Fi360 Toolkit: Fiduciary Software for 401(k) Advisors

[0:01] JD: Everybody look natural. Welcome everybody to a special episode of Retireholics. Why do I call it special? Because we're gonna do a bit of a product review. We're gonna do it in a Q and A type of fashion. And we have a guest with us from Fi360, Dave Palacek. [0:22] Chad: David or Dave, what do you prefer? [0:24] Dave Palacek: Dave. [0:25] Chad: Dave. Got it. Dave. [0:27] JD: Most of this is going to be David explaining to us. I go, David. That was pretty weird. It's going to be Dave explaining to us about the ins and outs of this product. But even though it is a special episode and even though we're doing a product review, it still is. [0:43] Mark: Retireholics still in the morning time. [0:46] Chad: It's still 10 o'. [0:47] Dave Palacek: Clock. [0:48] JD: The boe. The beer of the episode. And today we are having Captain Fatties gd. [0:56] Chad: Where is Captain Fatty's made? [0:58] JD: I have no idea. Jesus. [1:00] Chad: Right alongside Goletta California. [1:03] Justin: Goleta. [1:04] Chad: Goleta. [1:04] Dave Palacek: Yes. [1:05] Chad: Goleta, California. [1:06] Justin: What's up by you guys? [1:07] Chad: Wow. It's a Pilsner. [1:08] JD: It's a beach beer. [1:09] Dave Palacek: I think so. [1:10] Chad: Pretty sure I don't think so. Another JD specialty. It's a beach beer. Show em Pilsner. [1:14] JD: Editor of World Leaders. If it's called Captain Fatty's, which retireholic is it named after? [1:19] Justin: Oh God. [1:20] Chad: Vote at the bottom. Stand up, stand sideways. [1:24] Dave Palacek: Nope. [1:25] Mark: Doing it. [1:25] Justin: This is even a competition. [1:27] JD: Please don't. [1:27] Chad: It's actually the winner of the ASPA Taco eating contest. [1:31] JD: Right? Captain Fatties. [1:32] Justin: I'm surprised you enjoy this. [1:34] JD: What's that? [1:36] Chad: Yes, I will give it a. [1:38] JD: Give it a retirement score on a one to five. [1:40] Mark: No, give it an fi360 score. [1:43] Chad: Between zero and 100. [1:44] Dave Palacek: I'm going to go with like 11.0 is the best. [1:46] Chad: Zero's the best. I'm going to go like a 6.8. [1:50] JD: Wow. [1:50] Chad: Actually if it's between zero and 100, I'm going to go like a 26.2. There you go. [1:54] Mark: So it didn't meet your 25% didn't [1:56] Chad: get in the top 25% quartile. [1:58] JD: It's not on the watch list. It would remain depends on what kind [2:01] Chad: of methodology you're using. [2:02] JD: Okay, fair enough. [2:03] Chad: Hey, I will say this. [2:10] JD: All right, let's jump right into this, shall we? Because you guys banter is boring me. Dave, tell us what is FI360? Who's it for? Give us an understanding of this. This product you guys got FY360 at [2:23] Dave Palacek: its heart is about helping advisors follow a fiduciary process. And that's not only when the advisor is acting as a fiduciary, but it's when they're working with fiduciaries such as retirement plan committee members or other trustees and organizations really about how we can train or provide education to those advisors and then how can we equip them with the right technology or tools or processes to more efficiently execute their practice. [2:50] Justin: Kind of give us the history of it all, where it all started, where it came from. [2:55] Dave Palacek: So Fi360 was really started in 1999 and back then it was really focused just on our training or education. And in 2003 we actually started our first software product. Really just a one page profile that gave an advisor kind of a quick due diligence evaluation of a Fund. And really since 03, we introduced our toolkit in 2008 and just introduced a new software in 2016, the Fiduciary Focus Toolkit. Again, the essence of the software is helping advisors follow that fiduciary process that we teach. It's not necessarily helping with every single step of the process, but those parts that were either most time consuming or most difficult to do on the advisor's own self, they can now look to us and the software to really help make that more operational in their business. [3:45] Chad: Give us a real quick understanding. If you have tools for advisors who are fiduciaries on the upfront and then you have the software which is primarily in terms of usage as a toolkit, right? As an investment review product. [3:59] Dave Palacek: That's correct, yeah. So there's really three aspects of the software, if you will, in terms of how we help advisors. One is really helping them win new business. So how do we in the prospecting [4:09] JD: and sales, they're going to use it. Yep. Keeps going. [4:12] Dave