Potential fiduciary rule changes and uncertainty about regulation of retirement plan companies could slow HR tech...
investments, though some vendors and investment firms are moving ahead with compliance tools.
A new Department of Labor (DOL) measure would hold retirement plan investment advisers, such as brokerage houses, banks and insurance companies, to a significantly higher standard of accountability and require them to disclose conflicts of interest, particularly recommending their own products.
The DOL rule previously was set to take effect April 10. It was delayed for a 60-day review after President Donald Trump signed a presidential memorandum in early February that could result in fiduciary rule changes that weaken what was to be a major tightening of financial industry regulation, according to experts.
However, as the rule has made its way through the rule-making process over the past few years, some big financial and software industry players have changed internal policies and developed systems to comply with the intent of the regulation, regardless of what happens with fiduciary rule changes.
Among these are Fidelity Investments, which has started to inform customers that it will conduct business as a legal fiduciary as the rule stipulates, and SAP, which has added a fiduciary-rule-compliance module to its SuccessFactors human capital management system.
"Fidelity has spent a lot time, money and energy" on reconfiguring software and call-center systems to comply with the rule, according to Erin Sweeney, a lawyer who works with investment committees of financial institutions on fiduciary rule issues at the Washington, D.C., firm Miller & Chevalier. "They're not going to go backward. I'm telling all my clients to get into compliance."
However, "what employers have to struggle with is the lack of certainty," Sweeney said.
In any event, fiduciary rule changes could go in any of several directions, according to Sweeney and Robert Lawton, a retirement plan consultant in Milwaukee specializing in fiduciary compliance.
Erin Sweeneylawyer, Miller & Chevalier
One, probably unlikely, outcome could be that the rule gets killed off. The most likely avenue: Debate continues, perhaps even after the review period, not much happens right away and the end result is a watering down of the rule, Sweeney and Lawton said.
Lawton noted that one of the measure's biggest backers has been AARP, which is a powerful lobby with many members included in Trump's base.
At the same time, critics -- including some on Wall Street and in the Trump administration -- see the fiduciary rule as an overreaching regulatory maneuver that will stifle business.
"The rule is a solution in search of a problem," White House press secretary Sean Spicer said at a news conference on Feb. 3, after Trump signed the memorandum, Business Insider and others reported.
Spicer went on to assert that the DOL had "exceeded its authority" with the rule.
Meanwhile, Lawton said plan sponsors, the companies that hire investment firms for their advice and management of 401(k) and other retirement plans, should be patient and wait out the tumult over fiduciary rule changes. They should also determine if their current adviser is a fiduciary, and if they are not, put the advisory business out to bid, Lawton said.
"There's going to be a lot of debate. This is going to re-emerge as a controversial issue," Lawton said.
The entities most affected by technology issues associated with fiduciary rule changes are what are known in the retirement advisory business as record-keepers, which are often part of larger advisory firms, like Fidelity, T. Rowe Price and Wells Fargo.
Record-keepers fulfill the accountant-like task of tracking the myriad forms of money types in 401(k) plans, such as salary deferral, employer matching, profit-sharing and rollovers.
"They're going to have to adjust their technology and be careful on how they provide investment guidance," Lawton said. "They're going to have clear boundaries on what they can say and the advice they can give to plan participants after this issue is settled."
Fidelity, in particular, is moving toward full compliance with the original fiduciary rule -- partly because it now defines itself as a technology, rather than a financial services company. It is investing in new record-keeping and voice systems and algorithm-based, automated investment advice systems, Lawton said.
DOL chief cautions cloud users to hold cloud providers responsible for uptime and service failures
HR software systems includes 401(k) management tools