February 15, 2017

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
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
Maturity Type : Limit Maturity
Maturity Date : 2047-02-15
Maturity Price : 22.60
Evaluated at bid price : 22.95
Bid-YTW : 5.17 %

GWO.PR.P Deemed-Retractible Quote: 25.51 – 25.80
Spot Rate : 0.2900
Average : 0.2024

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 5.22 %

FTS.PR.F Perpetual-Discount Quote: 23.65 – 23.90
Spot Rate : 0.2500
Average : 0.1772

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-02-15
Maturity Price : 23.36
Evaluated at bid price : 23.65
Bid-YTW : 5.18 %

CU.PR.I FixedReset Quote: 26.36 – 26.67
Spot Rate : 0.3100
Average : 0.2461

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-01
Maturity Price : 25.00
Evaluated at bid price : 26.36
Bid-YTW : 2.94 %

NA.PR.W FixedReset Quote: 21.04 – 21.22
Spot Rate : 0.1800
Average : 0.1162

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-02-15
Maturity Price : 21.04
Evaluated at bid price : 21.04
Bid-YTW : 4.09 %

TD.PR.Z FloatingReset Quote: 23.64 – 23.88
Spot Rate : 0.2400
Average : 0.1815

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.64
Bid-YTW : 3.28 %

One Response to “February 15, 2017”

  1. AltaRed says:

    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.

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