Products August 1, 2019

Investment Product and Service Launches

LifeYield creates alliance with software-based service organization; Dimensional announces new Investment Solutions Group; Vanguard reopens funds and broadens access to others; and more.

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Art by Jackson Epstein

Art by Jackson Epstein

LifeYield Creates Alliance with Software-Based Service Organization

LifeYield LLC has announced an alliance with Chalice Financial Network, a Software-as-a-Service (SaaS)-based member-benefit organization for small- and medium-size businesses in the financial services space, to provide its 47,000 members increased access to investment planning and implementation software.

LifeYield’s proprietary Taxficient Score will help Chalice’s members—many of whom are financial advisers—to quantify the financial benefits of tax-smart asset allocation for their clients over 10-, 15- or 20-year periods. For example, following the guidance provided by Taxficient Score, a household with $1 million in assets divided equally between stocks and bonds could realize after-tax savings as substantial as $159,000 over the first 10 years, $325,000 over 15 years and $590,000 over 20 years. The Taxficient Score and LifeYield’s other tools help advisers quantify the value of the advice they provide, attract new clients and encourage a holistic, household-level approach to wealth management, the firm says. 

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“LifeYield aims to help advisers differentiate themselves and increase the value and capabilities they bring to their clients and prospects,” says Mark Hoffman, CEO of LifeYield. “This partnership with the Chalice Financial Network will help advisory practices of all sizes gain access to the powerful tools necessary to improve after-tax outcomes for investors and grow their businesses. We look forward to our collaboration with CFN, and we are thrilled to be able to help its members and their clients make more and keep more.”

“The Chalice Financial Network prides itself on equipping its members with the most cutting-edge, technologically advanced tools to help them run their businesses more efficiently,” says Derek Bruton, president of Chalice Financial Network. “LifeYield’s one-of-a-kind software offers solutions to problems many advisers and investors don’t even realize they have and results in quantifiable cost savings that advisers can use to demonstrate the value they provide to their clients.”

Dimensional Announces New Investment Solutions Group

Dimensional is creating an Investment Solutions Group within its Investment team and promoting its co-heads of Research. Marlena Lee will serve as head of Investment Solutions, and Savina Rizova will become the sole head of Research. Lee and Rizova both hold PhDs from the University of Chicago Booth School of Business.

The Investment Solutions Group will include employees who have been part of the firm’s Portfolio Solutions team as well as additional colleagues from across the Investment team and Global Client Group. The changes have been taken into effect starting on August 1.

“With the creation of this team, our clients will be able to draw on specialized expertise from Portfolio Management, Trading, Research, and now Investment Solutions to help address a wide range of investment-related topics,” says Co-CEO and Chief Investment Officer Gerard O’Reilly. “Marlena and Savina have proven themselves as strong leaders. We look forward to providing clients with additional value and sharing our research and insights more broadly.” 

Vanguard Reopens Fund and Broadens Access to Others

Vanguard has announced the reopening of the $36.6 billion Vanguard Dividend Growth Fund (VDIGX) to all investors, effective immediately. 

Vanguard closed the fund to most new accounts in July 2016, seeking to protect the interests of existing shareholders by reducing cash flow after a period of rapid growth. Cash flow has subsequently subsided and market conditions have changed since the fund’s closing. 

“After careful analysis of the fund’s current cash flows and asset level, and following consultation with the fund’s adviser, we’re confident that there is ample capacity to reopen the fund,” says Matthew Brancato, head of Vanguard’s Portfolio Review Department, who noted that the reopening should not be construed by investors as a “buy signal” for the fund or dividend stocks in general. 

Introduced in May 1992, the actively managed Vanguard Dividend Growth Fund is designed to provide investors with some income while offering exposure to dividend-focused companies across all industries. Reopening the fund will have no impact on its investment objectives, strategies, and policies, says Vanguard, and Wellington Management Company LLP remains the fund’s investment adviser.

Vanguard also announced plans to broaden access for sophisticated investors to two actively managed alternative investment funds, Vanguard Alternative Strategies Fund (VASFX) and Vanguard Market Neutral Fund (VMNFX). The minimum initial investment requirement for retail investors for both funds will be reduced from $250,000 to $50,000, which is the same as the newly launched Vanguard Commodity Strategy Fund (VCMDX). Vanguard’s three alternative investment funds, managed by the firm’s Quantitative Equity Group, will share a standard minimum.

Concurrently, Vanguard Alternative Strategies Fund will be opened to financial advisers, institutional investors, and Vanguard Flagship and Vanguard Personal Advisor Services clients. The fund is currently available only to institutional investors enrolled in Vanguard Institutional Advisory Services and as an underlying holding of Vanguard Managed Payout Fund. These changes will go into effect in the fourth quarter of 2019.

Franklin Templeton Reduces Fees for Three LibertyShares ETFs

Franklin Templeton has announced fee reductions for three Franklin LibertyShares exchange-traded funds (ETFs) available to U.S. investors.

Management fee reductions will be made to Franklin LibertyQ U.S. Equity ETF (FLQL) and Franklin LibertyQ Emerging Markets ETF (FLQE). In addition, the fee waiver for Franklin Liberty International Aggregate Bond ETF (FLIA) will be reduced. All reductions are effective as of August 1.

Each fund expense ratio dropped 0.10%. The net expense ratio for Franklin LibertyQ U.S. Equity ETF was at 0.25%, and as of August 1, is now 0.15%; while the Franklin Liberty International Aggregate Bond ETF was once set at 0.35% and is now 0.25%; and the Franklin LibertyQ Emerging Markets ETF is currently 0.45%, but used to be 0.55%.