Palacek: Yep, absolutely. So how do you take a prospect that comes in the door and compare their current lineup or their current plan or their current account? If it's a wealth account, we're not just retirement only. But how can you take that, compare it against your proposed menu to hopefully win a new plan. So that's a key aspect of not [4:32] JD: only are you showing them that the grass is potentially greener, that you've got this better menu you've thought out. But you, but you're also at the same time showing them, check out my ongoing process. I'm going to be able to do this for the next year and the next five years and the next 10 years. [4:45] Dave Palacek: And that's exactly what happens. You're able to take our proposal system and work that into then the ongoing client monitoring report. And that's really where we can help showcase. Especially when you're working with a 401 plan or other fiduciary, it's not just helping you follow the fiduciary process, but you're able to use the monitoring tools to help that plan sponsor committee also ensure they're meeting their fiduciary obligations. [5:10] Mark: So tell us a little bit more about how many people are using tools that you have. You're putting on a major conference. There's a lot of people here and good folks targeted. Give us more because I know these aren't the only people using it. [5:23] Dave Palacek: Absolutely. So in terms of our kind of broad user base, we have over 11,000 designees. And in terms of our software, just as a few metrics for you, one is we have over 4,000 users using the software. And again, as I said before, it's really not just 401k centric. That's probably 70, 75% of our user base is using it for 401k plans. But we have wealth only advisors using it. And we have a lot that have both 401 and wealth that are using the software. And in terms of usage, you could look at monitoring reports as a good kind of proxy for that. So how many, how many regular monitoring reports are being produced out of our system every year? And right now we're over 40,000 plans or accounts that are being monitored using the fiduciary process. Wow. [6:09] JD: From my personal experience, I've kind of seen Fi360 grow in my career to have over 11,000 and have it be such a reputable brand today. It's been quick growth for me. You guys have come a long way. [6:23] Chad: Well, and it came to our attention because our financial advisor on our 401k plan was using that methodology as he came in and hosted our future reviews. [6:31] JD: That's a good point. [6:32] Chad: And that's kind of how we initially saw it. And I think it's good. As you mentioned, the toolkit and the monitoring reports, in my mind, as I've talked with many advisors over the years, I see the toolkit as a scalability piece of their business. You have lots of clients, you have lots of 401k clients, private wealth clients. You need to have one methodology that you're reviewing the investments with so that you can send out a singular quarterly report with the same methodology and not feel like you need to prepare with eight different advisors reports or eight different record keepers reports. And I imagine that's probably a big Part of the hat you all put on when you're bringing advisors on is making sure they see how this can scale their book form. [7:08] JD: Is that a value you guys are cognizant of? [7:11] Dave Palacek: Yeah, absolutely. So back to the process. Obviously all process sometimes can make things more lengthy or more difficult potentially. So a lot of the goal of the software is to help the advisors do that with more of their, with more of their business. Not only 401k plans, but other accounts. So that's not going to happen unless that's efficient, unless we can help them be more efficient. So that's absolutely a goal. And one of our focuses really this year too has been not only this year, but the last few years has been focusing on integrations and not only with other record keepers and custodians, but other software vendors where we can to make that process more efficient for the advisors and their staff that are using [7:48] Chad: the tools are the end user. Once you deliver that report to the client, I imagine they're seeing quite a bit of value in receiving this from an advisor. An advisor having access to these tools too. [8:00] Dave Palacek: Absolutely. And I think one of the key aspects of FI360 and our score in particular is that it is pretty simple, simple to see from a client standpoint, but it does have the kind of backing of that fiduciary process underpinning it. So you're able to