In April 2016, the Department of Labor (DOL) issued an expansion to its fiduciary rules. One key takeaway is that advisors providing retirement advice would now have to meet a stricter fiduciary standard. In recent months, many advisors have confronted questions about how these rules will impact their practices, including how increased regulatory scrutiny may impact their firms’ day-to-day operations.
One issue in particular is whether advisors’ technology systems are prepared to handle the DOL changes. For some advisors, the answer is no. A recent survey conducted by Advicent and WealthManagement.com found that many advisors’ technology systems may not be sufficient to manage growing operational and administrative demands.
The reluctance of advisors to upgrade their systems and take advantage of available technologies may not only make compliance more challenging, but result in missed opportunities to improve their practice. Smart use of technology can help advisors comply with new regulations, while also potentially boosting a practice’s efficiency and effectiveness by automating processes, improving client interactions, and making it easier for advisors to scale their businesses. To compete in the new DOL environment, advisors must harness technology in order to provide current and future clients with compliant investment solutions and financial plans that are appropriate for their needs.
The technology solution
Advisors surveyed by Advicent and WealthManagement.com cited several ways that the new DOL rule may require them to take on additional responsibilities. Nearly one-third anticipate they’ll spend more time creating financial plans. Others foresee increased paperwork, changes to policy, and compliance issues that require more attention.
And while advisors agree that they’ll need to lean on technology solutions to help manage those additional responsibilities, not everyone is confident that their systems are up to the task. Consider that 68 percent of advisors surveyed already use software to assist with compliance, document management, and customer relationships, and that nearly 75 percent of advisors use some kind of software for financial planning and portfolio management. Despite their use of those tools, however, only 38 percent of respondents say their technology systems are “very adequate” to handle changes from the new DOL rule.
The majority were less certain: 35 percent said their systems were “somewhat adequate,” while another 12 percent described their systems as “not very” or “not at all adequate.” Nearly 16 percent of advisors were “not sure” whether their systems would be able to help them manage the demands posed by the new rules.
That uncertainty over the adequacy of existing systems suggests that advisors should consider overhauling their current technology systems. And most advisors are open to such an overhaul: Nearly 70 percent of the survey’s respondents expect to increase their tech spending in 2017.
Financial technology—whether client portals, portfolio management software, or backend systems that organize data and streamline processes—can help advisors address the concerns posed by the changing regulatory environment and give advisors and their clients confidence in the planning process going forward.
This content originally appeared as part of a collaborative study and whitepaper completed by Advicent and WealthManagement.com. To download the complete whitepaper, visit: http://go.advicentsolutions.com/content-dol-wm.html.
