So determined to demonstrate its fiduciary rule bonafides, adviser software firm Active Allocator asked the attorneys at Wagner Law Group to review its product. The firm advertised that Wagner issued a legal opinion concluding their software helps advisers meet the regulation's unique requirements.
Yet now that the fiduciary rule's implementation has been delayed and could be potentially rescinded, was the effort all for naught?
"We have no regrets," says Brian Jones, co-founder of Active Allocator. "There are still thousands of advisers operating today as fiduciaries. It's a very powerful message to those thousands of RIAs."
Active Allocator, which is a portfolio construction platform, is just one of dozens of fintech firms that began promoting their tools to advisers last summer, aiming to capitalize on compliance requirements the rule would demand.
Jones and fellow fintech heads defend their strategy, arguing that just because the rule may end up derailed, the need for advisers to upgrade their technology and be open with clients doesn't go away.
"Even if the DoL rule goes away, the fiduciary framework holds," says eMoney Advisor CEO Ed O'Brien. "That is, how do you bring planning more into your practice so that you are acting in the best interest of the client and being able to show it to them and be transparent?"
"When you step back and think about what you have to do to act in your clients' best interest, it's not any one thing; it's about starting at the very beginning," he adds.
Industry observers and marketing experts say that while firms may have to tweak their messaging, the DoL rule has created client awareness and demand.
"The genie's out of the bottle," says Joel Bruckenstein, fintech columnist and T3 conference organizer. "The public was educated on what a fiduciary is, so for me, firms creating software that addressed specific points in the rule may or may not be relevant. But the idea that an adviser or firm is acting in the best interest is not going way, and tools that help demonstrate that to a client have true value."
THE REAL ISSUE
Financial services marketing consultant Dan Sondhelm, CEO of Sondhelm Partners, said it was smart for the firms to have aggressively promoted DoL-related features before the rule came into effect.
"Whether a law is in place to protect investors isn't the issue," Sondhelm says. "The problem is now visible. Advisers have to have to deal with the problem. They have to have an answer and process to show they are looking out for the best interest of their clients. Smarter clients will keep this issue top of mind."
There's been no slowdown in demand for the analytics platform being offered by Boston-based FinMason, says its CEO Kendrick Wakeman.
"We are not changing our products in light of the delay of the DoL and last week was one of the busiest weeks we have had in our history from the standpoint of sales demand," he says.
"Regardless of the outcome, the wealth management business needs to upgrade their technology across the board, and soon. We predict that virtually every advice provider will either upgrade their existing technology platform or buy a new one over the next 12 months. Those that don’t will be taking a substantial business risk."
In fact, an unintended legacy of the rule will be the innovation developed to meet its compliance requirements, says Brian Edelman, head of Financial Computer, based in Bloomfield, New Jersey.
One example is how his firm created an integration platform to link an adviser’s mobile phone and their CRM.
"We uncovered that what everyone thought people were doing, they actually were not. It was crazy that an adviser was meeting and speaking with clients, but there was no tracking system, nothing that could be considered books and records level tracking," he said.
The rule has been a catalyst for advisers to at least examine their practices and find inefficiencies that can be automated, Edelman adds.
"If your organization set aside money to respond to the DoL rule, it should be used," he says. "Why not use it to accomplish what the rule intended anyways?"