Products July 15, 2015

External IT Updates Its Platform for Microsoft 365

Compliant-ready features have been implemented into External IT’s office suite solution that integrates with Microsoft Office 365.
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The updated platform gives financial services firms access to the tools, support and service they need to enhance their business models in a cost-effective and secure way, while maintaining compliance, according to Sam Attias, vice president of financial services practice, External IT.

In order to protect financial data, especially when moving between systems, External IT’s platform offers built-in controls to manage how sensitive information is shared, in line with requirements by the Securities and Exchange Commission (SEC) for device management and who has access to confidential information. Attias notes that if audited, a company will be asked for lists of devices employees use to access information and customer data.

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“We have the ability to see every device in real time,”Attias tells PLANADVISER, such as which end users are using which devices to access the company’s applications. “You can set up a process where they can’t use the device until the company signs off on it,” he explains. Devices can be shut down remotely, and it lets an organization control who uses what device to approve, deny and archive information, which satisfies the SEC requirements.

The platform creates what Attias calls good security hygiene: “Each user as well as co-managers can see every action an employee has taken,” he says. “When they are accessing IT; what apps they’ve launched, what device is being used and what files are shared or downloaded. Is there anything that looks suspicious?”

Document retention and archiving can also be addressed through External IT’s platform. The SEC and the Financial Industry Regulatory Authority (FINRA) both have compliance requirements for the length of time documents must retained, Attias points out, underscoring that advisers need to retain files in unchanged format—“That’s key,” he says—for at least five years.

Financial services firms’ complicated technology infrastructure combined with intense regulatory requirements, requires set-up and support from industry specialists—available through the External IT platform, built by those knowledgeable in financial services and software integration, implementation and maintenance. 

Combining Microfsoft Office 365 with External IT’s enterprise cloud platform enables clients to support new ways to work because it gives them access to their information and tools anytime, anywhere in a compliant manner, according to Attias.

Compliance is critical to an adviser’s business, Attias observes: “Over the years, it’s become increasingly clear that IT is a bigger and bigger part of that picture, and it should be the main driver of how they use IT applications; how they interact with their customers. They can use anything they want, but it’s about how they use it and how they access it. The question is how to use things in a compliant matter. It’s a how question. Not an if.” 

More information is on the website of External IT.

In Practice July 15, 2015

Robo Evolution Leading to More Access to Participants

Forces are set to open the 401(k) retirement plan marketplace for advisers to better serve participants.
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Regulatory pressure and new technology for reaching clients will make the 401(k) business more viable in terms of advisers’ ability to serve participants, contends William Trout, a senior analyst for Celent in Houston.

In his article, “The Defined Contribution Conundrum: Automated Approaches to Unlocking the Potential of the 401(k) Retail Investments Market,” Trout says plan participants have been poorly served by the closed 401(k) ecosystem, and it has also discouraged advisers—many have treated the 401(k) as a feeder system for their more profitable individual retirement account (IRA) side lines. He contends that automated delivery (including a direct-to-consumer form that skirts connectivity requirements to plan sponsors and providers) affords opportunities to scale what has been a low-margin business.                   

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“The DC space is less transparent, a shoddier user experience than general retail brokerage because retail brokerage has had transparency forced upon it,” Trout tells PLANADVISER. “Participants are still paying the kind of fees that have gone away in the retail space.” He adds that this is one of the things the Department of Labor (DOL) is trying to change with its proposed conflicts of interest rule.

If a fiduciary standard implies fee transparency, there will be a pushback from investors, according to Trout. He notes in his article that this scenario has already played out in the UK. There will be an advice gap where the government might undercut its own objectives of ensuring that more participants receive comprehensive advice on their investments, and automated, robo-adviser solutions may be able to fill that gap.

However, there are barriers to entering the 401(k) market. Managed account providers acting as de-facto robo-advisers to DC plans need a connection with retirement plan providers—such is the case with Financial Engines and Morningstar—and an agreement with the plan sponsor that they can provide advice. Trout says these models may be a bellwether for the retail investments business as a whole. He notes that already it is becoming more difficult for advisers to encourage retirement plan participants to roll their balances into an IRA, because they are more savvy now and realize it may not be a better deal.

NEXT: The evolution of the adviser-participant relationship.

Trout anticipates a “big bang” scenario where regulatory forces and new technology come together to create an open marketplace for retirement plans. Participants are stuck with whatever provider the plan sponsor chooses, but with increased portability and participants changing jobs more often, Trout sees the idea of the captive participant going away. “I’m not sure how it will happen, but maybe it will be more like health care private exchanges,” he says.

In addition, Trout says the ingrained relationship between managed account provider, plan provider and plan sponsor will be disrupted by regulation. “We could have a really hard push by the DOL that undercuts the monopoly.” Providers will come under pressure for being part of a high-cost system with revenue sharing and 12b-1 fees, he says, noting that particularly at small plan level, participants are paying double for advice services.

Trout notes in his article that Blooom, a relatively new robo-adviser, is forging partnerships with private health care exchanges with the ultimate goal of offering integrated medical and retirement benefits plans. It offers a direct-to-consumer model in which Blooom has direct control of investments. “Longer term, it seems likely that the direct-to-consumer model should gain traction as the nature of employment shifts from a career path to a series of consulting gigs, and 401(k) plans are made portable (i.e., less sponsor-centric) in response to this new way of working.

Trout adds that 401(k)s have been served in isolation from the adviser standpoint, but they should be part of a bigger picture and integrated with advising all assets. “How can an adviser know what’s best for retirement assets, if he doesn’t know what assets participants have otherwise,” he queries.

He thinks advisers should look at automation and consider partnering with providers such as Blooom or others down the road to serve DC participants in a more scalable way. “Serving participants directly is challenging, so advisers need to look at robo-type solutions for advice and models such as Blooom’s where they are actually managing accounts,” he concludes.

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