Did you miss, “An Update from Lance Reihl and Ata Azarshahi”? June 3rd’s leadership update call featured Lance Reihl discussing some exciting enhancements to ESI’s platform, his decision to retire from ESI at the end of July, and the introduction of his successor, Ata Azarshai. Ata then took some time to say hello and share his hopes for ESI’s future with particular focus on distribution and recruiting. Miss the call? No problem: we have the full podcast recording available for you here.
Upcoming Training Opportunities Thursday, June 18, 2020 at 4:00pm EST Docupace – Using Starting Point for Brokerage Maintenance Click here to register.
With Treasury yields nearly as low as they can go and the Fed actively buying Treasuries and MBS again, rates are expected to remain rangebound which was certainly the case last month. May’s largest yield change was 12 bps on the 30-year Treasury, with all other points on the yield curve remaining within 7 bps from where they started the month. A range-bound rate environment leaves spread changes and starting yield as the main drivers of total return and May was a good month for spreads as investor sentiment turned positive with the economy gradually beginning to re-open.
The fourth module in ESI’s training series regarding Regulation Best Interest (“Reg BI”), the landmark regulation set to go into effect on June 30, 2020, is now available. This module addresses:
Regulatory requirements for delivery of the Form CRS and comprehensive Reg BI Disclosure forms
Please note that this training is intended to provide ESI-specific guidance with respect to certain elements of Reg BI that have the most impact on your business. ESI is also preparing a comprehensive, computer-based training module, which all registered persons will be required to complete prior to the rule’s effective date. We will provide additional information around this, and other training, in future communications.
If you have any questions regarding this notice, please contact ESI Compliance at 800-344-7437.
Recently issued Field Notice 2020-06 outlined requirements for Registered Representatives (“RRs”) and Investment Adviser Representatives (“IARs”) to utilize WebEx or Zoom when conducting group seminars and/or public speaking events with the general public (including educational and recruiting events). ESI is pleased to provide additional guidance to help with your use of these tools.
AssetMark, Inc. is committed to lowering investment costs and helping advisors deliver value to your clients. AssetMark will transition certain mutual fund strategies from retail share classes to institutional share classes, which have lower operating expense ratios. The changes to platform pricing coupled with lower-cost share classes will reduce the overall cost of investment for the vast majority of client assets held in the impacted strategies.
Effective, July 1st, ESI will begin leveraging a new NFS communication to enhance the security of client accounts with existing Standing Payment Instructions.
The new “Annual Money Movement Standing Instruction (SI) letter” will be available for all standing instruction types. The consolidated letter will include any check, wire, eft and journal standing instructions associated with an account. The letter will be sent on the anniversary of the account establishment date and will include any instructions for that account at that time.
Please note: End clients may receive the annual SI letter on different days throughout the year as the mailing is based on the anniversary of the account establishment date. Additionally, the letter is eDelivery eligible. Clients that have enrolled in eDelivery will login to view the communication securely in the Wealthscape Investor Portal.
What is Reg BI? Regulation Best Interest – or Reg BI – is a landmark regulation set to go into effect on June 30, 2020. This new regulation addresses broker-dealer business, specifically, and will officially replace the industry’s long-standing, transactional “suitability” criterion with a “best interest” standard.
How does Reg BI impact my business? Reg BI introduces a best interest standard that impacts process, forms and communication with clients.
How does Reg BI impact my clients? Reg BI requires additional disclosure, provided through the new Customer Relationship Summary (Form CRS). In mid-June, ESI will conduct a mailing to all existing customers – both brokerage and direct – to ensure that they receive a copy of our Form CRS prior to the regulation’s effective date of June 30. This means that each of our existing customers will have received a copy of the CRS prior to the implementation date and, therefore, you can continue to provide recommendations on their existing accounts without having to ensure delivery, yourself. Of course, this only applies to individuals who were customers of the Firm prior to June 30th. After June 30th, recommendations are subject to delivery criteria as explained in our training materials.
The disclosure being sent to your clients will be shared with you within the week.
What are my training resources? ESI has multiple training opportunities.
Recorded Training Modules – ESI has been rolling out training webinars that provide information in short, easy-to-digest recordings. There will ultimately be 5 training webinars (3 are currently live), and an additional Field Notice on the impact of Reg BI on incentives. To view any of these webinars, log in to the National Life website, and click on the Reg BI link on the left (see screenshots below or click here).
FIRE Solutions Training – At the end of June we’ll roll out a Reg BI course in FIRE Solutions, the platform that you use for your Firm Element courses. The FIRE Solutions course comprises all the training in one course and will become a part of mandatory training.
