Fiduciary Compliance Requires More Than a Tech ‘Band-Aid’: Orion’s Clarke

Eric Clarke, founder and CEO of Orion Advisor Services, warned firms against applying a technology "Band-Aid" to comply with the Department of Labor's fiduciary rule.

"It's easy as a technology provider to…kind of pick at a wound and apply a Band-Aid, but that [technology solution] might not even apply towards helping them comply with the DOL rule," Clarke said during a visit to ThinkAdvisor's New York offices. "I read a lot of these articles about how technology solutions are helping advisors comply with the DOL and I'm like 'I don't even think that's really my interpretation of the DOL rule.'"

Clarke founded Orion, which is known for its integrated portfolio accounting system, in 1999, and the company now services more than 800 firms with $315 billion in assets under management. In addition to portfolio accounting, the fintech provider's other main functions include trading and advisory fee billing, as well as additional technologies like client portals and mobile apps to help advisors stay on par with robo-offerings.

Clarke urged advisors not to buy into the "propaganda" about the DOL rule.

"They're saying 'you need to buy this technology widget to comply with DOL, and we have the only one that does this,'" Clarke said. "I'm like, 'I don't even see how that widget complies with [the DOL rule].'"

Rather, Clarke stressed the need for advisors to first spend time with their chief compliance officers or compliance consultants to "find out how the DOL [rule] really impacts their business specifically."

Then, he added, advisors can ask when they can do from a technology perspective to make sure that they're in compliance.

While technology may not be the be-all, end-all solution to comply with the DOL rule, Clarke noted that some tools will undoubtedly help clients comply.

"There are some good technology solutions out there that I've seen as far as document storage—having your clients sign off on those [Best Interest Contract exemption] agreements. Those kinds of things are going to be important for clients to use," Clarke said.

As for other tools, like onboarding and risk assessments, Clarke said he is skeptical of how they will impact advisors' DOL compliance.

"I don't know if those [onboarding tools and risk assessments] are going to help advisors comply with the DOL or not," Clarke told ThinkAdvisor. "It depends on the process and the workflow and how the advisor engages with the client. Those are great tools—they're awesome—I just don't know specifically how it's going to help comply with the DOL rule."

Meanwhile, another fintech provider, Advicent Solutions, which has been providing financial planning software to enterprises and independent advisory firms since 1969, is seeing the direct effects of the DOL rule as more advisors move to a financial planning mindset.

"A lot of [firms] are starting to apply a financial planning mindset to advisors who haven't previously had to have a financial planning mindset," Cory Olson, senior product director at Advicent, told ThinkAdvisor. "That, for us, is not new, but for a lot of the advisors and clients we work with, it is new."

Advicent is helping these clients understand how its products can help from a compliance standpoint for transparency, documentation and reporting, as well as how to roll out these tools to massive work forces.

And, now that the "summer of DOL" is over, many of Advicent's clients are starting to move forward on process and change management, as well as training their field forces. According to Olson, this has particularly accelerated in the past six weeks.

"All of our enterprise customers are in some way looking to change their business processes, that much is true. I would say probably a good third of them are looking to incorporate planning tools…at least with new audiences in a more broad way in their client base," Olson said. "A lot of our clients already were under a fiduciary standard, so they were already covered."

Advicent services more than 6,000 firms and about 120,000 financial advisors globally, including large financial institutions, insurance brokers and small independent firms.

One of the biggest changes that Olson and his colleague, Anthony Stich, director of global marketing at Advicent, expect to see in the fallout from the DOL rule will be to workflows. Firms will need to create regimented or fixed workflows, according to Stich.

"If you follow the same workflow, you then are doing what is in the best interest because it's proven," Stich told ThinkAdvisor. "'This is the path we should take, this is how we will get there.' And those workflows, I think, will be one of the big key points."

According to Olson, technology can help ensure that that process is being followed, or that there is a "consistency of approach."

"Consistency of approach on how each advisor approaches their clients, the information they gather, how they document their recommendations and ultimately have them available," Olson explained. "That consistency of approach hasn't had to be as regimented in the past."

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Fiduciary Compliance Requires More Than a Tech ‘Band-Aid’: Orion’s Clarke

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