use it kind of as your minimum fiduciary screen. But it's also something that your clients can pretty easily resonate with, which usually [8:23] JD: those particularly striking about balance between creating something that's palatable for plan sponsors that don't want to be just beat over the head with tons of analytics and metrics and things. But beneath it is a very sophisticated, prudent process that has all those things. That's definitely how I've experienced and I just want to reiterate for clarity purposes. I totally agree with both of you guys. I think that when you look at a plan advisor and their current, you know, operations, they need to prepare for these client meetings throughout the year if they have a decent book. I mean, even if you get to 10 plans and then 20 and then 40 and 50 and it just becomes more and more magnified. You want to be able to prepare for those meetings quickly, efficiently. You want to be knowledgeable about the methodology that you're endorsing with your clients. There are so many positives to having one system to do that as opposed to trying to use record keeper A's and record keeper D's and Record keeper C and what a nightmare. Such a huge value. What's next? You actually just kind of told me and I want to dive a little more into that, but share with me some other things as well. What do you see for the future of Fi360? How does this product be enhanced? One I'm really interested in is tying to the record keepers. Is that what you just told me? You're going to get data from them for your advisors so they don't have to insert what like plan assets and participant counts, those types of things. [9:48] Dave Palacek: Historically, if you go back five, six years, you know the way to get data in the system was generally you're manually entering it or you're uploading an Excel file with, you know, client funds and balances. And now that works okay if you have a small amount of plans, but once you grow that base or you're doing it more regularly, that can be a real drag. So that was really one of the most time consuming elements of the software. And if you combine that with also a need for more of a book of business type view, not only for an advisor, but for larger organizations that have multiple advisors, sure. That kind of aggregated view is also a desire. So. So we've been working on adding more and more integrations both at a record keeper level. So going to someone like an American Funds or an Empower and a census. But they're also working with custodians where if you're using a independent TPA or someone else and you're custody at Schwab or TD or Matrix or Mid Atlantic that we're able to pull the plan data in which will facilitate all the kind of initial creation of all the client accounts or plan accounts and then it will continue to update the information as you move forward. [10:56] Justin: As long as doing this all automatically. It's not something that's triggered by the advisor. If they want it, you guys just do it. [11:01] Dave Palacek: Or there's a basic signup process for the advisor to begin with with the given vendor. It's usually some type of authorization. So they can send information to Fi360, they can release the plan data to Fi360. But that's usually simple form. There's no cost for it for the advisor. So it's something that's just part of. [11:19] JD: Yeah, now in a future, in a future perfect world. You know, If I've got 50 plans across a variety of record keepers, I just go to my Fi360 hub and it's all there for me. Updated. [11:29] Dave Palacek: I don't know, quarterly or I don't know, generally monthly. [11:33] JD: Monthly. Oh damn some dude. Instead of quarterly. [11:36] Dave Palacek: My bad. Now most of the plan monitoring reports are quarterly but the investment data does update. [11:41] JD: Yeah, but the plan sponsored data, now that's very, very, very cool. [11:45] Dave Palacek: So as far as integrations, that's the one main focus there. But as far as other. Two other areas that we're really working towards from a product standpoint are more reporting on model portfolios. Whether that's just a asset allocation service that you have as part of your plan menu or whether you're actually offering more of a 338 model where you are unitizing it or actually taking on the investment management responsibility. So the more we can do to provide reporting on that that the advisor can use to monitor the models and also. [12:18] JD: Wow. [12:19] Justin: Have fun with that, Brandon. [12:21] JD: I think that's a retireholics first. That is I'm imagining some great edited graphic with