The genie is already out of the bottle for digital advice In the last month, the so-called “DOL Fiduciary Rule“ has gone from being due for imminent implementation to now being in doubt, or at least materially delayed. While the April 10 deadline for partial Rule compliance was postponed (the January 1, 2018 deadline is still up in the air), many firms have spent a great deal of time preparing for it. And while those firms are waiting to hear details about the delay as well as whether it will be scrapped altogether by the new Presidential Administration, neither changes the momentum. Even if the Rule is repealed altogether, it doesn’t remove the massive benefits of digital advice. At this point, the genie is out of the bottle. Advisors and investors alike have already gone too far down this road, and are now in a better, stronger position, not to mention, client expectations are shifting to a new normal as clients exert their increasing financial mobility. Digital opportunity The Rule – some six years in the making – was designed to expand the definition of an “investment advice fiduciary” to all financial institutions and individuals offering financial advice to retirement accounts and qualified plans, effectively elevating many advisors’ and planners’ obligations to clients from a “suitability” standard to a much higher “fiduciary” standard. They would be bound legally and ethically to meet the standards of that status, including changes to methods of client communication and client reporting. This move – in concert with the reduction of services eligible for commissions – seemed initially to many in the industry to simultaneously cut out a revenue stream (commissions) while increasing costs (because of the additional time, effort and data-tracking systems required to comply with the Rule). But most advisors were not prepared to get out of the retirement game. Luckily, FinTech came to the rescue, harnessing and building upon elements of digital advice previously applied almost exclusively in the Robo arena. The smart players quickly recognized both salvation and opportunity in digitalization. Through a digital platform, forward-thinking advisors have discovered they can deploy advice from an advisor portal to a client portal as well as keep records in a fashion that both complies with the Rule and prevents ongoing cost increases to serve that client base. But they also found a better, more efficient way to do business – i.e., a way to actually lower costs vs. in-person meetings, paper forms and PDF reports, and in the process investors got a better digital experience. Furthermore, most investors feel more comfortable with a fiduciary standard – the same standard that applies to RIAs. So digital advice provisioned under the Rule
improves client satisfaction and loyalty, which in turn increases the longevity of the advisory relationship. With digital advice, advisors and planners promote stickiness – because it gives clients more control over how they can view and act on their investments on a client portal – at the same time as decreasing the costs to the advisor and planner of serving each client. Combining these two benefits is an obvious win-win. No U-turn in advice While the Rule started as a regulatory regime, the double win to the advisory firm and to the investor – i.e., value innovation – is impossible to deny. Many in the industry see this, and are pushing forward regardless. Now it’s about maximizing scale, profitability and investor happiness. Efficiency is the new goal. The Rule simply acted as a driver, with the result being the embrace of digital processes. Presidential Memos and a possible future Executive Order do not change that. The genie isn’t going back into the bottle.
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