Many advisors not currently operating under a fiduciary standard were unhappy when the Department of Labor finalized its conflict of interest rule in April; in fact, several lawsuits against the DOL have been filed by industry groups. While others fight it, retirement plan record keepers and providers are embracing it; two-thirds of them believe the DOL rule will have a positive or neutral impact on their asset retention over the next two years, according to a new study by LIMRA, a research, learning and development organization. Twenty-eight percent of companies expect the rule to improve their asset retention, while 36 percent believe it will have no impact on their current asset retention rate. “The DOL fiduciary rule impacts all qualified assets and will likely have a major impact on the rollover market, with some DC plan providers benefiting from increased in-plan retention due to a slowdown in IRA rollover activity,” said Matthew Drinkwater, assistant vice president, LIMRA Secure Retirement Institute.
Legacy Systems Holding Back Wealth Management Innovation
Wealth management firms are hindered from moving more toward innovation to compete with robo advisors due to a heavy reliance on legacy systems, according to digital modernization firm Syntel. With the Department of Labor's fiduciary rule expected to be implemented in April 2017, Syntel sees a heavier reliance on robo advisors because financial advice based on processes rather than human interaction is theoretically identical to all clients and free of conflicts. But wealth management firms need to figure out the right balance between modern and legacy technology to keep up to date and attract millennial clients. The best course of action for that, according to Syntel CEO and President Nitin Rakesh, is to seek out technology partners to help firms modernize by implementing intelligent automation for back-office processes. "Major financial services firms have long viewed fintech as a challenge to their market share," Rakesh said. "However, there is a more collaborative paradigm emerging, with large financial institutions looking to partner with fintech companies to integrate new digital solutions with their traditional offline services."
The results of the Emerging Markets Investor Sentiment Survey, conducted by Emerging Global Advisors, reveals growing optimism in emerging markets among investors. The quarterly survey received responses from 83 asset managers and financial advisors and reported a 28 percent increase in the emerging market "sentiment score" from the first to second quarter of 2016, meaning investors are showing greater interest in increasing portfolio allocations to emerging markets. The survey also revealed that 49 percent of investors have replaced or expect to replace an active manager with a smart beta ETF. "The survey empirically reveals growing optimism among EM investors and a willingness to utilize strategic [smart] beta portfolios to capitalize on EM's key growth drivers," said Marc Zeitoun, Chief Product and Marketing Officer at Emerging Global Advisors.