that. [12:29] Chad: You see, you must if you're building IT advisors calling for that kind of model portfolio reporting from you guys. [12:36] Dave Palacek: Yeah, we have actually a pretty good amount that have requested it or that need it both for that asset allocation service model where it's not really a. You're not taking on the Investment Management 338 duty to build a model, but it's just a pre allocated percentage of the plan menu. That's been the majority. But how do you show that to the plan sponsor committee members or even to a participant to better evaluate what the models are and how well they performed is something that we are getting a lot of requests for. [13:05] Chad: So we're at the point. Let's take some questions from the audience. Yeah, that guy, front row. [13:13] JD: Who is that guy? [13:15] Chad: Wow. I need to know. I like to use active and passive investments in my lineups and I need to know if there's a way that I can mess with the methodology so that I could give a different report to people. [13:27] Dave Palacek: Sure. So as part of the IPS process, there's four really ways to incorporate a due diligence process into your ips. So you can take your active investments for example, and you can use the Fi360 score to properly score those in terms of what's on or off watch. You also could institute a different criteria for passive funds. So if you'd like to use tracking error or information ratio or expense ratio or whatever screens you come up with, you could put those into your IPS and use that in addition to what you're already doing for the active funds. And we also do allow that Configuration for target date funds in money markets as well. If you have different criteria that you'd [14:08] JD: like to use, let's talk about maybe a more sophisticated advisor that's out there that might look at this from a retirement plan perspective and think that maybe it appears to be simple or cookie cutter, if you will. You know, these scores and these rankings, I'm learning there's some flexibility here too, right. I know they can't change the score itself, but there are some parameters within it that they can customize, right? [14:34] Dave Palacek: That's right. So you have essentially the Fi360 score, just like you think of a Morningstar rating. So it is a data point. It's Morningstar proprietary test. [14:43] JD: Never heard. Sorry. Sorry to interrupt you. [14:45] Dave Palacek: Don't worry about it. So that score is proprietary to us and you can use that score or the averages that we calculate as is and a lot of our advisors use that in whole or they use that in conjunction with some other data points. So for instance, you could use r our scoring methodology and then maybe you really want to look at 10 year return and you care a lot about information ratio. For instance, you can add those on as additional screens to determine whether a fund is on or off watch. So you kind of augment our score with that. The other alternative is if you really don't want our scoring methodology, which some percentage of our audience does because they want to create their own custom screen, they don't really want the Fi360 score necessarily on their reporting. In that case, you can really start from scratch. Put in whatever factors you care about, whatever thresholds you care about, and that can be set up to monitor your funds so you're not forced into the Fi360 score if you don't want to be. [15:44] JD: So there you go. There's some flexibility to it. [15:46] Mark: Tons of it. [15:47] JD: Sounds like very good. That's a cool little recap. We know people's attention spans out there are short. I don't want to keep them watching us too long. So tell us, where can they find you? Where can they learn more about Fi360? Where do they go to check this stuff out? [16:01] Dave Palacek: Sure, yeah. Easiest place is just fi360.com and from there you can. [16:07] JD: That's for the editor. [16:08] Mark: How do you spell Fi360? [16:12] JD: This is your chance to close this out. You decide where fi360.com is going to go. Go ahead, put it on the screen. [16:19] Dave Palacek: Make it a rainbow. Rainbow. Okay. [16:23] JD: Now it's backwards, though. It's right over your head. Thanks again. Thanks for tuning in. We are the retireholics. And we are doing what? Shameless product reviews. One beer at a time. [16:34] Chad: Shameless infomercial this is. [16:36] Mark: We're brand ambassadors. [16:38] Chad: Damn right. [16:39] JD: Ambassadors Proud brand ambassadors of FI360. Check it out. Cheers. See you next time. [16:45] Mark: We'll know how we got that far.