was sent out for public comment by a vote of 3 to 2, with Peirce and Uyeda voting against it. The comment period will extend 60 days after the proposal is entered into the Federal Register.

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