There’s a great piece in the WSJ about the practical effects of the fiduciary rule:
Judith Friedlander, an 80-year-old retiree from Murrieta, Calif., doesn’t appreciate the government trying to regulate how she manages her roughly $400,000 individual retirement account.
After the Labor Department last year approved the fiduciary rule, which generally requires advice on retirement assets to be conflict-free, Ms. Friedlander says her financial adviser suggested she transition from a commission-based account of the sort that could run afoul of the rule into a fee-only account.
But Ms. Friedlander isn’t interested in a switch. She trades only a few times a year and says moving to a fee-only account that charges a percentage of her assets would be far pricier than the periodic commissions she currently pays. “I don’t see any advantage to the regulation for someone like me,” says Ms Friedlander, who adds that she hasn’t decided what to do.
…
As brokerage firms over the past several months have announced their compliance plans, some approaches have put new limits on IRA investors. Bank of America Corp.’s Merrill Lynch, for example, has said it will no longer offer individual retirement accounts that charge commissions, and will instead favor charging retirement savers a fee based on a percentage of their assets. J.P. Morgan Chase is taking a similar tack, offering brokerage retirement clients only a fee-based IRA.
Of course, fee-based accounts in a sell-side brokerage is a whole nuther can of worms. New issue commissions, proxy solicitation fees … the potential for conflict is endless. I continue to advocate that buy-side and sell-side be strictly separated, with the former charging account fees and the latter charging commissions; that anybody on the buy-side be required to publish a performance history from inception that is subject to audit and in which any defined groups be strictly mapped onto the fiduciary’s contemporary KYC form; and that only one ‘side’ can be owned by a single entity (e.g., brokerages and advisory firms can’t have a common owner).
HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1991 % | 2,010.4 |
FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1991 % | 3,688.9 |
Floater | 3.76 % | 3.94 % | 48,490 | 17.51 | 4 | 0.1991 % | 2,125.9 |
OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0490 % | 2,974.0 |
SplitShare | 4.70 % | 4.17 % | 57,396 | 0.79 | 4 | 0.0490 % | 3,551.6 |
Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0490 % | 2,771.1 |
Perpetual-Premium | 5.43 % | -3.39 % | 70,487 | 0.09 | 16 | -0.0196 % | 2,729.7 |
Perpetual-Discount | 5.17 % | 5.17 % | 102,773 | 15.07 | 22 | -0.1161 % | 2,911.9 |
FixedReset | 4.48 % | 4.13 % | 229,690 | 6.72 | 97 | 0.3169 % | 2,296.2 |
Deemed-Retractible | 5.04 % | 0.45 % | 128,795 | 0.12 | 31 | -0.0633 % | 2,836.8 |
FloatingReset | 2.49 % | 3.22 % | 49,177 | 4.68 | 9 | 0.0431 % | 2,450.5 |
Performance Highlights | |||
Issue | Index | Change | Notes |
FTS.PR.J | Perpetual-Discount | -1.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 22.60 Evaluated at bid price : 22.95 Bid-YTW : 5.17 % |
SLF.PR.J | FloatingReset | -1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.15 Bid-YTW : 8.96 % |
TRP.PR.A | FixedReset | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 18.09 Evaluated at bid price : 18.09 Bid-YTW : 4.27 % |
BNS.PR.P | FixedReset | 1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 3.32 % |
VNR.PR.A | FixedReset | 1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 21.44 Evaluated at bid price : 21.44 Bid-YTW : 4.62 % |
BAM.PR.R | FixedReset | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 19.22 Evaluated at bid price : 19.22 Bid-YTW : 4.35 % |
PWF.PR.T | FixedReset | 1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 22.22 Evaluated at bid price : 22.52 Bid-YTW : 3.93 % |
TRP.PR.D | FixedReset | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 21.17 Evaluated at bid price : 21.17 Bid-YTW : 4.20 % |
BAM.PF.A | FixedReset | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 22.93 Evaluated at bid price : 23.33 Bid-YTW : 4.35 % |
FTS.PR.H | FixedReset | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 15.55 Evaluated at bid price : 15.55 Bid-YTW : 4.08 % |
BAM.PR.T | FixedReset | 1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 19.11 Evaluated at bid price : 19.11 Bid-YTW : 4.51 % |
GWO.PR.N | FixedReset | 1.40 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.25 Bid-YTW : 9.42 % |
CU.PR.C | FixedReset | 1.75 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 21.69 Evaluated at bid price : 22.09 Bid-YTW : 3.93 % |
TRP.PR.F | FloatingReset | 1.86 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 17.02 Evaluated at bid price : 17.02 Bid-YTW : 3.54 % |
Volume Highlights | |||
Issue | Index | Shares Traded |
Notes |
MFC.PR.R | FixedReset | 236,521 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 4.41 % |
BMO.PR.S | FixedReset | 120,938 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-02-15 Maturity Price : 21.41 Evaluated at bid price : 21.74 Bid-YTW : 4.00 % |
MFC.PR.H | FixedReset | 105,781 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.05 Bid-YTW : 4.94 % |
BNS.PR.Z | FixedReset | 90,405 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.32 Bid-YTW : 4.61 % |
TRP.PR.K | FixedReset | 86,235 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-05-31 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 4.38 % |
IAG.PR.G | FixedReset | 79,902 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.15 Bid-YTW : 5.21 % |
There were 45 other index-included issues trading in excess of 10,000 shares. |
Wide Spread Highlights | ||
Issue | Index | Quote Data and Yield Notes |
FTS.PR.J | Perpetual-Discount | Quote: 22.95 – 23.30 Spot Rate : 0.3500 Average : 0.2319 YTW SCENARIO |
GWO.PR.P | Deemed-Retractible | Quote: 25.51 – 25.80 Spot Rate : 0.2900 Average : 0.2024 YTW SCENARIO |
FTS.PR.F | Perpetual-Discount | Quote: 23.65 – 23.90 Spot Rate : 0.2500 Average : 0.1772 YTW SCENARIO |
CU.PR.I | FixedReset | Quote: 26.36 – 26.67 Spot Rate : 0.3100 Average : 0.2461 YTW SCENARIO |
NA.PR.W | FixedReset | Quote: 21.04 – 21.22 Spot Rate : 0.1800 Average : 0.1162 YTW SCENARIO |
TD.PR.Z | FloatingReset | Quote: 23.64 – 23.88 Spot Rate : 0.2400 Average : 0.1815 YTW SCENARIO |
I agree buy-side and sell-side should be separated. It was that suspected conflict of interest that was a factor in me firing my last ‘full commission’ broker. I could no longer semi-trust the recommendations… not that I trusted them all that much in the first place.