Webinar explored how one B/D came to FundKeeper for the fiduciary solution, but stayed for the convenience and cost savings

In a recent panel discussion, the audience learned how one introducing broker/dealer that had been chiefly concerned about the impact of the proposed fiduciary rule on direct mutual fund accounts ended up solving many additional challenges that those accounts pose by taking a centralized approach. The mid-June webinar, “Check & App is Great, Till it’s Not: The Case for Centralizing Fund-only Accounts,” explored the decision by CUSO Financial Services (“CFS”) to create an alternative to the direct-at-fund approach (where mutual-fund-only customers open accounts directly with fund companies by filling out applications and mailing a check) by integrating a white-label version of FundKeeper onto its technology platform and into its advisors’ workflow.

The Business Case for Centralizing

CFS and its affiliate, Sorrento Pacific Financial, first got on the path to FundKeeper out of regulatory concerns. “We initially came to the platform when the Department of Labor fiduciary rule came out,” said Monica Daggs, chief administrative officer of CFS. “We said ‘we have a good sense of what our Check & App business is, but the DoL is going to force our hand to tighten our protocols.’ But what we found over time is that there were a lot of other benefits, not just for the DoL.” Those included an easy transfer process for existing accounts, simplified technology upgrades like remote check capture and online account opening, and faster account data feeds.

Daggs highlighted an additional important consideration: “It was important for my firm and the firms that we represent to own the adviser experience and to have a single consolidated experience for account opening as well as how accounts are presented. And so that was another benefit of having all of the mutual fund direct business in a consolidated account. It gives us a better point to be able to control that process and have a great experience for our advisers.” She said CFS considered other alternatives for its direct business—including a traditional brokerage platform, which could have provided many of the same benefits—but found FundKeeper to be the simplest and most cost-effective option.

The Operational Case for Centralizing

Another panelist, Ian Martin, executive VP at U.S. Bancorp Fund Services (which jointly created FundKeeper with Envision Financial Systems), dug deeper into some of the back-office operational headaches the technology seeks to make go away. Consolidating client positions on a single platform, he noted, provides transparency into all of their positions and operational efficiencies such as a single source for commissions; the ability to set consistent rules across funds and block certain funds or set suitability parameters; and the ability to quickly address problems, including not in good order (or “NIGO”) transactions.

“And last but certainly not least,” Martin observed, “this industry is one where reps will move on and they’ll take other opportunities, they’ll move to other firms. Being able to offer a broad set of options for reps to handle business is important for rep retention.”

The Compliance and Tech Case for Centralizing

While the DoL has backed away from the fiduciary rule that originally prompted CFS to look for alternatives for its direct-at-fund approach, Envision Financial Systems Senior VP Kelly Lynch said compliance officers she meets still quickly recognize the benefits of an omnibus approach, chief among them, an exceptions-based process. “As I walk into a shop, I often see manual review, paper review, checklists, paper moving around,” said Lynch. “With FundKeeper, we’ve automated that process so that the system can store what those rules are. And as accounts are opened, as transactions are entered, those rules can be applied and only the exceptions are routed back to the principal. So rather than manage by reviewing every item, you are managing by exception. A lot of compliance people have found that pretty attractive.”

At a more macro level, Lynch said compliance pros are sometimes reluctant to admit that they don’t always have a holistic picture of all the accounts that are held direct at fund. With a centralized approach, customer and fund data is aggregated and stored in one place and in easily searchable electronic form.

And, while centralizing would seem like it could take discretion and decision making out of rep’s hands, Lynch said it often has the opposite effect because when processes like adding systematic withdrawals or changing account data are automated and standardized, advisors can be empowered to drive those processes. In such a scenario, Lynch noted that compliance is happy because they know the changes were implemented in a standardized and reviewable fashion, and the technology department is happy because they helped shape the processes on the front end rather than constantly trying to match the technology on the back end to the non-standardized actions of the front-office.

Integration Lessons Learned

The entire panel engaged in a dialogue around integrating a centralized approach for fund-only accounts. Daggs noted that even though CFS made FundKeeper adoption optional (they had been considering making it mandatory when the DoL fiduciary rule was more of a concern), nearly half the advisors were using FundKeeper less than a year after the rollout. She said they appreciate small conveniences like prepopulated data on forms or consolidating ACH payment information—which had previously involved a totally separate form—on the main account opening form.

Daggs recalled one interaction with a somewhat reluctant rep working out of a credit union who needed to fund an account and was curious about the remote check capture feature. “I said, ‘Well did you fill out those ACH instructions on the new account form?’ ‘Well yeah.’ I said, ‘Okay have your client take the check back to the teller line and return it, and go here, click these three buttons,’ and the account funded. And he’s like, ‘Wow that was easy! Is that it?’”

Lynch noted that FundKeeper was built with flexibility in mind so that broker-dealers can do a fully customized implementation that is white-labeled and integrated with their existing technology or they can use it off-the-shelf in a more stand-alone configuration. In either case (or the in-between case) Lynch said FundKeeper brings in an implementation team headed by a project manager who works closely with his or her counterpart at the broker-dealer and together they bring the B/D’s various subject matter in operations, technology, compliance and marketing to the table as needed.

“We’ll bring our entire team to the office and meet with the various groups that may be involved, and kind of work through the potential solutions to get things running,” added Martin.


The panel ended with questions from the audience about how FundKeeper might fit in the context of their own business. To watch and listen to a recording of the entire session, click here. Better yet, to learn more about how FundKeeper can help you improve your clients’ experience, find operational efficiencies in your direct-at-fund business and tighten up your compliance processes, contact us.