Compliance March 1, 2019

Massachusetts Secretary Galvin Forms FinTech Working Group

The Secretary of the Commonwealth says the FinTech Working Group is the first dedicated team established by a state securities regulator specifically to provide support to, and receive advice from, fintech businesses.

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William Galvin, Secretary of the Commonwealth of Massachusetts, has directed the state’s Securities Division to form a FinTech Advisory Working Group.

Secretary Galvin suggests the FinTech Working Group is the first dedicated team established by a state securities regulator to provide support to, and receive advice from, fintech businesses.

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“The goal of the working group is to help fintech businesses navigate regulatory requirements, while meeting its mandate to protect investors and to foster fair and efficient capital markets and confidence in the markets,” Galvin says. “The working group will strive to keep regulation in step with digital innovation and will monitor developments in fintech, as well as the challenges encountered by fintech-related businesses in the securities industry.”

According to Secretary Galvin, the working group includes stakeholders from a broad spectrum of the technology and financial services community. “This collaboration will help advise securities regulators on meeting the novel demands of this rapidly growing space,” he says.

The FinTech Working Group members consist of private industry experts in the area, as well as staff members from the Massachusetts Securities Division.

Advisers are likely familiar with Galvin and the recent work of the Massachusetts Securities Division. The Division aggressively investigates and sanctions broker/dealers and advisers operating in the state. In 2016, the regulator launched a broker/dealer audit initiative that focused on firms employing 10 or more agents registered in Massachusetts and employing a higher-than-average percentage of Massachusetts-registered agents with at least one misconduct disclosure on their records. According to the Division’s subsequent report, the average percentage of Massachusetts-registered agents employed with at least one disclosure incident at all broker/dealer firms doing business in the state, regardless of size, was about 15% (as of June 2016). According to officials, the firms’ responses show the vast majority of broker/dealers are conducting more background checks due to FINRA Rule 3110(e), which became effective on July 1, 2015.

Data & Research March 1, 2019

Retirement Planning Behavior Differs by Financial Fragility

Almost all of those with high fragility are prioritizing being able to afford everyday bills, while those with low fragility are prioritizing saving for the future, including for retirement, according to a Society of Actuaries report.

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There are dramatic differences when it comes to retirement planning behavior by levels of financial fragility, according to a report from the Society of Actuaries (SOA), “Aging and Retirement: Financial Fragility Across the Generations.” The SOA interprets financial fragility as vulnerability to a financial crisis and having a negative outlook of personal finances

Those with high fragility are much more likely to have short planning horizons and to prioritize everyday bills over retirement or emergency savings. Debt, especially credit card debt, is a major barrier, with 94% of those with high fragility holding some form of debt and 56% reporting credit card debt.

“Reducing financial fragility is an important step in helping individuals manage the priorities of today and those of the future, especially funding a secure retirement,” the report says. “Financial wellness and education programs looking to address these issues should understand the range of differences among financial fragility issues. These programs need to be designed so individuals of different fragility levels can connect to what is useful and important to their situation.”

There is significant variation in financial planning time frames based on levels of financial fragility. Six in 10 of those with high fragility can only plan paycheck to paycheck, while this is only the case for 20% with moderate fragility and just 5% of those with low fragility. On the other end of the planning spectrum, only 6% with high fragility plan for the rest of their lives compared to 10% of those with moderate fragility and 29% of those with low fragility.

While almost all of those with high fragility are prioritizing being able to afford everyday bills, those with low fragility are prioritizing saving for the future, including for retirement (67%).

To address their financial priorities that mainly focus on affording everyday bills and current debt, those with high financial fragility are more likely to say they are sticking to a budget and learning to use credit cards wisely than those with low fragility. Additionally, they are significantly more likely than both moderate and low fragility individuals to say they will be cutting back on things like vacations and eating out, making efforts to get their debts under control, and cutting back on needed medical costs to address their financial priorities this year. Those with low fragility are more likely to plan for tomorrow’s priorities by sticking to a monthly savings plan, contribute to an employer’s retirement plan, target investing to grow their money and produce income now and in retirement, and work with a financial adviser.

Concerns around retirement are high for all, but especially for those who are more financially fragile. The biggest concern for retirement for those who have high financial fragility is they might not be able to maintain a reasonable standard of living for the rest of their life. For those with moderate and low financial fragility, the biggest concern for retirement is that savings and investments may not keep up with inflation.

Greenwald & Associates conducted an online survey of 2,001 individuals for the Society of Actuaries last July on which the financial fragility index is based.

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