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10.08.2017 to 22.08.2017
at P3
Insider Insights

Taking a customer-centric approach in financial services

Equisoft
July 17, 2019

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Blog » Wealth » Insider Insights » Taking a customer-centric approach in financial services

The focus of this year’s conference was on how investment trends and technology are shaping the fund industry & its global future. Themes ranged from the importance and emergence of Asian markets—they’re not the future, they’re now—to rising costs, fee compression and increasing competition in the marketplace.

We were particularly interested in a panel session on The Evolving Distribution Landscape—a topic we are engaged with every day at Equisoft. At the outset of the discussion the host asked what changes the panelists had observed in 2018 and so far in 2019. The first answer was a surprise.

The Department of Labor fiduciary rule

The panelists discussed how, over the last two or three years, the US Department of Labor’s (DOL) fiduciary rule has had the biggest impact on distribution—not the observation most in the room were expecting since the fiduciary rule was vacated by a federal appeals court in 2018.

The idea behind the DOL fiduciary rule was perhaps best expressed by President Obama back in 2015, when he said, “Today, I’m calling on the Department of Labor to update the rules and requirements so that retirement advisors put the best interests of their clients above their own financial interests. It’s a very simple principle: You want to give financial advice, you’ve got to put your client’s interests first.”

The changes would have forced increased fee disclosure, stricter fiduciary standards for advisors working on commission, and requirements for product recommendations that favor the customer versus the advisor. The changes would have definitely served the customer’s best interest—but, were also contentious for advisors and firms faced with higher compliance costs and potentially lower commissions.

Ultimately, the new regulations were, first delayed, and then tabled completely. But even though the fiduciary rule never actually came into effect, many companies had already begun making the necessary adjustments to their business practices—increasing oversight on products, disclosing fees and enforcing needs-based product recommendations. Seeing how these changes benefited their customers, many firms ended up implementing fiduciary guidelines even though the DOL regulations didn’t become law.

Where things stand with the DOL fiduciary rule

Those voluntary changes in advisor and dealer activity may have had the most significant impact on the industry over the past two years. In general, product oversight costs increased, and fees were compressed. The increased due diligence costs forced companies to re-evaluate their product shelf and discontinue those products that were no longer profitable. In some cases, larger firms who only dabbled in the retirement account market decided to get out of that business altogether.

At the same time, when we look back on the turbulent history of the DOL fiduciary rule, it’s clear that, despite the challenges the approach creates for companies and advisors, the benefits to the customer in terms of increased oversight, better product recommendations, greater understanding of their needs and lower fees has been a net boon to all.

Championing a needs-based approach to sales

Throughout the conference the message was clear that all industry stakeholders need to work together in the best interests of the customer. This customer-centric approach, and the alignment of the goals of all industry stakeholders, is central to everything we do at Equisoft.

Our analytics and sales solutions are specifically designed to help wholesalers and advisors most efficiently and effectively achieve their clients’ investment goals. Our Equisoft/analyze for advisors products have a client profiling and proposal capability that makes it easy for advisors to develop a unique and comprehensive understanding of each client, and then recommend the right products to match. The tools ensure that advisors are building and recommending appropriate portfolios and acting as a fiduciary.

As well, our Equisoft/analyze for wholesalers solution aligns the interests of fund companies, wholesalers and advisors by ensuring consistency of messaging and positioning of products. It can help both manufacturers and distributors identify the strengths and weaknesses within their product lineup—helping companies faced with higher levels of oversight and lower fees make the right decisions about which products they will retain.

Whether or not some version of the DOL fiduciary rule takes effect in the future, Equisoft is committed to helping the entire investment eco-system—from fund companies to dealers to advisors—deliver the most value to their clients.

Learn more about Equisoft/analyze for advisors.

Learn more about Equisoft/analyze for wholesalers.