Kevin S. Whiteford was the only agent/advisor asked to accompany Cambridge Investment Research, Inc’s team to discuss important pending legislature in Washington D.C. Kevin is a member of the Financial Services Institute (FSI), and discussed the following topics with United States Congress Members.

Promoting Retirement Security

The Financial Services Institute (FSI)1 supports reasonable efforts to improve the ability of Main Street Americans to save for a financially secure retirement. While the state and federal governments can be good partners in this effort, we believe that retirement solutions should be provided by the private sector to ensure that Americans have access to personalized investment advice.

1 The Financial Services Institute (FSI) is the only organization advocating solely on behalf of independent financial advisors and independent financial services firms. Since 2004, through advocacy, education and public awareness, FSI has successfully promoted a more responsible regulatory environment for nearly 40,000 independent financial advisors, and more than 100 independent financial services firms who represent upwards of 160,000 affiliated financial advisors. For more information, visit www.financialservices.org.

2 The Insured Retirement Institute, The State of Retirement Security in America Today – 2019 Boomer Expectations for Retirement Study available at: https://www.myirionline.org/docs/default-source/default-document-library/iri_babyboomers_whitepaper_2019_final.pdf?sfvrsn=0; Claude Montmarquette, Nathalie Viennot-Briot, Centre for Interuniversity Research and Analysis on Organizations (CIRANO), The Gamma Factor and the Value of Advice of a Financial Advisor, available at https://www.cirano.qc.ca/files/publications/2016s-35.pdf

All investors should have access to competent and affordable financial advice, products and services delivered by a growing network of independent financial advisors and independent financial services firms.

Having a relationship with a trusted financial advisor is crucial to saving for retirement. Research shows that investors who work with a financial advisor are better prepared for their retirement, better understand the costs that may arise in retirement and how to save for them, and feel more confident in their ability to be successful in retirement.2 In order to ensure that Main Street investors have access to critical financial advice, products and services, FSI supports retirement security legislation that includes the following:

Expand workplace retirement savings opportunities

Small Businesses across the country struggle to absorb the cost of offering retirement savings options to employees. Legislation can fix this critical gap in coverage by:

• Providing tax incentives to enable more small employers to help their employees save for retirement; and
• Enabling more small employers to use multiple employer plans.

Remove the age cap on IRA contributions

As Americans are living and working longer than ever before, allowing IRA contributions for as long as someone is working will ensure they can continue to save for retirement.

Expand access to lifetime income products in retirement plans

Increasing access to lifetime income products in retirement plans will ensure that Americans have the tools they need to turn their savings into protected income streams.

Allow the tax deductibility of advisory fees

Seeking help navigating the complexities of retirement savings should not result in tax challenges for Americans. Permitting savers to deduct investment advisory fees will immediately impact their bottom line and allow their retirement savings to grow.

FSI is committed to constructive engagement in the legislative process. We are ready to serve as a resource in your efforts to help Main Street Americans save for their retirement. Should you have any questions, please contact our Director of Legislative Affairs, Hanna Laver, at (202) 499-7224.

End Regulation by Enforcement

Introduction

The Financial Services Institute (FSI)1 and its members are concerned that a recent SEC enforcement initiative constitutes regulation by enforcement. This practice harms firms by failing to provide the necessary certainty for them to operate their business -independent financial advisors and firms have a reasonable expectation the SEC will disclose the rules of the road before engaging in enforcement. Further, regulation by enforcement raises costs for firms, which are then passed on to Main Street investors.

1 The Financial Services Institute (FSI) is the only organization advocating solely on behalf of independent financial advisors and independent financial services firms. Since 2004, through advocacy, education and public awareness, FSI has successfully promoted a more responsible regulatory environment for nearly 40,000 independent financial advisors, and more than 100 independent financial services firms who represent upwards of 160,000 affiliated financial advisors. For more information, visit www.financialservices.org.