DoubeLine Capital Adds R Shares to Five Mutual Funds

The DoubleLine Funds Trust, the open-end mutual fund family advised by DoubleLine Capital LP and related companies, has launched R6 class shares for five of its funds, available to certain 401(k) and other employee retirement plans.

R shares are a retirement share class offered via employer-sponsored benefit plans such as 401(k) plans. DoubleLine’s R6 shares do not have a sales load.

According to the firm, the five mutual funds and their R6-share ticker symbols are DoubleLine Total Return Bond Fund (DDTRX), the DoubleLine Core Fixed Income Fund (DDCFX), the DoubleLine Low Duration Bond Fund (DDLDX), the DoubleLine Flexible Income Fund (DFFLX) and the DoubleLine Shiller Enhanced CAPE Fund (DDCPX). These funds are also available in institutional (I) and retail (N) share classes, says DoubleLine Capital.

In Practice August 1, 2019

Cybersecurity Is About Protecting Clients—and Your Practice

One element of the cybersecurity discussion that is often overlooked is that the biggest threat to many advisory firms is not actually to client accounts but instead to the advisory brand.

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In recent months, Advisor Group has added significant cybersecurity expertise to its senior management team. The new hires include Jason Lish, who has for about four months now served in the position of chief security, privacy, and data officer for Advisor Group’s Advisor Solutions team.

His role involves collaborating with advisers and executives from across the four individual firms that comprise Advisor Group—FSC Securities Corporation, Royal Alliance Associates, SagePoint Financial and Woodbury Financial Services. In a recent conversation with PLANADVISER, Lish pointed to his extensive cybersecurity background protecting organizations such as Alight Solutions, Charles Schwab and Honeywell, as the main reasons he was able to get this newly minted and exciting position.

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“Four months in, I’ve now had sufficient time to understand the business and to start to make an impact,” he says. “From a priority perspective, so far there are two general areas where our firms are focused. First is on strengthening the overall security program at the home office by putting in place risk-based methodologies and enhanced capabilities that I’ve seen work in larger institutions I’ve been involved with.”

Lish says the Advisor Group firms—like others in the advisory industry—have a good cybersecurity foundation, “but in this space there are always ways to continue to harden the environment and put layered security measures in place.” At Advisor Group, he explains, the next step forward in cybersecurity is being referred to as the “CyberGuard” program.

The CyberGuard Program includes such features as comprehensive cybersecurity insurance, privacy/data breach insurance protection and coverage for breach response costs, regulatory liability and business disruption; discounted access to a cloud-based data backup solution that gives advisers secure, encrypted access to files from laptops, smartphones and other devices; and access to a security auditing and monitoring platform that continually monitors advisers’ systems to identify potential security gaps.

“The program also includes providing trusted login enforcement, login reporting and remediation support,” Lish says. “We now offer enhanced email and file storage capabilities with strong authentication and security monitoring features.”

Lish’s comments about improving advisory firm cybersecurity echo those made recently by Bart McDonough, CEO and Founder of Agio, which he describes as a “hybrid managed IT and cybersecurity services provider specializing in the financial services, health care and payments industries.”

“In today’s evolving cybersecurity environment, our clients come to us for two main reasons, which do overlap,” McDonough says. “First, they want help with their technical cybersecurity capabilities across the board. They have both generic and specific concerns about potential points of exposure for their organization.”

The second reason clients come to Agio is to get help meeting third-party cybersecurity standards, such as those put in place by regulators, particularly the Securities and Exchange Commission via its Office of Compliance Inspections and Examinations (OCIE), or private parties that review and approve cybersecurity.

For context, during recent examinations, OCIE staff identified common security risks associated with the storage of electronic customer records and information by broker/dealers and investment advisers in various network storage solutions, including those leveraging cloud-based storage. These risks are outlined in a Risk Alert published recently by the OCIE. Summarizing the matter, the Risk Alert states that, while the majority of these cloud-based network storage solutions offer encryption, password protection, and other security features designed to prevent unauthorized access, examiners observed that firms did not always use the available security features.

“There has been a lack of understanding of what the different threat vectors are and what advisers’ evolving obligations are from a regulatory perspective,” Lish reflects.

He warns that independent advisers are actually becoming a preferred target of hackers and bad digital actors in the financial services realm. For this reason alone it has become essential that the leadership of advisory firms make cybersecurity a top personal and organizational priority. 

“This is based on the fact that your larger institutions, the big banks for example, have been at this cybersecurity game for quite some time,” Lish explains. “They have been working for many years to harden their environment, and so this has actually led attackers to move away from these targets and to go to less sophisticated environments that have not as yet had to develop the knowledge or expertise to put the necessary defensive capabilities in place. If you look at an RIA that is operating wholly on their own, they may not even know where to start with cybersecurity.”

Lish adds that one element of this discussion that is often overlooked is that the biggest threat to many advisory firms is not actually to client accounts but instead to the adviser’s brand.

“Independent advisers are often operating in small, trust-based, tight-knit communities, and in that way it can be very hard to recover the brand reputation after a cyber incident,” Lish says. “Not to mention the security capabilities are coming up more and more in the request for proposals process. The cybersecurity questions are actually being formalized. To that point, we’re working to develop better ways to articulate what security is and what we are doing to achieve it.”

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