Could digital advice tools solve all of advisors' fiduciary woes?
John Wise, CEO of InvestCloud, makes the case that the Department of Labor's fiduciary rule could be a potential lifeline for robos – largely because digital advice tools can help manage compliance with the new rule.
"Automating advice is the best thing you could possibly do because you've got a whole history about what did you select, what was your risk profile at this time," Wise told ThinkAdvisor. "So you've got the history of advice and consistency. Computers are one thing, they're very consistent."
In fact, some investment product manufacturers like BlackRock and Invesco have recently acquired digital-delivery platforms to quickly support pending DOL policy.
The Office of Management and Budget has completed its review of the Department of Labor's rule to amend the definition of fiduciary for retirement advice, according to its website. And it is expected that the DOL will release final regulations on Wednesday.
InvestCloud, which provides cloud-based office solutions for a variety of investment advisors, was launched in 2010. It took nearly two years to build using a patented technology called "programs writing programs." PWP radically reduces the amount of time and cost it takes to build applications because rather than using programmers writing code, it uses, well, programs. PWP also allows InvestCloud to react quickly to changing regulation.
"When legislation changes, you can react to those things very simply because we're using [programs writing programs] rather than thousands of programmers," Wise told ThinkAdvisor. "A lot of software companies, when legislation changes, they have to start rewriting code. That's a nightmare for them, takes them forever."
According to Wise, a single business analyst can do in days what would take a group of programmers weeks or months to accomplish at a traditional software company.
InvestCloud took on its first client – "a small hedge fund," Wise said – in 2012, and today it has 660 clients and $1.5 trillion in assets in its cloud.
InvestCloud's clients include wealth advisors, large family offices, pension funds and endowments, and hedge fund administrators and independent wealth platforms, and range in size from small startup companies to a manager with $47 billion in assets under management.
While InvestCloud itself is not a robo-advisor, it provides the tools for advisors to build their own robo investment platform in a short period of time.
"We're not a gold digger ourselves but we're supplying the shovels and picks to all the gold diggers so you can build advice platforms very inexpensively and actually automate," Wise said.
