Emerging Technologies Transcend DOL Fiduciary Debate

Sometimes two parties locked in debate speak too loudly to notice what’s already changing.

In the debate about a fiduciary standard in the retirement industry and how much the government should play a role, a solution may already exist: new digital advice technology platforms. These innovations could improve retirement participant outcomes, increase transparency, expand access to advice and drive down the cost of retirement planning. In other words, as the market develops, it will naturally address the issues that regulators are attempting to resolve.

No matter what the government does, markets are evolving. Retirement plan participants want, and increasingly expect, more objectivity from advice givers when it comes to their investments.

Existing technology mainly serves the needs of high-net-worth investors, but emerging technologies will improve services for everyone. This technology personalizes and automates advice for both large and small participants with tools such as data-driven account aggregation, savings advice, personalized savings and retirement income forecasts, as well as automated portfolio management.

If the government was to get involved by regulating who is and who isn’t a fiduciary, the argument goes, it could limit the quality or the reach of advice. But technology offers a solution for that. New platforms can allow advisors to use both the technology and their expertise together to scale their value and improve their margins, offering high-quality and efficient advisory services to more participants.

In addition, these innovations give the industry better ways to measure the impact of plan programs, investor behavior and advisor interaction. This creates a natural evolution within the industry focused on continually improving solutions for all investors.

Industry groups have suggested that proposed government regulations on advisors’ fiduciary duties will drive advice costs higher for retirement plans and be burdensome (limiting the ability to do IRA rollovers, for example). These predictions may be accurate in the near term. But technology could dramatically reduce the cost of advice over time.

Some may believe the government is overreaching by demanding that retirement plan providers act as fiduciaries, but it’s important to remember that holding defined contribution providers to that standard is a positive step—because it benefits retirement savers over the long term. It’s important to strike the right balance, however, and the industry must be allowed to improve and provide broad advice access to the retirement market. These goals could be easily achieved through the ongoing innovation and implementation of retirement technology platforms.

The evolution of technology has created a number of new opportunities for advisors and clients in the retirement industry. Specifically, technology creates efficiencies in the planning and managing aspects of retirement advising that will directly facilitate the fiduciary standard.