How fintech aims to make DOL fiduciary rule manageable

Wealth of tools popping up to help with compliance, but will require proper adviser due diligence

Oct 21, 2016 @ 1:32 pm

By Liz Skinner

Risk management tools and tweaks are being introduced nearly daily now to help advisers comply with the Department of Labor's best-interest rule for retirement advice, which goes into effect in less than six months.

Fintech vendors are introducing software that helps advisers assess risk tolerance and establish investment policies around clients, picks investments they can show are best for clients, and monitors and documents all these tasks over time.

Among the newest tools aimed at DOL compliance, RiXtrema introduced software Wednesday to guide advisers through the post-rule process of rolling client assets from qualified retirement plans into individual retirement accounts overseen by the adviser.

Its IRAFiduciaryOptimizer compares existing portfolios' fees, performance and the risk of the client's investments versus the risk tolerance of the client, said Daniel Satchkov, president of the tech company.

Under the controversial DOL rule, which must be implemented by April 2017, advisers need to be able to demonstrate they're acting as fiduciaries for clients when providing advice tied to retirement accounts, including IRAs.

The RiXtrema tool can convert the existing retirement investments into new portfolios of securities that have been approved by the advisory firm or broker-dealer. Whether an adviser just compares or compares and converts investments, it spits out a report that details why a rollover is in the best interest of the client, Mr. Satchkov said.

“IRA rollovers are an area of the DOL rule that has much wider implications than people realize,” he said. “The DOL is worried about making sure the investor isn't put in a worse situation.”

(More: DOL fiduciary rule could cause half of potential IRA rollover assets to stay put: report)

On Thursday, fi360 announced its software would help a home office keep its advisers on a fiduciary track when they're creating investment policy statements for clients and investment watch-list criteria, and in documenting and monitoring client accounts.

Fundamentally, it helps to automate workflow with processes that reduce the organization's liability related to fiduciary requirements, the firm said.

AssetMark introduced an assessment tool Wednesday that it said will show advisers how prepared — or not — they are for the fiduciary mandate.

Answers to a series of questions will evaluate the adviser's compensation and compliance plans and conclude what changes in processes may be needed to comply, the company said. The firm also sells tools that will help advisers prepare.

“We met with advisers across the country and we were struck by how thirsty they were for more guidance on the rule, and frankly, how little they were doing at that point,” said Matt Matrisian, AssetMark's senior vice president of strategic initiatives.

But financial services technology consultant Susan Glover warns that having tech tools doesn't mean advisers can totally wash their hands of responsibility with the rule.

“Technology is going to help with DOL, but there still needs to be due diligence,” she said. “Risk assessments and modeling tools contain assumptions and variables, so advisers need to dig as much as they can into how the end result gets calculated.”

(More: A comprehensive, searchable database of advisers' fiduciary FAQs)

Even technology companies agree their wares can't protect advisers 100% from litigation.

“You have to start by making sure you have advisers who want to act in the best interest of their clients,” said Aaron Klein, founder of Riskalyze, a risk-alignment software company. “Then technology is what is going to make DOL workable for firms.”

There are signs that advisers are still weighing their options.

Tyler Nunnally, FinaMetrica's U.S. strategist, said his fintech firm has seen “a notable uptick” in interest from advisers and broker-dealers in its risk-profiling tool since the final rule was published.

“The response from businesses appears to be focused on ways to incorporate risk profiling tools as part of a single technology solution, instead of the disjointed CRM and financial planning systems that the majority of firms currently have in place,” Mr. Nunnally said. ”This type of integration will obviously take some time, but we would expect inquiries to turn into sales once firms have had a chance to get their plans in place.”

Riskalyze said Thursday insurer AmeriLife has decided to use its risk-aligned platform with all of its annuity producers over the next five years.

It will allow its agents to show how including a fixed annuity can lower the overall risk of a client's financial life, Mr. Klein said.


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