Share Class Selection Disclosure Initiative

The Share Class Selection Disclosure Initiative was announced in February 2018, firms were given four months to voluntarily self-report instances where they may have failed to adequately disclose certain fees that investors pay and recommendations of higher cost share classes when lower cost shares of the same investments were available. In exchange, the SEC’s Enforcement Division agreed to recommend “lighter” settlements and lower fines, while warning that firms who did not self-report would face steeper penalties

However, Division staff could not cite a clear rule or regulation that had been violated instead citing previous settlements and published guidance as the basis for the violations. Further, firms report that the issue of inadequate share class disclosures was never raised during their regular exam cycles. If this was an issue of concern to the SEC, why was it not raised earlier so that firms had an opportunity to fix it sooner?

To date, the Initiative has collected $125 million from almost 80 investment advisers. In addition, firms that did not report during the Initiative are receiving document requests from the SEC alleging that they have engaged in misconduct but failed to take advantage of the Initiative. The Division is reportedly now moving to a second phase in the initiative, expanding its scope to other areas not identified in the original Initiative.

This practice of imposing regulatory requirements through the enforcement process runs counter to the statements of Chairman Clayton and Commissioner Peirce:

• “The Commission’s longstanding position is that all staff statements are nonbinding and create no enforceable legal rights or obligations of the Commission or other parties.” Chairman Jay Clayton’s “Statement Regarding SEC Staff Views,” made on September 13, 2018.
• “I have grown increasingly concerned that this necessary guidance—due to a lack of transparency and accountability—may have turned into a body of secret law. This secret law, as a practical matter, binds market participants like law does but is immune from judicial—and even Commission—review.” Commissioner Hester Peirce’s Remarks at SEC Speaks made on April 8, 2019.

Regulation by enforcement deprives industry of the opportunity for notice and comment required by law under the Administrative Procedure Act. Without proper notice of the “rules of the road” financial advisors and their firms cannot serve their clients, depriving Main Street investors of access to critical investment advice, products and services. For more information, visit https://financialservices.org/regs-without-rules/

US Job Openings August 2019

The number of job openings fell to 7.051 million in August 2019 from a downwardly revised 7.174 million in the previous month and below market expectations of 7.191 million. It was the lowest level since March 2018, mainly driven by a decline in the Midwest region (-183,000). Job openings decreased in nondurable goods manufacturing (-49,000) and in information (-47,000). Meanwhile, hiring dropped by 199,000 to 5.779 million in August, due to decreases in the private sector. Job Offers in the United States averaged 4452.07 Thousand from 2000 until 2019, reaching an all time high of 7626 Thousand in November of 2018 and a record low of 2264 Thousand in July of 2009.

https://tradingeconomics.com/united-states/job-offers

US Jobless Rate Falls to Lowest Since 1969

The US unemployment rate decreased to 3.5 percent in September 2019 from 3.7 percent in the previous month and above below market expectations of 3.7 percent. The last time the rate was this low was in December 1969, when it also was 3.5 percent. Over the month, the number of unemployed persons decreased by 275,000 to 5.8 million.

Among the major worker groups, the unemployment rate for Whites declined to 3.2 percent in September. The jobless rates for adult men (3.2 percent), adult women (3.1 percent), teenagers (12.5 percent), Blacks (5.5 percent), Asians (2.5 percent), and Hispanics (3.9 percent) showed little or no change over the month.

Among the unemployed, the number of job losers and persons who completed temporary jobs declined by 304,000 to 2.6 million in September, while the number of new entrants increased by 103,000 to 677,000. New entrants are unemployed persons who never previously worked.

In September, the number of persons unemployed for less than 5 weeks fell by 339,000 to 1.9 million. The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.3 million and accounted for 22.7 percent of the unemployed.

The labor force participation rate held at 63.2 percent in September. The employment-population ratio, at 61.0 percent, was little changed over the month but was up by 0.6 percentage point over the year. 

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 4.4 million in September. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

In September, 1.3 million persons were marginally attached to the labor force, down by 278,000 from a year earlier. (Data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 321,000 discouraged workers in September, little changed from a year earlier. (Data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 978,000 persons marginally attached to the labor force in September had not searched for work for reasons such as school attendance or family responsibilities.

https://tradingeconomics.com/united-states/unemployment-rate

US New Home Sales Rise More than Expected

Sales of new single-family houses in the United States jumped 7.1 percent from the previous month to a seasonally adjusted annual rate of 713 thousand in August 2019, following a revised 8.6 percent slump in July and easily beating market expectations of a 3.5 percent increase.

