As financial services firms develop their responses to the Department of Labor’s fiduciary rule, technology likely will play a large role in the new paradigm.
Steve Winks, founder of Richmond, Virginia-based PCT Research and Consulting, says that firms can’t provide “continuous, comprehensive counsel” without technology. “If you’ve got 500 clients and you’re monitoring risk-return, tax efficiency, liquidity, cost structure and other technical requirements and you do it in real time, that’s beyond the human capability of reasoning,” he says.
Understand Your Client
Some post-ruling tech trends are becoming discernible. The fiduciary rule requires advisory firms to move beyond knowing their clients to fully understanding their clients, says Kevin Knull, CFP, president of MoneyGuidePro® developers PIEtech Inc. in Powhatan, Virginia. He notes that under the best interest contract exemption rule, advisors need to understand the client’s “full financial circumstances, risks and needs,” and it’s no longer acceptable to sell a product without that in-depth knowledge.
Knull believes some firms are overlooking the requirement to establish that the client is invested in their (the client’s) best interest before the firm can render advice. Determining that status requires technology, he says: “Just because of the amount of time it takes to uncover all of that information and in particular to standardize the process, you really need to leverage some sort of technology in order to be able to do so.”
In response to that need PIEtech has developed the Best Interest Scout software to help firms better understand their clients in what Knull calls the “discovery phase.” The system, which will be sold to firms only, not individual advisors, uses online questions to guide clients through the process of entering the relevant information. PIETech provides instructional videos and live chat support during the data entry process if users need assistance. Data entered into Scout flows directly to MoneyGuidePro, although Scout buyers are not required to use MoneyGuidePro.