DOL Optimizer

FusionIQ’ s four-dimensional, adaptive, multi-factor model and its data driven technology is a sophisticated solution  helping the investment community solve several of the most pressing challenges associated with the upcoming U.S. Department of Labor (DOL) Conflict of Interest Rule.

The new DOL rule is one of the biggest regulatory events facing the financial industry. It will expand the definition of ERISA fiduciary investment advice and apply a “best interests” standard to a broader range of investment services, including retirement investment advice and certain IRA rollover recommendations.

The financial industry needs to evolve their businesses and strategies to meet the higher standards, and turn compliance into a competitive advantage.

The three major themes of the DOL ruling are the following:

Solving for Suitability

Under the new regulations, advisors will need to standardize and simplify the process for capturing recommendations for funds, ETF’s and equity portfolios such as SMA’s and UMA’s. FusionIQ can help financial advisors and firms make investment recommendations that meet fiduciary standards. Using the tool to evaluate and validate their mutual fund sell list, ETF buy list or equity allocation list  advisors can see that the investment choices, process for choosing those investments  as well as fund expenses on broker-dealer products  are suitable for specific clients. Firms can equip advisors with self-service tools to create portfolios, while aggregating required data and incorporating point-of-sale suitability analysis, fee with transparency and clarity to end customers.

Compliance with Customer Communication

The new DOL rule will require firms to produce, distribute and archive all disclosures, transaction documents, regulatory documents, and advisor recommendations. This will include the Best Interest Contract (BIC), Fiduciary Acknowledgement Letter, pre-transaction disclosures, and numerous other disclosures. Regardless of delivery method –electronic, print, mobile– all communications must have updated data sourced from multiple databases and quality checked for accuracy. The FusionIQ  solution allows for composition,  digital delivery, as well as tracking and archival capabilities for compliance.

Compensation and Conflicts of Interest

To comply, organizations need to identify and address conflicts of interest with third-party compensation both at the firm and advisor level by eliminating, restructuring, or “leveling” compensation / fees. It’s going to be critical to continuously monitor client accounts and advisor activity for compliance purposes. By creating, communicating and enforcing procedures that minimize conflicts of interest, firms can proactively manage risk. FusionIQ can help firms maintain compliance and manage risk by minimizing conflicts of interest with third-party compensation/payments; and aggregating account level data for monitoring, data  and reporting investment rationale.

The FusionIQ DOL Optimizer – the FusionIQ Optimizer compares Four-Dimensional, FusionIQ Composite Master Scores, existing portfolios' fees, and performance. Under the controversial DOL rule, which must be implemented by April 2017, advisers need to be able to demonstrate they're acting as fiduciaries for clients when providing advice tied to retirement accounts, including IRAs. The FusionIQ DOL Optimizer can convert the existing retirement investments into new portfolios of securities that have been approved by the advisory firm or broker-dealer. Whether an adviser just compares or compares and converts investments into “IQ” portfolios, it  produces a compliance report that details and can justify the process and diligence chosen for why portfolio A  rather than portfolio B is in the best interest of the client.