#XYPN17 FinTech Competition Award

By Aaron Schumm

I am pleased and humbled to share with you the great news that Vestwell has been selected as the winner of the XY Planning Network’s annual FinTech Competition.  This honor is especially meaningful because we were up against such impressive competition.

The other contenders included CSLA Tech, which has an awesome offering that helps advisors reduce the long-term consequences of student loans, as well as DataPoints, Loan Buddy, RobustWealth, ROL Advisors and Tolerisk, which are also designing amazing technology for the financial planning services community. Together, all of us are working to meet the needs of the next generation of advisors and their clients.

More than anything, this award speaks to the promise of FinTech and the need for continuous innovation. We are thankful that XY Planning selected Vestwell, as it affirms our mission to provide the next generation of solutions that advisors need and clients demand.

We are committed to keep pushing the envelope on solutions that enable every financial advisor to be able to offer their clients a low-cost, fiduciary and automated retirement platform. With these tools, advisors can focus on what they do best – building their business by focusing on establishing and nurturing exceptional customer service and relationships.

Thank you for partnering with us.  We’re looking forward to a bright future for all of us.

Day of Reckoning with the DOL

By Aaron Schumm, Vestwell’s CEO and Founder

It.  Is.  Here.  Department of Labor Secretary Alexander Acosta has made a wave in the political landscape by not further delaying the applicability date of the DOL Fiduciary Rule.  Many suspected the can would be kicked down the road, with another delay.  Without taking a political stance, this is a prime example of a highly publicized regulation not being “pared back” by the new administration by way of an executive order.

Forward-thinking shops have already moved to spiritually fulfil their fiduciary obligations – (Link).  But, as we all know, there are procrastinators.  The “wait & see” camp have been left scrambling for solutions.  The anecdote by John Castelly of Personal Capital perfectly captured the state of procrastinators, “This turnaround with a June 9 deadline is just like when we were back in school, thinking we would have a substitute teacher, so we didn’t do our homework, but the real teacher showed up instead and we are now not prepared.”

So, what does it mean for you?  Still, there remains a void that will be filled by the fiduciary rule becoming regulation on June 9.  In the simplest terms, the rule is about transparency of fees, suitability of financial products, and alignment of interests between advisor and consumer.  As it pertains to the 401(k) industry, there are a few key areas we will highlight.

Fee transparency. There can be no “hidden” fees, such as 12b-1’s, sub-transfer agent fees, etc.  Of interest to you, whether a company or an employee, might be the 408(b)2 and 404(a)5 fee schedules to understand who is being paid and how much.

Reasonable Fees. Expanding on point 1, the advisor and plan sponsor’s fiduciary responsibilities now include selecting providers and investments with a reasonable fee.  What’s a reasonable fee?  While that is debatable depending upon a number of factors, a strong argument can be made that with advent of low-cost investment products like index ETF’s and efficient technology platforms to help operationally scale, the total fees (including advisory, admin and investments)  can be totaled at well below 2%, and may be closer to 1% in practice (depending on the investments and service).

Fiduciary roles – There are 4 main areas in defined contribution plans:

    1. Named Fiduciary – This is typically borne by the plan sponsor but can also be aided by the platform provider.
    2. Named Investment Manager – If you’re picking the fund lineup for the employees, you’re picking up that responsibility.  But, investment managers, MF/ETF strategists, DCIO’s, financial advisors, and platform providers can step in to take on this role for you.  This is usually done under the SEC 3(38) and/or 3(21) construct.
    3. Named Administrator – This role is responsible for the final administrator processes on behalf of the company & employees.  Typically, the plan administrator named in the agreement is the plan sponsor.  However, it can be outsourced to a third-party administrator (TPA) and/or ERISA 3(16) provider.
    4. Named Trustee – This is the party acting as the trustee on behalf of the plan. Again, this is typically carried by the plan sponsor, but can be outsourced to a trust company or other third parties.

As the industry thankfully moves towards simplistic, fee-based, low-cost, and transparent environment, understanding the moving parts of retirement plans will become far less confusing for those less adept to 401k and 403b plans.

In every change, there is opportunity; the DOL rule may change the industry, in our eyes for the better.

If you have any questions around how the DOL rule impacts you as an advisor, company or employee, feel free to contact us here at Vestwell.  We are happy to help.

DOL Fiduciary Role Players

In response to: InvestmentNews’ Fidelity’s approach to DOL fiduciary rule rankles some 401(k) advisers

With the DOL fiduciary mandates effectively going into action, with a formal government action, financial service providers have begun to solidify their stances.

The question a provider asks themselves – Do I want to be a fiduciary to the plan sponsor and/or the participants?  Now, if you’re a provider that works with financial advisors and their clients, the answer is not black or white.

401(k) plans have been around nearly 40 years. During that time, they have been sliced one thousand ways, centering around different value propositions of the respective firms.  And for those of us that have spent a career working with financial advisors, we all know each advisor is unique in how they want to service their clients.

However, in lieu of the impending DOL fiduciary rule, some of the largest providers in the space have taken it upon themselves to push past their financial advisory network and strong-arm plan sponsor into a fiduciary offering that may not align with the advisor of record on the plan, nor the plan sponsor’s preference.  Firms have gone as far as sending 60-day negative consent letters to plan sponsors, whereby the they will be the named fiduciary for the plan sponsor as well as their employee participants.

Now, it can be applauded that firms taking this approach are looking out for their plan sponsor and participant clients.  But, where does that leave the advisors who want to help facilitate these important roles in the relationship?

There is still a lack of clarity about how far the “implemented” DOL fiduciary standards will go, but it is clear that the best interest of all parties will be front and center.  Many advisory firms have built their practices around this, dating back long before the DOL stepped in, simply to be pushed aside by their “partner” record-keeping and custodial providers, who want to play that role instead.  This will leave many advisors displeased, scrambling to articulate where they stand in their plan sponsor client relationships.

We believe that advisors should be enabled to play the roles in their client relationships where they feel they add the most value to their clients.  If s/he feels value is driven by the fiduciary services provided, and s/he wants to provide that service, that should be encouraged.  If the value prop is around investment selection, education, or advice, then they should provide that.  As the rule solidifies, and advisors get more comfortable with the new regulations, we will see increasing numbers of advisors offering fiduciary services to their list of client value add.

To encourage growing and enabling advisors, providers need to remain flexible around their platform and service capabilities.  The DC/DB plans need to be configured to compliment the services and advisor wishes to provide.  When servicing advisors, plan sponsors, and participants, we emphasize to advisors to think of us as an extension of their firm.   They provide the services they want to provide, and we round out the rest, as fiduciary or otherwise, acting as their technology and business support.

Just as the industry is constantly evolving, so are advisors.  We, as technology and services providers need to be there to equip advisors for the future of their businesses.