Fintech sales take off after DOL fiduciary rule's partial implementation

Interest in fiduciary-related fintech previously cooled following the election of President Donald J. Trump

Jun 29, 2017 @ 4:52 pm

By Liz Skinner

Adviser demand for a technological answer to meeting new requirements of the DOL fiduciary rule has jumped in the three weeks since part of the retirement advice regulation was implemented.

Technology providers said interest in their fiduciary fintech had cooled following the election of President Donald J. Trump, who some speculated would scrap the best interest rule before its targeted April 10 implementation date. Instead, the Labor Department delayed it until June 9, when part of the rule went into effect while the agency continues to review the entire regulation.

(More: DOL fiduciary rule takes effect but more uncertainty lies ahead)

"We've seen a tidal wave of interest since June 9," said Daniel Satchkov, president of RiXtrema, which sells a tool to help advisers compare costs of rolling funds out of 401(k) plans. "I think a lot of advisers were close to doing something for awhile, but they kept waiting because of the delays coming from the DOL."

RiXtrema has signed up 74 firms so far in June for its IRAFiduciary Optimizer, compared to single-digit sales of the tool during the other months of 2017.

RiXtrema's technology generates a report for transactions involving individual retirement accounts, comparing total fees an investor would pay before and after a rollover.

When the firm released the tool in October 2016, it quickly signed up about 30 clients before Nov. 8, when Mr. Trump was elected president.

"Since the election until June, everybody just stopped," he said.

It also helps an adviser show "fee reasonableness," Mr. Satchkov said.

TWO PROVISIONS

The two provisions that have gone into effect govern adviser interactions with clients in retirement accounts. Under those provisions, advisers must give advice that is in the best interests of their clients, charge reasonable compensation and avoid "misleading statements" about investment transactions and what they're being paid. The entirety of the rule's provisions, which could still see changes, won't be active until 2018.

Aaron Klein, chief executive at Riskalyze, said since May, when it became clear to many that the DOL rule was going to happen, his firm has seen a 40% increase in its growth rate.

"Advisers seemed to say, 'DOL is here, I have to find a way to document that I'm making decisions in their best interest,'" Mr. Klein said.

Riskalyze's Autopilot investment platform includes "one-click fiduciary technology" that will help advisers keep track of the investments within portfolios to make sure they're meeting risk and other parameters and provide documentation of this care.

(More: Most advisers could be doing a lot more with tech)

Another firm, The E-Valuator, sells a tool for advisers that sets investment performance thresholds across mutual funds and exchange-traded-funds in a client's account to help ensure a company is meeting its fiduciary obligations.

For lagging investments, the tool will identify suitable replacements.

"The week of June 9 we had two phone calls from very large, well-known institutions that decided now they had better act," said Collin Miller, president of The E-valuator. "They had been working under the assumption that the rule was going to get pushed over."

The firm has 22 organizations using the tool, including one of its largest clients, Redhawk Wealth Advisors, which manages about $900 million in assets.

(More: Labor secretary Alexander Acosta gives DOL fiduciary rule supporters something to cheer about — at least for now)

Lisa Graham, product manager of eMoney Advisor, said this month firms have been very active in terms of asking about how the company's products can help advisers meet the fiduciary rule.

She said eMoney, which is owned by Fidelity Investments, has seen a greater number of advisory firms expanding their eMoney relationship with add-ons this year.

Soon they'll be able to add a new feature offered by CapitalROCK that will examine the client's current retirement account situation and recommend whether rolling over a 401(k) into an individual IRA or annuity would be best for the client. It will provide documentation of that decision.

In September 2016, eMoney said it was boosting the compliance functions of its financial planning platform to help advisers meet the Labor Department's new fiduciary requirements for retirement advice.

Its "fiduciary framework" adjusts the client on-boarding procedures and enhances monitoring and archiving of the interactions between clients and advisers, all to provide documentation that shows advisers acted in the best interests of clients when giving recommendations.

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

Nov 13

Conference

Best Practices Workshop

For the sixth year, InvestmentNews will host the Best Practices Workshop & Awards, bringing together the industry’s top-performing and most influential firms in one room for a full-day. This exclusive workshop and awards program for the... Learn more

Featured video

Events

Financial advisers highlight solutions to increase diversity and inclusion

These Excellence in Diversity & Inclusion award winners suggest short-term changes to help foster D&I in the financial advice profession.

Latest news & opinion

Dawn Bennett found guilty of $20 million Ponzi scheme

Jury took less than five hours to convict the former financial adviser and radio host.

10 advisory firm employee benefits you won't believe

Some advisory firms stand out for their creative efforts to keep their troops happy and engaged. Spa retreat, anyone?

Small-cap funds take a beating

For most of the year, the sector had outperformed, but that all changed last week.

SEC commissioner Stein suggests Congress address differing broker, adviser standards

She said lawmakers may have to change 'solely incidental' language that lets brokers give advice.

Social Security and the fear of missing out

How to lower expectations when clients think they're owed a bigger Social Security benefit.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print