We noted a change from the DOL towards more regulation, and occasionally, regulations and interpretations that seemed to not fully assess their implications on the investing profession. We saw this with both the DOL’s change to independent contractor definitions as well as in the way DOL handled the proposed changes to the request for exemption from prohibited transaction process.
For the last four or five years, every article seeking to review the past year’s events has summed up the previous twelve months as “a lot.” The repetition of how much the past year has been may seem iterative – a wordy version of the movie Groundhog Day. Another common theme of the newsletters hitting your inbox this month is that of what’s to come. After so much unpredictability and turmoil in the markets, reading those future planning articles may seem less than fruitful. Yet, we still think it is important to take stock of what has happened in 2022 and look at what we think might be coming in 2023. We think so for two main reasons. First, because it can be helpful to remember all that happened in the last year. Second, to make sure that you measure your progress on business goals against the reality of what occurred. We also want to invite you into conversation about what most concerns you. So, here’s a wrap up of what we covered and what we think will be the main issues for 2023. Let us know what you think.
Looking Back: What We Covered
Investing planning is coming more sharply into focus. We wrote about a few different investment planning trends this year. Notably, at the end of the year, we wrote how clients are trending back towards passive investments, like index funds. This trend, and the research that noted it, hit at nearly the same time as the cryptocurrency bankruptcies. We think that means investors have a different motivation towards returning towards some tried and true strategies to balance their portfolios than fear of the market or emotional investing.
Investing Trends. On the opposite side, we wrote about changes in real estate investing and alternatives to alternative investments. What’s driving these two different forces? It could be how people are responding to market volatility and increased concerns over inflation, two other topics we covered in 2022. Other trends we saw in 2022 included ESG-based investing increasing in institutional investors.
More guidance and ease from regulatory bodies. We wrote recently about how the IRS will soon be allowing requests for determination letters for 403(b) plans, expanding how that process has worked in the past and has created some ease in audits for other retirement plans. We also wrote about the trend we’ve seen from the SEC towards greater ease for investors in accessing company information. However, we noted that there could be a change in the air after seeing how the Inflation Reduction Act’s drafts dabbled in some investing regulation. We also noted a major change from the DOL on how it will handle requests for exemptions from prohibited practices.
Your practice is changing, for the better? 2022 also held a lot of changes in the way advisors practice. That included potential changes in how the DOL views financial advisors, and specifically, whether they will remain independent contractors. We also wrote about keeping on top of statistics and trends. Our articles on improving your practice also covered how to avoid sounding like a scam. We also thought that the lingering effects of the pandemic on hiring and on internal communications could impact advisor’s work. This lead us to address how to improve recruiting and how to tackle the tech debt in your office.
Looking Forward: What We Think May Be Coming
In 2020 we wrote often about new regulations. We noted a change from the DOL towards more regulation, and occasionally, regulations and interpretations that seemed to not fully assess the implications on the investing profession. We saw this with both the DOL’s change to independent contractor definitions as well as in the way the DOL handled the proposed changes to the request for exemption from prohibited transaction process. We anticipate a more active DOL in 2023. On the other hand, we note both the SEC and the DOL have continued to make moves towards providing greater information to the public in formats that are both easier to read and easier to find. We think this trend could be beneficial to investors. Advisors may want to continue to work with clients on investor education as this trend continues.
This, That, and the Other thing. As we move into 2023 there continues to be some lack of clarity around the extent of the recession and whether the market forces causing inflation have peaked. Given that we saw investors seeking more information about alternative investments such as real estate at the same time as seeking information about returning to passive investing, like index funds in response to market volatility. This trend may continue as investors will be seeking a variety of options. This same push for more of the traditional as well as more portfolio balancing may continue. In other words, clients may want to hear about all the options, all at the same time.
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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