What’s the difference? Financial advisor Allan Roth argues on ETF.com (of all places) that ETFs are great, but in essence, similar Vanguard ETFs and mutual funds are "simply different share classes" of the same funds. Still, the mutual fund has some slight advantages: No bid/ask spread on the buy, no premium (nor discount) to its NAV, mutual funds allow the owning of fractional shares (ETFs will put excess money in cash) as well as carry less of a cash drag from the process of reinvesting dividends, which takes longer with ETFs. “Making the assumption that ETFs are always better than mutual funds is flawed. The death of mutual funds has been greatly exaggerated,” Roth writes.
While the Fed took a dovish tone in regards to when they might raise interest rates, investors may have something else to worry about: a possible “profit recession.” Sam Stovall, U.S. equity strategist at S&P Capital IQ, writes that the research firm’s consensus earnings per share estimates for the S&P 500 slid to 0.3 percent growth, compared to high single-digit growth forecast just a few months ago. “While not an official profit recession, as no contraction in EPS growth is currently projected, the full-year growth estimate is getting uncomfortably close to that threshold,” Stovall said. All 10 recessions since 1945 were accompanied or preceded by downward trending growth in rolling 12-month EPS for the S&P 500. The question is, will history repeat itself?
A Massachusetts congressman is trying to slam shut the “revolving door” at the Securities and Exchange Commission. Stephen F. Lynch (D-Mass.) introduced a bill last week that would bar staffers from taking advantage of the agency’s long tradition of leaving the SEC to join top corporate legal teams. “When an enforcement attorney leaves the SEC on Friday, and shows up on Monday requesting favorable treatment for a bank charged with wrongdoing, it can greatly damage the integrity of our regulatory system,” the Project On Government Oversight’s executive director Danielle Brian said in support of the bill.
With RIA firms turning to cloud-based technology vendors to help with nearly every aspect of their business, there is growing competition to develop hubs that integrate all of the services together. This battle has three sides, argues technology consultant Craig Iskowitz: CRM software led by Salesforce, financial planning apps like eMoney and MoneyGuidePro, and custodial systems like TD Ameritrade’s Veo One and Pershing’s NetX360. All of them want to be the choice platform for every advisor, but each has their own strengths and weaknesses. Custodial systems work great, but only for advisors that custody with one company. Salesforce might be better at managing contacts, but it doesn’t integrate as seamlessly with various financial planning services. Integration is one of the hottest words in FinTech, and the industry can expect this battle to rage throughout 2015.