With 2016 safely in the rearview mirror, now is a good time to look back on some of the big financial events of last year. Here are 5 of the biggest financial stories of 2016:
1. The stock market’s roller-coaster ride — With the Dow Jones Industrial Average hovering near the 20,000 mark, most people have forgotten that 2016 started off with a near stock market meltdown. The first two weeks of January were officially the worst start to a new year for the stock market in U.S. history, with the Dow plunging more than 1,100 points, or nearly 6.8 percent.
On February 11, 2016, the Dow closed at 15,660 — and then proceeded to go on a tear, finishing the year at 19,774, up 13.4%. The lesson: There will always be ups and downs in the stock market, but you shouldn’t make investing decisions based on short-term market volatility. Instead, keep a long-term investing perspective.
2. The financial advisor fiduciary rule — In April, the Department of Labor issued a final rule expanding the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974 (ERISA). Although there have been some discussion of whether president-elect Donald Trump may alter the Fiduciary Rule, as the Fiduciary Rule currently stands, will elevate all financial professionals who provide investment or retirement planning advice to the level of a fiduciary.
As a fiduciary, financial professionals must always act in their client’s best interest and put their clients’ interests above their own. The fiduciary standard is higher than the suitability standard, which states that a financial professional must make recommendations that are suitable for their clients. The Fiduciary Rule, which will be phased in between April 10 of this year and January 1 of next year, will make it much more difficult for financial advisors to conceal potential conflicts of interest.
3. The Department of Labor’s overtime rule — and subsequent rule strikedown — The DOL also changed the rules in the Fair Labor Standards Act (FLSA) that determine which employees are eligible to receive overtime pay. These changes would have more than doubled the salary threshold for receiving overtime pay, resulting in more than 4 million salaried workers becoming eligible for overtime pay when they worked more than 40 hours per week.
But a week before the rule would have become effective on December 1, a federal judge granted a preliminary injunction stopping its implementation. While the DOL has said it believes the rule is legal, many believe it’s unlikely that it will be reinstated given the election of Donald Trump as President.
4. The Wells Fargo scandal — In September, Wells Fargo Bank was fined $185 million due employees opening more than two million bank and credit card accounts without customers’ knowledge or permission. In response, Wells Fargo fired about 5,300 employees and ended its aggressive sales goals program that many employees said forced them to adopt this practice.
Congressional investigations quickly ensued and the bank’s embattled CEO testified before the Senate Banking Committee. On October 12, the bank announced that he would retire without a severance package. Meanwhile, the bank started a massive PR campaign, including running national TV ads, in an effort to repair the damage to its brand.
5. The IRS telephone tax scam — The was one of the biggest scams of 2016 in which scammers claiming to be from the IRS threatened people with jail time or deportation if they didn’t pay supposed tax bills by sending them cash or prepaid debit cards. They were often able to alter caller IDs to make it look like the IRS really was calling, as well as obtain personal information to try to fool victims.
According to the IRS, about 4,500 victims have lost more than $23 million as a direct result of this scam. The good news is that authorities were able to locate the source of many of these calls, which were originating in India, and shut down many of these call centers. There has since been a decline from up to 200 new victims a week last spring to just 19 new victims a week. But be on your guard because this scam could kick back up again this tax season.
We wish you a Happy New Year and look forward to working with you in 2017 to help you achieve your financial goals!