FAQ and Forms Overview – As we continue the development of our training materials, we’re compiling an FAQ designed to address top of mind questions that aren’t covered in training. We’ll also provide some quick reference materials. Such as a Forms Overview to help ensure you are ready to do business on June 30th.
Broker Dealer Instruction: Bulk reassignment request with a letter of instruction To move multiple accounts or clients to a different Financial Advisor, please submit your instructions to AdvisorRelations@assetmark.com. This request should include a clear Letter of Instruction signed by an authorized signee with a soft copy of a Excel spreadsheet listing the below information. Our associate will reach out to the sender at the Broker Dealer for any requests missing information specified above.
account numbers
client names
current rep name
current AssetMark rep ID
new rep name
new AssetMark rep ID
Account Number
Client Name
Current Rep Name
AssetMark Rep Code
New Rep Name
AssetMark Rep Code
xxxxxxx
Clientname
OldRep
AG4444
NewRep
AG1234
Broker Dealer Change Form Starting 7/15/2020, AssetMark will no longer be accepting Broker Dealer’s “Change of Dealer” Form and will only accept AssetMark’s form with appropriate signature(s). If you have questions, please call 800-822-4227 or direct them to advisorrelations@assetmark.com
Morningstar to Update Mutual Fund Portfolios in Illuminations
Morningstar Investment Services LLC, a provider of investment management and advisory services, offers Morningstar® Managed PortfoliosSM on the Illuminations platform. Morningstar Managed Portfolios are model portfolios that consist of open-end mutual funds, exchange-traded funds, or equity securities. Initial construction and ongoing monitoring and maintenance of the Morningstar Managed Portfolios is provided by the investment professionals of Morningstar Investment Services’ direct parent company, Morningstar Investment Management LLC, who acts on Morningstar Investment Services’ behalf.
Morningstar Investment Management, has launched Morningstar Funds Trust, an open-end management investment company registered under the Investment Company Act of 1940, as amended. Morningstar Funds Trust consists of a series of nine, open-end, multimanager mutual funds designed to replace third – party mutual funds offered in their managed portfolios. This move to a lower cost structure is aligned with their parent company, Morningstar, Inc.’s, investment principles and reinforces one of their corporate values—Investors First.
To understand what’s changing, it’s useful to consider how Morningstar Investment Management built their managed portfolios in the past. Previously, the portfolio managers selected and allocated assets to third – party mutual funds in some portfolios. Those third – party funds invest in individual securities such as stocks and bonds. With the launch of Morningstar Funds Trust, Morningstar Investment Management’s portfolio managers can allocate to either sub-advisers or other securities. It’s important to keep in mind that while this structure will change the funds that their mutual fund based managed portfolios allocate to, the underlying investment exposures of stocks, bonds, and other securities should be largely unchanged. It is also important to know that the new Morningstar funds will be transaction fee funds at NFS. Normal transaction fees will apply for trades.
These new portfolios have been used for all NEW accounts starting in July of 2019, however the existing accounts were NOT updated at that time. At the end of June, 2020 Morningstar is going to update all the existing accounts. This update will mean these accounts will be rebalanced out of the retail mutual funds and into the Morningstar Funds. If you have questions about the new portfolios, please select the link below or call Morningstar Investment Services at 877-626-3227.
Disclosures: In the United States, Morningstar® Managed PortfoliosSM are offered by Morningstar Investment Services LLC or Morningstar Investment Management LLC, both registered investment advisers and subsidiaries of Morningstar, Inc., are intended for citizens or legal residents of the United States or its territories and can only be offered by a registered investment adviser or investment adviser representative.
Morningstar Funds Trust is registered with the Securities and Exchange Commission as an open-end management investment company under the Investment Company Act of 1940, as amended. Before investing you should read Morningstar Funds Trust prospectus carefully. Investing in open-end management investment companies (i.e., mutual funds) involves risk. The value of an investment in a fund within Morningstar Funds Trust may go down. Morningstar Funds Trust uses a multimanager approach; therefore, in addition to market fluctuations, a specific Morningstar fund’s performance is derived from the skills of the subadvisors and the allocation of assets among them. Diversification does not eliminate the risk of loss in a declining market nor does it assure a profit. Past performance is not a guarantee of future results. The Funds within the Morningstar Funds Trust are distributed by Foreside Fund Services, LLC and are only available to citizens or legal residents of the United States or its territories through Morningstar Managed Portfolios advisory service.
Please consider the investment objectives, risks, and charges and expenses of the Funds carefully before investing. The prospectus contains this and other important information about the Funds. A prospectus is available at http://connect.rightprospectus.com/Morningstar or by contacting Morningstar Investment Management LLC, 22 W. Washington Street, Chicago, IL 60602, +1 (877) 751-4208. Before investing please read the Morningstar Funds Trust prospectus carefully.
