Seth Rosenbloom, associate general counsel at Betterment for Business, an increasingly prevalent robo-adviser in the 401(k) market, says the new Department of Labor Fiduciary Rule FAQ publication “doesn’t break any new ground.”

While the document is undoubtedly going to be valuable reading for anyone working under the Employee Retirement Income Security Act (ERISA) and hoping to comply with the revamped fiduciary standard, it does not seem to signal any real change of intent or timing on the part of the DOL.

“These clarifications show that the DOL did not cave to any pressure from firms that sell their own products to soften the rule,” he suggests. “Rather, the DOL is holding firm in its intent to make sure the rule protects the best interests of investors while tacitly, and not so tacitly, paving the way for independent robo advisers to succeed.”

Rosenbloom says the fact that the DOL has not taken any real steps to soften either the fast-approaching implementation deadlines or the challenging requirements to comply with the Best Interest Contract (BIC) Exemption—among other key exemptions—is a bit of a surprise, given the strength of industry lobbying in the last year.

“We’ve heard reports that the Department of Labor was being lobbied to soften the definition of a ‘level fee fiduciary,’ for example, so that firms that recommend proprietary funds would qualify,” he explains. “If so, the DOL stood up to these efforts and made it clear that it believes that investors are best served by truly independent fiduciaries who don’t financially benefit from recommending their own funds.”

Rosenbloom points to FAQ Question 9 as a telling example, which suggests “The touchstone [of fiduciary responsibility] is always to avoid structures that misalign the financial interests of the adviser with the interests of the retirement investor.”

He adds that the FAQ underscores the fact, time and again, that “incentives matter.”

NEXT: A boost to technology providers and robo adopters? 

“We all learned from recent bank scandals that when you offer people incentives that are contrary to their customers' interests, customers will inevitably suffer. The DOL understands that and is attempting to reduce and eliminate conflicts wherever they occur,” Rosenbloom says. “When an adviser recommends proprietary funds from which it receives a financial benefit, the adviser's advice will eventually be affected by the conflict. Under the new fiduciary rule, as the FAQs make clear, firms that retain these problematic incentives will have to face a higher standard in defending their practices.”

Rosenbloom concludes that, under the fiduciary rule as expounded in the FAQ, “if you're providing advice digitally as a robo-adviser and you're recommending proprietary funds, you're not eligible for the Best Interest Contract Exemption and as a result may be unable to attract new clients.”

This may at first seem like a blow to robo-advisers, but Rosenbloom points out that there are two classes of robo-advisers that have emerged—those wedded to/created by a single investment provider, and those which are truly independent and can work in a provider-agnostic way. The former group may be left scratching their heads with the publication of the new FAQ, but Rosenbloom says independent robo-advisers have effectively been given the green light.

“The DOL is paving the way for independent robo advisers. In its answer to Question 10, the DOL notes that the rule is informed by its view that the marketplace for robo-advice is still evolving in ways that appear to avoid conflicts of interest that would violate the prohibited transactions provisions and that minimize cost,” he explains. “In other words, independent robo advisers are emerging as an unbiased, low-cost alternative, so there is no need to created new exemptions that would favor conflicted robo advisers.”

Executives with LifeYield, another financial services technology company that sees real tailwinds coming out of the new fiduciary paradigm, echoed many of the same ideas in a recent interview with PLANADVISER. The firm serves a somewhat different purpose from Betterment—explaining itself more as an adviser-support tool provider than an actual adviser—but it still sees a lot of room for growth ahead in supporting new-fiduciary advisers.

“We have a suite of technology enabled products that are designed specifically to help advisers measure and serve clients’ best interest—they are not calculators. They are optimizers,” says Mark Hoffman, the firm’s CEO. “They are tools to help clients and advisers do the critical analysis to ensure that clients are getting the most value they can get out of their accounts and investment approaches. This is a whole new area of focus coming out of the new fiduciary rule.”

Hoffman says the tools “are very much designed to be delivered in partnership with advisers on the ground.”

NEXT: The fiduciary recipe comes together 

“Independent robo-advice technology tools are not meant to replace the adviser,” Hoffman adds. “They may be used directly by some clients, but many more investors will prefer to continue working with a live adviser—and our tools can then support the adviser and the client. The adviser and the client are freed up to focus on discussing problems and goals, while our robo-tools support the optimal execution.”

Jack Sharry, an executive vice president working on product development with LifeYield, adds that his firm and others “want to help advisers answer the questions that are being asked.”

“Specific to the DC space, for example, we have had a lot of inquiries around our Social Security optimizer tools,” Sharry says. “We’re working with a couple of advisory firms to make our Social Security optimizer tool available to their DC plan clients directly. You could image us, then, helping the adviser provide crucial guidance about when and how to draw Social Security and other sources of income. This is relatively new for us—and it is making for some very interesting conversation, figuring out how this is all going to work. There is a lot of demand out in the marketplace for this type of a hybrid approach.”

Hoffman feels that the DOL rule is still “creating a lot of confusion about the future of proprietary products and advice.”

“My metaphor is that the DOL came up with a recipe for retirement cake in their new rule,” he says. “The recordkeeper has two eggs, the custodian has the baking pan and the oven, the broker has the flour, and the investment manager has the butter. Where the robo provider and advisers can step in is by taking charge of the recipe and guiding the plan sponsor very efficiently through the actual process of baking the cake. They can also take pictures of the whole process to show off later.

“You can’t just add ingredients and have a recipe without someone actually doing the cooking,” Hoffman concludes. “That’s the point in the future of the DOL rule, we could say. There has to be knowledgeable measurement, action and implementation of best practices.”