What’s first on the agenda?

Former SEC Chair Gary Gensler has (mercifully) left the building, leaving the official pick in Paul Atkins to lead the agency. Acting agency head Mark Uyeda, a Republican crypto proponent, is already working to reverse Gensler-era regulations that created what he has described as “policy through enforcement.” The agency is reportedly weighing a pause on crypto cases, and Uyeda could even focus on rulemaking geared toward private markets and environmental, social, and governance.

Uyeda’s time as chair, while Atkins awaits confirmation, will lay the groundwork for the next Trump 2.0 commission’s agenda, and could have wide reaching implications for the industry. “I would expect the SEC to go from crypto-hostile to crypto-friendly overnight,” said Tom Graff, CIO at Facet. 

Crypto Course Correction

The SEC launched a crypto task force on Tuesday with Commissioner Hester Peirce, aka “CryptoMom,” at the helm. The goal is to redefine the agency’s rules on digital assets. “The SEC can do better,” the agency said in a press release. 

• First up on Uyeda’s chopping block could be Bulletin 121, guidance from 2022 that recommends institutions holding crypto assets record them as liabilities. Opponents of the practice say it creates a disincentive for banks to hold crypto at all.
• Uyeda and Peirce — who were aides to Atkins when he was at the SEC from 2002 to 2008 — are also expected to create rules clarifying when cryptocurrency is considered a security, per Reuters. 

Planet, Schmanet. ESG products have gained plenty of notoriety in recent years, with Republican lawmakers saying they’re not only bad for business, but can ultimately hurt investors by putting political agendas before returns. The agency could start getting tougher on the so-called woke investments, especially if a firm claims that their ESG product has a certain environmental impact. “The SEC could become ever more aggressive about asking for proof,” Graff told The Daily Upside.

PE is likely to become a greater focus for the SEC in the coming months, said Davis Richardson, a managing partner at tech consultancy R3 Insights. Retail clients are now embracing private investments, where regulations are generally thinner than in public markets. “American investors’ appetite for risk has certainly gone up, so private equity is something the SEC is going to have to start considering very carefully,” he told The Daily Upside.

The Great Wealth Transfer is looking decidedly female. 

Women are expected to inherit the lion’s share of the much-talked-about $124 trillion wealth transfer happening over the next two decades, with some $40 trillion being transferred to widowed women, according to a Cerulli report. Because women statistically outlive their husbands, the “horizontal transfer” means women will take the reins in important financial decisions. It’s a major opportunity for advisors who make an effort to tailor their services to surviving spouses, but unfortunately, advisors are playing catch up. Some 70% of widows switch advisors within a year of an inheritance. 

“Building the relationship with both spouses is not only important, but essential,” said Vanessa Martinez, CEO at Expressive Wealth. “There are transactional people and relationship people: Most women want a relationship.” 

Man, I Feel Like A Woman

There are also differences between how men and women prefer to engage with their finances and financial plans, even if those distinctions are nuanced, the report found. Women, for example, are much more likely than men to prefer that advisors lead with financial planning and other strategies — not just investments. Philanthropic and sustainability goals are also more top of mind for high-net-worth women than men.

“Women care more about trust and relationships,” said Cerulli analyst and the report’s author Chayce Horton. “Men typically care more about services, investment performance [and] managing risk.” Long-term financial planning, ESG criteria, and making sure children and grandchildren are taken care of are also top of mind for women. The report found:

• Some 9 out of 10 high-net-worth firms said partners are at least somewhat involved in the financial planning process. Of those clients, over 80% of assets are retained after an inheritance.
• Women (53%) said relationships are more important when choosing an advisor than men (42%).

“Firms that can provide direct support for women will have a tailwind for decades to come,” Horton said.

Put a Sock in It. The good news is there are ways to get ahead of the wealth transfer. Recruiting women advisors is one way to help build relationships with women clients. That includes establishing recruiting and mentoring programs for advisors and having dedicated resources that emphasize topics like financial planning and philanthropy, according to Cerulli.

Martinez said advisors who stop talking, and instead give room for both spouses to speak often end up with a much better understanding of their clients, and build stronger relationships. “Remember the rule for crossing the street?” she told The Daily Upside. “Stop, look, and listen.”

Forget the Nasdaq, the Dow and the S&P.

The overwhelming majority of US companies are now private, and assets like private equity, credit, and real estate are becoming huge hits with clients. The bulk of advisors (80%) plan to boost private market allocations in portfolios this year, according to Blackstone. The problem is that these markets are far different from traditional ones, with limited transparency and low liquidity. There’s also less formal regulation, and irregular earnings reporting, that can create hesitation among advisors. Without proper expertise, some are feeling underskilled and overwhelmed. 

“It’s like a physician in general medicine deciding to become a brain surgeon,” said Matt Chancey, a CFP with Realta Wealth. “There is a lot of additional training required.”

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