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Regs, Cyber Threats – Not Robos – Top FA Concerns

November 10, 2016

Financial advisors no longer think robo-advisors are their biggest threat, ThinkAdvisor writes. Instead, traditional advisors are now most concerned about growing regulatory and cybersecurity requirements on the industry, according to the publication.

That’s according to top trends at the most recent Technology Tools for Today conference in Las Vegas, attended by more than 200 executives from technology vendor firms, RIAs and independent broker-dealers, ThinkAdvisor writes.

Robos’ threat to traditional advice practices has taken a back seat thanks to the technology’s slowing growth and the increasing competition robos now face from established brands rolling out their own versions of automated advice platforms, according to the publication.

When it comes to technology compliance, the issue that concerns advisors most is the Department of Labor’s fiduciary rule, which requires retirement brokers to put clients’ interests first, ThinkAdvisor writes.

That’s particularly the case now that the industry is splitting on how to comply with the rule, according to the publication. Over the past month, Merrill Lynch and Commonwealth Financial announced that they will stop offering commission-based individual retirement accounts in order to minimize their brokers’ potential conflicts of interest when selling investment products.

But Ameriprise, Cetera, Morgan Stanley and Raymond James have opted to offer both fee-based and commission-based IRAs, arguing that they would rather leave the choice up to their advisors and clients.

In both cases, however, the DOL rule will require more documentation of client communications, extra reporting capabilities and enhanced advisor supervision, ThinkAdvisor writes. Advisors will need integrated tech tools to manage these new requirements, panelists at the T3 conference in Las Vegas said.

Furthermore, technology can help advisors better manage client risk, ThinkAdvisor writes. In light of the DOL rule, advisors need a more comprehensive documenting approach to identify clients’ risk tolerance and flag any irregularities in their answers to risk-profile questionnaires, according to several panelists, ThinkAdvisor writes.

On the other hand, a campaign advisor to president-elect Donald Trump has signaled that the DOL rule would likely be repealed by a Trump administration.

In addition, advisors are concerned about their cybersecurity capabilities, particularly because the SEC has been too slow in creating guidelines and requirements for cybersecurity compliance, ThinkAdvisor writes.

But technology can help advisors meet growing cybersecurity demands, such as using third-party tech providers to gauge problem areas, Dan Skiles, president of Shareholders Service Group, said at the conference.

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.