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How Tech Will Help FAs Tame the DOL Rule

By Crucial Clips     November 16, 2016
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ, Sep. 29, 2016 

BRUCE LOVE, MANAGING EDITOR, FINANCIAL ADVISOR IQ: Hi, this is Bruce Love. I’m with Financial Advisor IQ, and I’m speaking with Cory Olson, Director of Global Product Strategy at Advicent.

Cory, the DOL’s fiduciary rule is a massive change for the American market, but it’s something that we’ve seen happen in a few other countries before, as well.

CORY OLSON, DIRECTOR OF GLOBAL PRODUCT STRATEGY, ADVICENT: Yes, this is very true. Similar regulations have taken place in Australia, in South Africa, in the U.K. And as a global company, we’ve recognized and serviced these changes before. So it’s not new to us.

What’s really happened is that folks that used to just have a product-centric approach to their advice have now had to take a more holistic approach to their advice – looking at the client’s risk tolerance, their full goal picture, all of their assets and accounts, to be able to provide that holistic advice in the client’s best interest. We expect the same thing will happen here in the United States.

BRUCE LOVE: So is there a way that you think people need to – advisors need to approach looking at how they’re going to comply with this in terms of technology usage?

CORY OLSON: Absolutely. So there’s a few key things that are going to happen. One is transparency.

The advice that you’re giving to the client must be represented well to them, and the thoughts and recommendations of the advisor must be well documented. That applies to auditability. You must be able to produce and understand and support why you made those recommendations, and that can happen through technology.

And then, lastly, is consistency of approach. A lot of the clients that we’re speaking with are understanding that they’re going to need to change how they approach new clients, how they collect information from them, and how they ultimately present it so that they can stay within those recommendations and regulations.

BRUCE LOVE: So give me an example of exactly how technology can help an advisor do that.

CORY OLSON: Technology can help with data collection. So are you collecting the right risk tolerance information? Are you using account aggregation to get the full financial picture? Are you looking at the client’s goals and understanding how your recommendations will actually impact their goals, which is ultimately in their best interest?

It can also help with modeling scenarios. What if I did this plan and recommended this product versus another product that I may recommend? And how does that all ultimately end up for the client? All of that is the way that technology can help an advisor to make certain that they’re providing advice in the best interest of the client.

BRUCE LOVE: So are we talking about the ability to be able to standardize? Or are we talking about being able to exemplify that you’ve made the right choices for your client?

CORY OLSON: All of it. I would say standardization, automation, as well as the auditability, so that you can go back when asked and prove that you have done things in the best interest of the client.

BRUCE LOVE: Cory, the DOL implementation should be happening right now is what we’re being told. And in fact, you have to start complying as of April next year. What have you seen firms doing to prepare for this?

CORY OLSON: These are massive, massive efforts. The folks that we’re talking to have huge cross-functional teams looking at, first, understanding how they need to change their business practices, the products that they offer, and ultimately how they deliver the advice. They’re also looking at how technology pairs with that.

What we’ve seen a lot of is firms providing planning technology to folks that never typically used planning technology in the past. The reason being is that they now have to take a planning approach. They have to understand the goals, understand the priorities, document it.

So along with the technology decision now comes the hard task of rolling it out. So we see a lot of firms starting to concentrate on training, process management-- the change management to be able to roll this out to their massive field forces to make certain they’re ready in April.

BRUCE LOVE: How long do you think this is going to take for small advisors, medium-size advisors, large advisors? It’s not something you can really just start doing – turn the tap on April next year, is it?

CORY OLSON: No, absolutely not. In fact, we see a lot of firms and we’re working with them. Obviously, the larger the firm, the larger the problem and the larger the change. To an individual advisor, we have some advisors that are already operating in this model. The RIA channels are already operating in a fiduciary model, so they’re used to it.

It’s really going to be the folks that are providing the retirement advice and specific products. So we’re already seeing firms starting to roll that out. They’re starting to hire consultants to help them put together the plans. And the larger firms are very much into that process now and need to be ready to go in Q1.

BRUCE LOVE: Cory, you say firms are moving into a planning mindset if they haven’t had one before. How exactly do you do that?

CORY OLSON: So, a planning mindset, really, is about operating in the client’s best interest by understanding their full financial picture. It’s understanding all of their accounts. It’s understanding the risk that they’re willing to take. It’s understanding their goals in the future.

And it’s understanding their priorities – what do they really value most? Is it the education of their child to a private university or is it a public university? Is it retirement? Is it covering themselves in the case of insurance?

So understanding their full financial picture allows you to make certain that the products and advice that you’re recommending match to that full financial picture and set of goals. And that planning mindset is new for a lot of the advisors that are now being impacted by this rule.

So we see a lot of change management in the adoption of planning technology to help them. And they’re looking for something simple, easy to use, scalable, that they can easily incorporate into their practice.

BRUCE LOVE: Cory, thank you very much.

CORY OLSON: My pleasure.