Friday Financial Five – April 8, 2016
Friday, April 08, 2016
The Department of Labor has finally made the fiduciary standard the law of the land for financial advice. While it may seem natural to assume financial advisers are working in their clients’ best interest, the amount of time it took for DOL’s ruling indicates otherwise. Effective January 2018, financial professionals must act in their clients’ best interest. While technically only referring to retirement accounts, it is expected that this will be the standard across the wealth management landscape.
Savings attributed to the fiduciary ruling
A hugely important factor in the DOL ruling is the expense the government felt could be curtailed by applying the fiduciary standard industry-wide. The department anticipates IRA holders will gain over $30 billion over the next decade thanks to the implementation rule. On the flip side, the added costs for companies to comply with the rule will amount to between $10 and $31 billion over the next ten years.
Court finds Metlife is not too big to fail
A judge has overturned the government’s assessment that Metlife is a systemically important financial institution. Being labeled “too big to fail”, which leads to more stringent capital requirements, had Met looking at separating different lines of business. In the court process, Metlife argued that the methodology used by the Financial Stability Oversight Committee (FSOC) was not prudent and the judge agreed that the government’s ruling was “arbitrary and capricious”. The FSOC will appeal the ruling and it remains to be seen if other insurance companies, including AIG and Prudential, will go down the same path.
Ranking states’ financial literacy
People are trying to get more familiar with money, borrowing, credit, and investing. Wallethub’s 2016 list ranking states in terms of financial literacy indicates there’s still room for improvement, as twenty percent of respondents still spend more than they make. New Hampshire grabs the top spot thanks to a number one ranking in planning and daily habits, while Massachusetts dropped to thirty-five and Rhode Island ranked forty-second.
Over 40% of student borrowers aren’t paying
The trillion dollars outstanding in student loans is an issue, especially with the continued delinquency on the payment for this debt. Courtesy of the Wall Street Journal, over 40% of government backed loan borrowers aren’t paying or are late on their payment. This number doesn’t include the huge surge in borrowers that enrolled in a distressed repayment plan. In all, the total amount of borrowed dollars in delinquency is over $200 billion.
Dan Forbes, a CFP Board Ambassador, is a regular contributor on financial issues. He leads the firm Forbes Financial Planning, Inc in East Greenwich, RI and can be reached at [email protected].
Related Slideshow: Massachusetts Business Rankings
See how Massachusetts stacked up.
Massachusetts has 2015's 28th highest insurance premium penalties for high risk drivers, according to a WalletHub report.
Mass is behind Colorado and New Mexico who come in at 26 and 27 spots respectively while Mass is ahead of Tennessee and the District of Columbia who rank 29 and 30 respectively.
Massachusetts ranks 14th overall in the category of DUI conviction annual premium increase with an amount of $756.
Massachusetts ranks 20th overall in the category of speeding over 20 mph annual premium increase with a total of $261 while ranking 21 overall in the category of two accidents annual premium increase with a total of $1,364.
Massachusetts has been ranked as the 5th most eco-friendly state in the country, according to a recent study by WalletHub.
Mass ranks tenth in environmental quality and fourth in Eco-Friendly Behaviors landing them in 8th overall.
Mass is behind Minnesota and New York who are in the fourth and third spots respectively, and in front of Washington and New Hampshire who come in at the six and seven spots.
Small Business Friendliness Grade: D+
The Economist grades states on an A+ to F grading scale for its small business climate. Massachusetts ranks near the bottom of the nation, joining New Mexico and New York in receiving D+ grades. 9 states scored worse than a D+ in the Economist rankings.
Overbearing bureaucracy and excessive licensing is stifling small business in America.
Forbes ranks each state in business costs, economic climate, and growth prospects.
The most damning in the commentary:
Massachusetts’ business costs, including labor, energy and taxes, are the highest of the 48 contiguous states—only Hawaii is higher—at 20% above the national average.
ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.
The most damning in the commentary:
Taxation and regulation are always the key barometers. Massachusetts and Oregon are the worst.
ALEC ranks each state in economic performance and outlook.
Although Massachusetts ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.
#18 Free Enterprise
Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.
Massachusetts's reputation as a hotspot for science and technology endures in this year's rankings. The commonwealth is a center for STEM jobs and university research and development, ranking 4th and 2nd, respectively, in those two categories. It also ranks 6th as a center for high-tech establishments. Massachusetts is taking aggressive steps to bolster economic activity with high-impact university-industry R&D projects and new tools for tech-based startup companies.
The Pew Charitable Trusts
#45 The Pew Charitable Trusts
The Pew Charitable Trusts ranks each state in job growth and job creation.
Massachusetts added 38,368 jobs in 2014.
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