July’s sales pace was revised higher to 666 thousand units from the previously reported 635 thousand units.

New home sales, which account for about 11.5 percent of housing market sales, were up in the South (6.0 percent to 426 thousand) and West (16.5 percent to 191 thousand), but dropped in the Midwest (-3.0 percent to 64 thousand) and Northeast (-5.9 percent to 32 thousand).

The median new house price rose 2.2 percent from a year earlier to USD 328.4 thousand in August. The average sales price jumped 6.1 percent to USD 404.2 thousand.

The stock of new houses for sale declined 1.2 percent from the previous month to 326 thousand, the lowest since September 2018. At August’s sales pace it would take 5.5 months to clear the supply of houses on the market, down from 5.9 months in July.

Year-on-year, new home sales surged 18.0 percent.

https://tradingeconomics.com/united-states/new-home-sales

Fed Cuts Rates Despite Disagreement Among Policymakers

The Federal Reserve lowered the target range for the federal funds rate to 1.75-2 percent on a 7-3 vote during its September meeting. It was the second rate cut this year, amid global growth concerns and muted inflation pressures.

Median Fed policymaker projection is for no further rate cuts in 2019 but seven of 17 policymakers saw one more cut as appropriate.

GDP forecasts were raised to 2.2 percent in 2019 (vs 2.1 percent previously estimated) and 1.9 percent in 2021 (vs 1.8 percent), while that for 2020 was unchanged at 2.0 percent. Inflation expectations were seen at 1.5 percent in 2019, 1.9 percent in 2020 and 2.0 percent in 2021, matching June’s projections.

Amid a breakdown this week in the overnight repurchase lending market, the Fed set interest on excess reserves rate at 1.80%, widening the spread from top of target range to 20 bp from 15 bp.

FOMC Statement:

Information received since the Federal Open Market Committee met in July indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports have weakened. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1-3/4 to 2 percent. This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair, John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against the action were James Bullard, who preferred at this meeting to lower the target range for the federal funds rate to 1-1/2 to 1-3/4 percent; and Esther L. George and Eric S. Rosengren, who preferred to maintain the target range at 2 percent to 2-1/4 percent.

https://tradingeconomics.com/united-states/interest-rate

US Core Inflation Rate Year over Year August 2019

The US core inflation rate, which excludes volatile items such as food and energy, rose to 2.4 percent in August 2019, the highest in a year and above market consensus of 2.3 percent. Core Inflation Rate in the United States averaged 3.61 percent from 1957 until 2019, reaching an all time high of 13.60 percent in June of 1980 and a record low of 0 percent in May of 1957.

https://tradingeconomics.com/united-states/core-inflation-rate

US Inflation Rate Falls Unexpectedly in August

The US annual inflation rate fell to 1.7 percent in August 2019 from 1.8 percent in the previous month and below market consensus of 1.8 percent.

Food inflation stood at 1.7 percent in August, little-changed from 1.8 percent in July, as costs of food at home rose at a slower pace (0.5 percent vs 0.6 percent). Additional price increases were recorded for transportation services (0.9 percent vs 0.7 percent); medical care services (4.3 percent vs 3.3 percent); shelter (3.4 percent vs 3.5 percent); apparel (1.0 percent vs -0.5 percent); medical care commodities (0.1 percent vs -0.4 percent); new vehicles (0.2 percent vs 0.3 percent); and used cars and trucks (2.1 percent vs 1.5 percent).

Energy prices tumbled 4.4 percent in August, following a 2.0 percent drop in the previous month. Within energy commodities, gasoline cost declined 7.1 percent (vs -3.3 percent in July) and fuel oil went down 8.4 percent (vs -6.0 percent in July). Within energy services, electricity prices fell 0.1 percent (vs 0.5 percent in July) and utility (piped) gas service cost slid 3.5 percent (vs -2.9 percent in July).

The core inflation rate, which excludes volatile items such as food and energy, rose to 2.4 percent in August, the highest in a year and above market consensus of 2.3 percent.

