On DOL Fiduciary

In wake of DOL fiduciary rule changes, technology can solve problem of small accounts

Advisers should weigh wealth management technology as an answer to their small-account woes

Apr 8, 2016 @ 12:18 pm

By Alessandra Malito

+ Zoom

For months, critics of the Labor Department's proposed fiduciary rule have argued that it would orphan small accounts because the cost of managing such accounts would be prohibitive.

There's something that eases those pain points and softens the blow, though: technology.

Already-existing software is the answer to efficiently and profitably managing all accounts, even those that advisers may consider too small to keep under the DOL fiduciary rule. The final rule, released last Wednesday, requires all advisers to provide conflict-free advice on client retirement accounts.

Advisers can analyze these portfolios in one swoop and rebalance them with a few clicks of a button. They also can implement a robo-adviser strategy for accounts they may otherwise want to orphan.

“Ten years ago, we didn't have the technology in place to efficiently service smaller accounts,” said Eric Clarke, chief executive of Orion Advisor Services, a turnkey provider of wealth management technology. “Today they can take advantage of off-the-shelf technology that allows them to compete in the marketplace and accommodate those small accounts.”

WAVE OF CHANGES

If advisers do not consider technology as an answer to their small-account woes, those accounts may move to robo-advisers. Many of the automated investment companies say they are in a good position to handle the wave of changes the DOL's rule brings.

There are plenty of robos created specifically for advisory firms, said Sean McDermott, an analyst at Corporate Insight Inc.

“If an adviser is keen on continuing to be able to service clients that fall under $50,000 in assets, there are methods and available tools that can allow them to do that,” he said. “It would take an investment in obtaining the software and updating the technology, but investing in your business is part of the game.”

Lex Sokolin, partner and chief operating officer of Vanare Inc., a wealth management technology provider that owns robo-adviser NestEgg, said his company is working on bulk tools that allow advisers to migrate a large set of existing accounts onto the Vanare platform, redo asset allocations for thousands of clients and provide client reporting.

Tools for bulk, or batch, processes, which handle a task across numerous portfolios at one time, are an effective way to manage a large volume of accounts that don't need too much attention.

This can make rebalancing easier and allow advisers to create letters to send to clients about market shifts or relevant news, said Neal Quon, co-founder of QuonWarrene, a technology consulting firm for the financial services industry.

A lot of advisers already have batch functions available in their software but aren't familiar enough with them.

“Advisers never took real advantage of it,” Mr. Quon said.

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