Here’s something you don’t hear much about: How will the newDOL fiduciary rule impact somerecordkeeper business models?

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Over the years, registered investment advisors have questionedwhether some recordkeepers may have crossed theline by offering “generic” investment advice to 401(k) participants.

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They claim this, in fact, has morphed into actual investmentadvice.

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To date, recordkeepers have managed to fall outside thedefinition of investment fiduciary.

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It’s possible--and some would say very likely--the new DOLfiduciary rule will make it harder for recordkeepers to avoid beingclassified as fiduciaries (see “Will New DOL Rule Contain Fiduciary Surprise for401k Recordkeepers?FiduciaryNews.com, November 10,2015).

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If recordkeepers are suddenly thrust into the investment adviceregulatory regime, how will they respond?

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Unlike brokers, whose business model has become the focus ofmuch of the discussion dealing with the potential impact of the DOLrule, recordkeepers in general do not currently have complianceinfrastructure to address investment adviseor compliance.

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Because of this, a number of people familiar with therecordkeeping industry feel recordkeepers might simply stopoffering investment advice.

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Who benefits from this?

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Clearly, advisors who can offer investment advice within thefiduciary framework are best positioned to step in and fill thevoid.

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Or maybe not.

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It gets right down (again) to who will pay for this (andhow).

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It is very difficult for the plan level advisor to also provideindividual advice to plan participants.

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In the past, this was done as part of the plan level service,meaning the entire plan paid for “casual” individual advice. Today,that same service is limited to “generic” investment education.

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The transition towards this has confused and frustratedemployees. It has also allowed recordkeepers to come in and fillthe void.

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And this has bothered many legitimate investment advisors.

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The new DOL fiduciary rule is likely to close this loophole, andit’s natural to think this will open the door to those sameadvisers.

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But it might not, unless those investment advisors can garnerfees that will allow them to maintain a sustainable businessmodel.

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This may be possible, as several well publicized advisor firmshave said they are doing this already.

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Can these firms handle the potential increase in capacity? Willplan sponsors be aware of these service providers?

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If not, the DOL is trumpeting robo-advisors as a potential solution.Of course, like the generally accepted panacea of target-datefunds, robo-advisors are fraught with their own issues.

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It’s possible plan sponsors will be initially attracted torobo-advisors, but it’s equally possible they’ll becomedisenchanted by the inability for machines to engage in humanconversations.

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There are a lot of issues that go into making financialdecisions. These go well beyond analyzing investments. In fact,most of them deal with saving, budgeting, and cash flowdecision-making.

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So, there may be a third way. It may be employees really don’tneed investment advice, they want financial coaching. That’s bestdelivered by a human.

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And that human doesn’t have to fall under the realm of the DOLfiduciary rule.

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Now that’s an opportunity no one seems to be thinking about.

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Christopher Carosa

Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).