Products November 19, 2009

Fidelity Adds Tools for Brokers Considering Independence

Fidelity Investments said it expanded its Transition Solutions program, which gives brokers information about independent business models.

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Working with Fidelity consultants, brokers can access a new tool to help them analyze the economics of three common independent models: starting an independent registered investment adviser (RIA) firm, partnering with a third-party (e.g., rollup or acquiring a firm), or joining an independent broker/dealer. Fidelity also said it offers a new white paper titled “Options for Independence.”

For wirehouse brokers contemplating independence, Fidelity consultants offer the Financial Advisor Economic Estimator, which allows brokers to input specific information about their current practices, from annual production and current payouts to deferred compensation and office location. Specific values for more than 50 expense items across nine different categories, such as salary, legal fees, registration and insurance, are included in the analysis, according to Fidelity.

The estimator will then produce a detailed and customized financial report that includes annual estimates over a 10-year period of the costs, taxes, and payouts associated with three common independent business models compared with the wirehouse model. The report also shows estimated pre- and post-tax operating income, equity value of the firm and the tax consequences of taking a forgivable loan.

If they aren’t ready for a detailed report, brokers can also access a simplified online version to get a high-level overview of the annual financial estimates for the independent model compared to a wirehouse by entering their current assets and production levels. Fidelity said the online version is designed to help brokers determine if they should proceed with a more detailed financial analysis with a Fidelity consultant.

Diversions November 19, 2009

Christmas Stockings Could Be Lighter, but Who Cares?

This holiday season, some consumers are cutting back—but one economist argues that holiday spending is a waste anyway.

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Almost a third of 2,300 adults polled in September plan to spend less on holiday purchases this year than in 2008, according to Burst Media’s holiday spending outlook. The survey found that more than half (63%) of consumers plan to spend the same or cut back on holiday purchases, and only about 15%  plan to spend more.

While households of all incomes are reining in spending, households with incomes of $35,000 to $75,000 are cutting back the most (46%). Women plan to be more frugal than men, with 38% planning to spend less on gifts and entertainment, compared to 27% of men, according to the survey from Burst Media, a provider of advertising representation, services, and technology to independent Web publishers.

While less holiday spending could be viewed as bad for the economy, one economist might argue that holiday purchases are a throwaway anyway. In the new book “Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays,” author Joel Waldfogel argues that holiday consumer spending just generates vast amounts of economic waste to the tune of $5 billion each year.

When’s the last time you received clothes a Christmas present you never wore? Waldfogel contends that holiday spenders often give gifts the recipient doesn’t want. People are more satisfied when they shop for themselves. Furthermore, gift-givers might max out their credit cards to give gifts that leave the receiver less than satisfied, creating a “deadweight loss.”

So, perhaps those who are cutting back on gifts this year shouldn’t feel so bad.

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