In its simplest terms, the Department of Labor’s fiduciary ruleis really all about “the Mom Test,” says Rob Foregger.

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The co-founder of NextCapital, a Chicago-based software providerof open-architecture, managed account platforms for 401(k)plans and individual wealth management advisors, acknowledges thecomplexity of DOL’s rule, and the fact that it will fundamentallychange how the institutional and retail advisory industries operategoing forward.

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Read: 8 fiduciary rule FAQs for planadvisors

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But that is not a bad thing, says Foregger, for investors or forindustry.

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“Ultimately, the rule is asking of advisors—is this the serviceyou would provide your own mother,” says Foregger. “That’s thequestion that is shaking up the entire industry.”

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The answer to that question can be found in technology, thinksForegger, who was in “fin tech” long before the term was rooted ininvestment lexicon. Prior to teaming with NextCapital in 2013, hehad a hand in building technology solutions for the financialadvisory space for most of the past two decades.

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While his background might certify him as a technologist,Foregger says NextCapital’s approach is less about being adisruptor, and more about being an enabler for advisors and 401(k)plan providers in the post DOL-rule world.

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Read: On eve of fiduciary rule, Financial Enginessees opportunity

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“The rule is going to fundamentally shift industry’s focus fromproduct manufacturing to advice manufacturing,” said Foregger.“This is what the next 10 years in our industry is going to be allabout.”

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For advisors on both the institutional and retail level, thefuture should not be feared, he says. The hundreds of thousands ofhours invested in engineering NextCapital’s platform were neverintended to replace the potential intrinsic value in the humancomponent of investment advice.

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Rather, NextCapital’s technology was conceived to make fiduciaryadvisors “bionic,” says Foregger.

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To get advisors there, NextCapital is wagering that managedaccounts will be the vehicle to transition industry into the postDOL-rule realm.

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The firm is of course not alone in that thinking. According toCerulli, managed accounts held $188 billion in 401(k) assets at theend of 2015, with Financial Engines dominating 60 percent of thespace.

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That of course is merely a fraction of the assets in target-datefunds, which is nearing $800 billion. Critics of managed accountshave included the Government Accountability Office, which in 2014published a report questioning the cost and value proposition ofmany managed account offerings.

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And they’ve included analysts such as Cerulli, which recentlypublished a paper suggesting the core participant data used bymanaged accounts is not comprehensive enough to offer a trulytailored, holistic investment strategy for individuals.

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Foregger does not necessarily disagree with either criticism,and says NextCapital’s platform represents the next evolution inmanaged accounts, in both the extent of specialized advice itoffers and its cost to investors.

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“Truly holistic advice has to involve more than just assetallocation,” says Foregger. “Much of what the DOL intended with itsrule was to move the responsibility of managing individuals’retirement outcomes back to investment professionals, as used to bethe case with defined benefit plans.”

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Like other managed account offerings, NextCapital’s platformuses core participant and investor data to create a target incomein retirement—current age, salary, 401(k) balance, and projectedretirement age.

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But it goes further from there, including a Social Securitycalculator and the ability to onboard data from assets outside ofqualified retirement plans, like taxable brokerage accounts, aspouse’s assets, savings and investments in bank accounts, or achild’s 529 plan. “It can even factor the value of your baseballcard collection,” says Foregger.

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That level of comprehensiveness is necessary to claim a trulyholistic planning approach and is unique from any other managedaccount platform in the market, claims Foregger.

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To compete going forward—and to stay in compliance with the DOLrule—all advice will have to be reasonably priced. Foregger saysNextCapital’s platform is “competitive” with the cost of TDFs.

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“We’re not about being derogatory to TDFs,” said Foregger. “Thereason why they have been the dominant qualified default investmentin 401(k) plans is because of their cost advantage—that’s why wedeveloped a managed account solution to be highly competitive onprice.”

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The DOL rule’s impact is expected to be most consequential onthe IRA rollover market. When the rule takes hold in April of 2017,any advisor recommending a rollover that results in an increase infees will be subject to the Best Interest Contract Exemption. Thatwill create a new onus on advisors to document why the rolloverrecommendation is serving an investor’s best interests.

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Most ERISA experts and industry analysts have suggested thatcould be cataclysmic to the IRA market. Foregger is one of the fewto go on record saying those predictions have been blown out ofproportion.

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“There are many reasons why a rollover will be in aparticipant’s best interest,” he said. “Investments in a planlineup may be expensive. Participants may not be getting access toadvice in-plan. Many won’t be getting holistic planning advice, andmany plans are not set up accommodate a tailored distributionstrategy.

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“The rollover is not dead,” he added. “But pushing productthrough an IRA is.”

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What’s more, by using NextCapital’s platform, advisors will havea way to document the delivery of comprehensive planning andservice that will be necessary to recommending a rollover, saysForegger.

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“The bottom line is that if you are selling a product for aliving, that’s going to be a tough model going forward. But if youare selling good advice, that is going to be very consistent withthe DOL rule,” he added.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.