2016 - Year in Review

2016 - Year in Review

Posted by Ray Mulligan on Dec 20, 2016 8:30:00 AM

2016 year in review.pngWow, what a year it has been! Financial Technology  (“FinTech”) continues to move at a torrid pace. Change, evolve, adapt, respond, expand – the pressing demands and what is being delivered to meet those demands continue to amaze and astound.

This post will look at a few of the “big rocks” that impacted the industry and the FinTech world.

DOL Fiduciary Rule

At the beginning of the year, we did not know what this was going to look like. By mid-year we received a clear picture and started to work in earnest to address the new system, reporting, and process requirements to meet the new rules. Here, at the end of the year, we are again not sure what may or may not be impacted with the surprising elections results.

We at IFS have created a complete suite of solutions to help firms collect, report, and track compliance around the current rules, and continue to help many of our clients address this evolving requirement. We also launched the DOL Advisor Toolkit, the industry’s only comprehensive solution for DOL compliance.

Here is what we do know – the industry is never going to be the same, especially in the area of qualified accounts, a number of firms were forced into mergers or purchases, based on the commission compression and the cost of system changes related to the DOL regulation.

Based on a recent survey by SEI, many advisors are still wondering what the impact of the ruling might end up being for them and their practice, specifically how it will affect their compensation and what changes they will need to make to comply. Many firms have chosen to eliminate commission-based qualified accounts all together, creating new products which are fee-based alternatives. Other firms are looking towards managing smaller accounts using the next big rock of 2016 – robo advisors.

Robo Advisors

Are computer algorithms good fiduciaries? Many firms are looking towards accounts based on model asset allocations and risk tolerance levels to both serve lower asset clients and address the “Best Interest” requirements created by the DOL.

While Robo Advisors serve a role in the core asset allocation and rebalancing functions of an investment account, there will always be a desire to have someone to talk to about the bigger issues that surround the accounts, such as estate planning, retirement goals, lifetime event funding, and other financial planning issues. We see this tool as very useful and a great addition to the marketplace to increase education and investment options available to consumers.

We at IFS have created solutions for those functions that have to take place “behind the scenes” that impact the client’s interactions with the firm, from the initial onboarding to money movements in, out, and between accounts, as well as the ability to perform account upgrades and closures. So, even though we expect to see more firms and new firms offering account management without advisors, we expect that our platform will continue to play a critical role in opening and servicing those accounts.

Robo Advisors have certainly created a disruption in the industry and forced advisors to continue to add value by providing services, guidance, and assurance outside of their asset allocation models. As we continue to have volatility in the markets, world economic events, and surprises like the 2016 presidential election, a good financial advisor cannot be replaced with an automated asset allocation model, but they should be able to leverage and incorporate it into their overall offering to their clients.

The 2016 Election

Well there is a surprise for you! The election of Donald Trump has certainly created much discussion about the direction of the financial markets, regulation, and tax policy under the new party leadership.

While we don’t have an opinion on politics here at IFS, we do look forward to helping our clients react and take advantage of the changes that are bound to occur. The financial markets and the financial services sector certainly seem to have liked the change thus far, and we look forward to an interesting and exciting year as president-elect Trump executes on his economic strategy. Currently, we have limited transparency into what that might look like.


Which brings us to our last big rock of 2016, which we feel has started out as a small rock at the top of the hill, gathering momentum and bringing other rocks with it as it tumbles and careens through the FinTech landscape. This technology is highly associated with bit-coin and other alternative monetary value stores, but is now being used to created private networks of shared information between firms, erasing the need for multiple systems and the reconciliation that dual systems require.

We believe that this is a technology that has great capability to be disruptive to many of the current clearinghouses of data which we have come to rely upon. The clearinghouse has become the trusted source of the exchange of information – matching buyer with seller, asset transfer firm with asset receiving firm, etc. What happens when there is only one shared ledger, one source of truth? We think it holds great potential, and continue to discuss with our clients and prospects where leverage of this emerging technology might lead to increased efficiency, simplicity, and transparency leading to fewer, trusted transactions.

In Summary

FinTech is a great place to be! As 2016 demonstrated, the pace of and demand for change doesn’t slow. This leads to innovation, rewards for risk taking, and a constant flow of ideas and potential opportunities. We at IFS look forward to continue to growing, expanding and innovating together with you.

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