The exact impacts of the wide-sweeping new rule from the Department of Labor related to retirement investment advisors is still being figured out. According to the rule, financial advisors in the care of a client’s retirement funds are to be held to a legally-binding fiduciary standard, where before this was not necessarily the case. The rule, which begins to take effect as soon as April 2017 for some, will require major compliance overhauls and a fairly drastic shift in the day-to-day operations of many advisor and brokerage firms.
One of the more overlooked ways the advisory landscape may be impacted is with regard to technological services provided by financial professionals. According to Insurance News Net, advisors and agents should expect life insurance carriers to make adjustments to their front- and back-end systems to stay in compliance with the DOL rule, and will begin making these changes as soon as the end of summer 2016.
According to Tom Benton, vice president of research and consulting at Novarica, who spoke to Insurance News Net, insurance carriers will primarily have to modify the illustrations and compliance protocols within software to bring it up to speed. Among the detailed changes that will likely need to be made are those involving agent compensation systems, distribution management and basic information processing.
Agent-facing portals an open question
In a report on the technology modifications needed to satisfy the DOL’s ruling, Novarica found that the topic of agent-facing portals remains a matter of discussion within the financial community. These portals, targeted to different demographic segments of consumers, each vary in approach and design. To modify each one of these individually presents a time-consuming headache for the IT departments of some major carriers. This is especially the case with portals designed for Spanish-speaking or Asian consumers, which must be written in different languages. This, of course, requires translation that is only an additional expense for financial institutions.
Insurance News Net reported that this development, along with broader industry trends related to business software, may be prompting carriers and advisory firms to adopt a subscription-based, software-as-a-service model for client- or agent-facing portals. This would require less capital expenditure on the part of insurers and allow updates to be applied automatically by the third-party software developer.
Other changes related to the DOL fiduciary rule will surely develop in the near future.