On a monthly basis, consumer prices advanced 0.1 percent in August, after a 0.3 percent gain in July and in line with market forecasts. Increases in shelter and medical care prices offset a decline in energy cost.

https://tradingeconomics.com/united-states/inflation-cpi

US Jobless Rate Steady for 3rd Month at 3.7%

The US unemployment rate came in at 3.7 percent in August 2019, unchanged from the previous two month’s figures and in line with market expectations. The number of unemployed persons decreased by 19 thousand to 6.0 million while employment rose by 590 thousand to 157.9 million.

Among the major worker groups, the unemployment rates for adult men (3.4 percent), adult women (3.3 percent), teenagers (12.6 percent), Whites (3.4 percent), Blacks (5.5 percent), Asians (2.8 percent), and Hispanics (4.2 percent) showed little or no change in August.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.2 million in August and accounted for 20.6 percent of the unemployed.

In August, the labor force participation rate edged up to 63.2 percent in August but has shown little change, on net, thus far this year. The employment-population ratio, at 60.9 percent, also edged up over the month and is up by 0.6 percentage point over the year.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 397,000 to 4.4 million in August; this increase follows a decline of similar magnitude in July. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

In August, 1.6 million persons were marginally attached to the labor force, little different from a year earlier. (Data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, there were 467,000 discouraged workers in August, about unchanged from a year earlier. (Data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.1 million persons marginally attached to the labor force in August had not searched for work for reasons such as school attendance or family responsibilities.

https://tradingeconomics.com/united-states/unemployment-rate

United States Existing Home Sales

Sales of previously owned houses in the US rose 2.5 percent from the previous month to a seasonally adjusted annual rate of 5.42 million in July 2019, slightly above market expectations of 5.39 million. Sales of single family homes advanced 2.8 percent to 4.84 million, reversing a 1.1 percent decline in the previous month; while sales of condos were unchanged at 0.58 million, after a 3.3 percent slump in June. The median house price stood at $280,800 in July, compared to $285,300 in June and $269,300 a year earlier. The months’ worth of supply fell to 4.2 from 4.4. Year-on-year, existing home sales rebounded 0.6 percent, the first annual gain in 17 months. Existing Home Sales in the United States averaged 3963 Thousand from 1968 until 2019, reaching an all time high of 7250 Thousand in September of 2005 and a record low of 1370 Thousand in March of 1970.

https://tradingeconomics.com/united-states/existing-home-sales

The number of job openings in the US were little-changed at 7.348 million in June 2019, compared to a revised 7.384 million in the previous month and market expectations of 7.317 million. Job openings declined in leisure and hospitality (-93,000), but increased in real estate and rental and leasing (+38,000) as well as state and local government education (+20,000). Meanwhile, hiring fell by 58,000 jobs to 5.702 million. Job Offers in the United States averaged 4428.65 Thousand from 2000 until 2019, reaching an all time high of 7626 Thousand in November of 2018 and a record low of 2264 Thousand in July of 2009

https://tradingeconomics.com/united-states/job-offers

US Jobless Rate Holds Steady at 3.7%

The US unemployment rate stood at 3.7 percent in July 2019, unchanged from the previous month’s figure and in line with market expectations. The number of unemployed increased by 88 thousand to 6.1 million while employment went up by 283 thousand to 157.3 million.

Among the major worker groups, the unemployment rate for Asians increased to 2.8 percent in July. The jobless rates for adult men (3.4 percent), adult women (3.4 percent), teenagers (12.8 percent), Whites (3.3 percent), Blacks (6.0 percent), and Hispanics (4.5 percent) showed little or no change over the month.

The number of persons unemployed less than 5 weeks increased by 240,000 to 2.2 million, while the number of long-term unemployed (those jobless for 27 weeks or more) declined by 248,000 to 1.2 million. The long-term unemployed accounted for 19.2 percent of the unemployed.

In July, the labor force participation rate was 63.0 percent, and the employment- population ratio was 60.7 percent. Both measures were little changed over the month and over the year. 

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 363,000 in July to 4.0 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full- time jobs. Over the past 12 months, the number of involuntary part-time workers has declined by 604,000.

In July, 1.5 million persons were marginally attached to the labor force, essentially unchanged from a year earlier. (Data are not seasonally adjusted.). These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, there were 368,000 discouraged workers in July, down by 144,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.1 million persons marginally attached to the labor force in July had not searched for work for reasons such as school attendance or family responsibilities.

https://tradingeconomics.com/united-states/unemployment-rate