Updates from Touchstone Investments
FundReorganization On May 21, 2020, the Touchstone Board of Trustees (the “Board”) approved a plan to reorganize the Touchstone Anti-Benchmark US Core Equity Fund (“the Fund”) into the Touchstone Dynamic Equity Fund (the “Acquiring Fund”). The reorganization does not require shareholder approval and is expected to be completed on or about September 11, 2020, or as soon as practicable thereafter.
Touchstone Fund Merger On May 21, 2020, the Touchstone Board of Trustees (the “Board”) approved a plan to reorganize the Touchstone International Growth Opportunities Fund (“the Fund”) into the Touchstone International Small Cap Fund (the “Acquiring Fund”). The reorganization does not require shareholder approval and is expected to be completed on or about September 11, 2020, or as soon as practicable thereafter. If you have questions about this merger, please contact Touchstone at 800-543-0407.
Touchstone Investments Positions Its Funds Sub-Advised by Sands Capital Management for Growth
Fees Are Modified and New Share Classes Announced
Touchstone Sands Capital Select Growth Fund Effective June 1, 2020, Fund expense caps are detailed below:
Class
Symbol
Annual Fund Operating Expense Level*
Total
Net
A
TSNAX
1.22%
1.20%
C
TSNCX
1.99%
1.95%
Y
CFSIX
0.96%
0.95%
Z
PTSGX
1.27%
1.19%
*Total Annual Fund Operating Expenses have been restated to reflect contractual changes in the Fund’s Investment Advisory Agreement effective June 1, 2020 and include Acquired Fund Fees and Expenses. Touchstone Advisors has contractually agreed to waive a portion of its fees and/or reimburse certain Fund expenses in order to limit certain annual fund operating expenses (excluding Acquired Fund Fees and Expenses “AFFE,” and other expenses, if any) to 1.15% for Class A shares, 1.90% for Class C shares, 0.90% for Class Y shares and 1.14% for Class Z shares. These expense limitations will remain in effect until at least 05/31/2021.
Prior to June 1, 2020, Fund expense caps are detailed below:
Class
Symbol
Annual Fund Operating Expense Level*
Total
Net
A
TSNAX
1.45%
1.45%
C
TSNCX
2.22%
2.20%
Y
CFSIX
1.19%
1.19%
Z
PTSGX
1.50%
1.19%
* Touchstone Advisors has contractually agreed to waive a portion of its fees and/or reimburse certain Fund expenses in order to limit certain annual fund operating expenses (excluding Acquired Fund Fees and Expenses “AFFE,” and other expenses, if any) to 0.25% for Class A Shares, 0.25% for Class C Shares, 0.25% for Class Y Shares and 0.25% for Class Z Shares. These expense limitations will remain in effect until at least 01/30/2021.Touchstone Advisors has contractually agreed to waive a portion of its fees and/or reimburse certain Fund expenses in order to limit certain annual fund operating expenses (excluding Acquired Fund Fees and Expenses “AFFE,” and other expenses, if any) to 0.25% for Class A Shares, 0.25% for Class C Shares, 0.25% for Class Y Shares and 0.25% for Class Z Shares. These expense limitations will remain in effect until at least 01/30/2021.
Institutional and R6 share classes of the Touchstone Sands Capital Select Growth Fund will be launched on or about September 1, 2020. Touchstone Advisors has contractually agreed to waive a portion of its fees and/or reimburse certain Fund expenses in order to limit certain annual fund operating expenses (excluding Acquired Fund Fees and Expenses “AFFE,” and other expenses, if any) in order to limit operating expenses to 0.78% and 0.72% for the new Institutional and R6 share classes, respectively.
Touchstone Sands Capital Institutional Growth Fund will be merged into the newly created Institutional share class of the Touchstone Sands Capital Select Growth Fund on or about December 11, 2020. The objective of the merger is to create one combined fund with greater economies of scale.
For additional details, please review the prospectus supplements.
Please join us for the third installment of our Rep Panel Discussion Series. In this session we’ll visit with Nick Pontilena of Integrated Financial Concepts in New Jersey and Travis Ramsdell of the Maffe Financial Group in Connecticut.
Both consistent and high-level producers, Travis and Nick have demonstrated an ability to keep momentum in their respective practices, despite the challenges of the past few months. In this session they’ll be sharing their thoughts on the activities, practices, and changes they’ve undertaken to keep serving their clients and their business.
Noise vs. information This email links to a great article written by Dr. Daniel Crosby that addresses the importance of filtering media noise during a crisis.
