A couple of weeks ago, ESI’s Leadership Team gathered with the field to kick off 2022 and recap the close to 2021. Check out the replay to hear about what a fantastic year 2021 was and what we’ve got in store for you in 2022. It’s an exciting time to be part of ESI – we’re so glad you’re with us on this ride!
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Effective January 1, 2022, certain states have adopted rules requiring continuing education (“CE”) for Investment Adviser Representatives (“IAR’s”) registered in their jurisdiction. The states that recently enacted this requirement are Maryland, Mississippi, and Vermont.
While more states are expected to follow in 2023, if you are registered as an IAR in one of the above states, this requirement goes into effect for you this year.
STATE CE REQUIREMENT
Annually, IARs registered in these jurisdictions will be required to meet their state’s CE requirements. Note: individuals who maintain an IAR registration in multiple states will be in compliance if their home state has CE requirements that are at least as stringent as the model rule and the IAR is in compliance with their home state’s requirements. See the NASAA[1] FAQ page (noted below) for additional details.
Unlike the FINRA regulatory CE or the annual Firm Element CE, you are responsible for enrolling and completing your IAR CE courses with an approved provider. ESI will not enroll or track these courses for you. Course providers are responsible for reporting completion directly to FINRA, which serves as NASAA’s vendor for tracking.
IARs must attain 12 CE credits each calendar year to maintain their registration. A “credit” is a unit that has been designated by NASAA to be at least 50 minutes of educational instruction. The 12 credits must include 6 credits of Products and Practices and 6 credits of Ethics and Professional Responsibility. The rule does not allow for any carry forward of extra credit hours, nor does it allow for duplicate courses to be credited.
Individuals who fail to complete their CE before the prescribed deadline will be automatically designated as “CE Inactive”. If you remain CE inactive for 30 calendar days, your IAR registration may be terminated. Newly-registered IARs are exempt from the CE requirement for the remainder of the calendar year in which they register, and have until the end of the following calendar year to fulfill the requirement. Transferring IARs remain subject to the CE requirement regardless of at what point in the year they change firms.
IAR CE Resources
You can check your IAR CE status by viewing your FinPro profile. New users of FinPro will need to register at https://finpro.finra.org/registerUser/. If you have an existing FinPro account, you can log in at https://finpro.finra.org.
Additionally, NASAA has a resource page, with FAQs, at: IAR Continuing Education FAQ – NASAA.
QUESTIONS
Questions regarding this notice may be directed to ESI Licensing at 800-344-7437.
[1] NASAA = North American Securities Administrators Association
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“On days when the market has dropped recently, what has been your strategy?” This article from Morningstar dives into the difference between risk and volatility. Want to share it with your network? You’ll find it in Hearsay Social’s Content Library.*
*available to IARs only for posting
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As I am writing this blog, the MOEX Russia index has plunged by as much as 45% before recovering slightly to close, down 33%. Russian forces have started a coordinated invasion of Ukraine. Initial reports have indicated that the attacks have resulted in damage to key military sites and multiple casualties – both Ukrainian and Russian soldiers. What happens next? What is Putin’s end game? The world is anxiously watching and wondering. While the markets are reacting violently to these recent events, continued volatility – at least in the short term – seems highly likely. How should investors react? Let’s consider some investing strategies.
Irrespective of the events in Ukraine, inflation concerns already had the markets in turmoil. Supply shortages and increased money supply had January inflation, as measured by CPI, posting its largest increase since 1982. The 12-month increase was up 7.5%. For reference, the previous 12-month inflation rate in January 2021 was 1.4%.1 How are these challenges impacting investor behavior? One metric that offers insight into consumer behavior is the household savings rate. The savings rate is generally defined as the ratio of money saved as a percentage of the household’s disposable income not spent on expenditures. Historically, personal savings rates tend to increase when the economy is trending down, which may make consumers more reluctant to spend.2 For context, following the outbreak of the global financial crisis, the value of personal savings in the United States increased from $359 billion in 2007 to $665 billion in 2008. More recently, in 2020, it amounted to $2.32 trillion.3 The average savings rate in the U.S. for 2021 was 11.9%. The savings rate from 1959 -2021 was 8.98%, so the current trend is about 3% higher than average.4 If clients are saving more, what are they doing with those savings? Are the additional savings being invested into the market or held in cash?
As financial advisors, we should recognize that clients may prefer to save during periods of global uncertainty and market turmoil. This seems to be a perfectly normal response to declining investment values. How much should investors be holding in cash, and should that amount increase during periods of market volatility? Emergency funds (i.e., 6-9 months of living expenses) require cash reserves. Holding a larger percentage of cash may also bring investors a higher level of psychological comfort during periods of crisis. If the savings rate is up – after the cash reserve has been addressed – what should investors consider for the rest?
Dollar-cost averaging strategies are generally considered prudent for investors who may be reluctant to invest lump sums. 5 The systematic process of investing smaller sums over a defined period can potentially reduce the impact of volatility of the total amount invested. Fee-based investment accounts can be opened for as low as $10,000, with a plan to add subsequent investments on a defined schedule until the total desired amount is invested. Subsequent amounts can be scheduled through either a dollar cost averaging plan created during the proposal or through a periodic investment plan submitted with the frequency and contribution amount. While the initial amount is immediately invested, the subsequent investment is generally held in a cash position by the manager until it can be fully allocated, and the account can be reallocated back to the asset allocation targets.
While it’s premature to predict the potential implications of the Russia/Ukraine crisis, clients can proactively implement risk-mitigation strategies both for inflation and geopolitical risk. Investing in equities has historically provided an excellent hedge against inflation and purchasing power risk. Dollar cost averaging can potentially help to lower the average cost of the share price and lower risk. As financial advisors, we are equipped to help our clients in times of crisis.
“And one has to understand that braveness is not the absence of fear but rather the strength to keep on going forward despite the fear.” Paulo Coelho
Dan Randall, CFP®, CLU, ChFC
Vice President of Product Management
1 Monthly 12-month inflation rate, Statista
2 Study shows surge in savings during the pandemic, Federal Reserve Bank of Kansas City, April 2021
3 Personal Savings Rate in the U.S., Statista, January 2022
4 United States Personal Savings Rate, Trading Economics, January 2022
5 Periodic investment plans do not assure a profit and do not protect against loss in declining markets. Dollar cost averaging plans involve continuous investment in securities regardless of fluctuating price levels of such securities. Investors should consider their financial ability to continue purchases through periods of low price levels.
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