Studies show that today both investors and advisors seem attracted by alternative options for investment including illiquid investments, commodities, derivatives, and real estate. This surely helps in boosting the portfolio returns adding to their popularity. Fixed income portfolio returns tend to be low owing to lower rates of interest associated with them. During the last 6 months the rates have increased compared to historical standards, they still seem quite low. The aim of the advisors is to squeeze as much income as possible from the portfolio of their clients.
According to the studies, by 2018 assets related to mutual alternative funds is all set to reach $490B. Investors use the alternative funds mainly as a means to diversify their investment portfolio along with hedging and volatility management. Examiners from Financial Industry Regulatory Authority will now be focusing on concentrations related to position of speculative equities for retail accounts along with sensitive interest rate securities. Securities value related to some of these could decline.
If rates of interest are to escalate quickly, investors having short-term investments will naturally suffer maximum because in such situations fund managers will sell at low rates. FINRA will conduct examinations for reviewing retail facing broker trainings for determining their understanding of specific financial products they recommend. This will result in proactive conversation that involves product-specific risks for the customers.
The regulatory body is also going to expand broker programs related to high-risk products besides adding an enforcement team for prosecuting broker-dealers and recidivist brokers with hiring patterns related to them. This program came about during the previous year for fast tracking investigations related to individual brokers with abusive sales history and fraudulent practices.
FINRA is also the designated enforcement and examination authority related to municipal advisors. In this capacity, it is going to focus on areas related to municipal advisory activities during examination of sales practice in 2014.
