Products & Services July 22, 2024

Raymond James Steps Into ETFs, Adds Mo Sparks as Head of Division

An ETF product platform is expected to launch in 2025.

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Raymond James Investment Management announced it is launching its first exchange-traded-fund product platform in 2025 and, as part of developing the platform, the firm has appointed Mo Sparks as head of exchange-traded funds, effective July 22.

Sparks will focus on building out the firm’s ETF platform for the investment management arm of the broker/dealer. Before joining Raymond James Investment Management, Sparks spearheaded the New York Stock Exchange’s new business development for ETFs, driving strategic initiatives and partnerships to promote industry growth, while also managing relationships with ETF issuers.

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“We are excited Mo will be leading our expansion into the ETF space—one more avenue that we can provide as part of our overall goal to give broader choice to select, high-demand investment strategies,” said Bob Kendall, president of Raymond James Investment Management, in a statement.

Sparks had also worked at Vanguard, where he held various leadership roles in product management and strategy, overseeing the development and management of Vanguard’s global ETF and mutual fund offerings. He was a founding member of the global product management leadership team and served as head of product management shared services, where he focused on go-to-market strategies, product development and sales distribution for the global ETF business.

Although ETFs have become more popular among individual investors, they are not common in defined contribution plans, in part because they are subject to intra-day trading. The “2023 PLANSPONSOR Defined Contribution Benchmarking Report” found that 0.4% of retirement plans offer exchange-traded funds in their investment lineup.

There are increased efforts to include them. In September 2023, F/m Investments LLC, a subsidiary of Diffractive Managers Group LLC, sought to make an exchange-traded-fund series available to a wider swath of investors, including defined contribution plan participants, by getting them classified as mutual funds.

Industry experts says despite existing challenges, technology is catching up, and there is rising interest from younger and newer investors to include ETFs in their retirement plans.

Compliance July 19, 2024

IRS Proposals Aim to Clarify SECURE 2.0 RMD Reforms

RMD age increases, annuities and excise tax corrections would be codified by the proposals.

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The IRS proposed several regulations to codify changes to required minimum distribution rules found in the SECURE 2.0 Act of 2022. These proposed regulations address Sections 107, 202, 204, 302, 325 and 327 of the SECURE 2.0 Act of 2022 and were made public on Thursday. The proposals were accompanied by final rules clarifying a new 10-year rule regarding RMD withdrawals and inheritance issues.

RMD Age for Those Born in 1959

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The first proposal clarifies Section 107 of SECURE 2.0, which raised the RMD age to 73 in 2023 and to 75 starting in 2033. Elizabeth Thomas Dold, a principal at the Groom Law Group, explains that the “statute was not clear,” and those born in 1959 “could have fallen into either category.” The IRS essentially codified the intent of Congress, not clearly expressed in SECURE 2.0, that anyone born in 1959 would have an RMD age of 73, Dold says.

RMDs for Partially Annuitized Holdings

Section 204 of SECURE 2.0 states that participants can elect to aggregate the value of an in-account annuity with their remaining account balance when calculating their RMD amount. Under prior law, the amounts had to be separate when making the calculation. The new rule would generally result in lower RMD amounts. The IRS proposal would clarify that the market value of the annuity must be calculated on December 31 of the year before the RMD-year in question.

Roth Source RMDs

Under previous rules, Roth IRAs were not subject to pre-death RMDs, but Roth employer-sponsored sources were. Section 325 of the SECURE 2.0 Act made all designated Roth accounts not subject to RMD payouts.

The IRS proposed that voluntary Roth distributions would not count toward the RMD amount. Dold says she expects that “the IRS will get questions about this.”

Excise Tax Corrections

Section 302 of SECURE 2.0 permits those who do not take an RMD on time to correct their error and pay a 10% excise tax instead of a 25% penalty, if the mistake is corrected within two years.

The proposed regulation states that RMDs made in subsequent years could be double counted as corrective distributions: “under the proposed regulations, if a missed required minimum distribution is corrected by a distribution made in a subsequent calendar year, the required minimum distribution for that subsequent year must be made in addition to the corrective distribution.”

Spousal Beneficiary RMDs

The IRS proposed, under Section 327 of the SECURE 2.0 Act, that spouses who are designated beneficiaries and who have the option of taking an RMD based on their life expectancy or under the 10-year rule could be defaulted into the life expectancy RMD option by the retirement plan if the surviving spouse does not make an explicit election.

Spouses with this option are those whose deceased partner had not yet taken a RMD payment.

Dold says that most of these proposals are likely to survive intact as final rules since they are “little areas that are important clarifications,” and “I don’t see any re-hauling of any issues, maybe tweaking.”

The comment period for the proposals ends 60 days after they entered into the Federal Register, and a public hearing to review them is scheduled for September 25.

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