Concerns have been swirling in the news headlines lately regarding the future of this financial reform legislation. Why? Since taking office, President Trump and Republicans in Congress have called for a repeal of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The legislation, passed in 2010, was aimed at better protecting consumers and addressing the risk of “too-big-to-fail” banks. Dodd-Frank’s major provisions include
A repeal of Dodd-Frank would have wide-ranging impacts, in both the short and long term. Yet, in reality, eliminating or even overhauling the multifaceted legislation can’t be done with the stroke of a pen and a flurry of executive orders. It would involve approval by multiple government agencies; the passage of new legislation by Congress that could gain the President’s signature, or withstand a veto; and mandatory public comment periods. Each step of the process would be subject to delays and protracted negotiation by multiple interest groups.
In short, this issue is likely to play out over years. We will certainly monitor developments, but it would be unusual for us to make changes to our portfolio positioning based on the possibility of deregulation within an individual industry or sector.
The Department of Labor’s (DoL) Fiduciary Rule had been scheduled to become effective in April 2017. This Obama administration rule requires advisors and broker/dealers who advise on retirement, ERISA assets, or IRA accounts to act in clients’ best interests and place clients’ needs before their own. However, last week, Trump signed a memorandum requiring the DoL to review the rule. While officially this only delays it, the action was widely interpreted as the first step to tabling it.
In terms of impact, as a registered investment advisor, Litman Gregory is already bound to a fiduciary standard. Putting clients’ interests ahead of our own is firmly embedded in our company’s DNA; nothing will change in the way we advise or interact with clients. The DoL rule was designed to ensure that, for the first time, others would be subject to fiduciary standards.
Financial stocks, especially those of big banks, including JPMorgan Chase, Bank of America, and Goldman Sachs, initially jumped. The eventual outcome—repeal, rollback, or status quo—is highly uncertain though. While we don’t make calls on individual sectors, we’ve been cautious on U.S. stocks for quite some time, believing valuations are expensive relative to fundamentals and versus other regions’ equities. That makes them especially vulnerable to a negative surprise.
Do you have more questions or want to discuss the topics covered in this post? Please call your Litman Gregory Wealth Advisor or contact us here.
Gretchen Hollstein and Monica Muñoz Named to 2021 Top Wealth Advisor Moms List
We are pleased to announce that Senior Advisors Gretchen Hollstein, CFP® and Monica Muñoz, CFP® have been named as two of the country’s Top Wealth Advisor Moms for 2021 by Working Mother. This recognition is a testament to their passion for both roles they hold, advisor and parent.
Commentary from Our CIO—Third Quarter 2021
Chief Investment Officer Jeremy DeGroot reviews key elements of the global macro environment and how they impact our financial market outlook: COVID-19, U.S. economic policy, growth, and inflation. He also covers our reasons for near-term caution on U.S. stocks, and an in-depth review of emerging market equities, in light of recent market headlines and regulatory developments in China.
Introducing Litman Gregory’s Updated Logo
For many years, our team has referred to the services we offer to our clients as "wealth management". To us, this communicates that we provide both investment management and financial planning in an integrated way to support their broader wealth planning goals. As of today, we have officially updated our name and logo.