Managed account software provider pushes into retail marketNews added by Benefits Pro on February 26, 2016

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Joined: September 07, 2011

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By Jack Craver

NextCapital, the Chicago-based software firm that provides managed account platforms for 401(k) plan providers, isn’t waiting for the Department of Labor to finalize its proposed fiduciary rule.

This week, the firm announced a new partnership with Pershing Advisor Solutions, the arm of BNY Mellon that provides custody, investment and technology solutions to RIAs and wealth managers.

The new deal will give retail advisors access to the automated advice NextCapital’s technology provides for 401(k) participants.

In a joint statement issued by NextCapital and Pershing, company leaders said the deal is reflective of not only of the larger “robo” movement, but also the DOL’s pending fiduciary rule, which some independent analysis predicts will create inroads for robo advisors.

Rob Foregger, co-founder of NextCapital, said the new product will target “Fortune Fifty” financial services companies with 401(k) businesses, IRA rollover businesses, and advisory and asset management businesses.

“Our service is designed to be delivered as fiduciary advice via our partners,” said Foregger in an email. “Our target would fall under very large RIAs, or firms that aspire to build very large RIAs.”

If the DOL finalizes a fiduciary rule resembling its proposed form, commission-based broker dealers will be forced to redesign themselves as 3(38) fiduciaries, or face the cost of complying with the proposal’s Best Interest Contract Exemption in order to continue to earn commissions off recommended products.

Throughout the years-long debate over the DOL’s efforts to regulate a fiduciary standard of care for all advisors to 401(k) plans and IRA account holders, critics have argued such a rule would create cost inefficiencies for smaller accounts.

Recent analysis from Morningstar said as much as $600 billion of low-account IRA balances can be expected to flow out of commission-based accounts, if the DOL’s rule is finalized as proposed.

Foregger says automated platforms like NextCapital’s are “absolutely” prepared to meet that need.

But it won’t just be small accounts moving in the direction of automated fiduciary advice, said Foregger.

“Many of the large institutions we are working with are seeking to deliver a modernized digital wealth management solution for all market segments, including mass affluent and high net-work clients,” explained Foregger.

Arguments that affluent investors won’t cotton to digital solutions don’t have much merit with Foregger.

“The entire industry is pushing towards a tighter advisor-computer experience,” he said.

“Saying your high net worth clients don’t want a digital advice experience is like saying your high net worth clients don’t want an iPhone,” added Foregger.

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