Solutions Help Advisers Stay Ahead of Fiduciary Reform

Capital One Investing has unveiled a redesigned adviser compensation model that, according to the firm, puts clients’ interests first and will allow advisers to respond nimbly to the new Department of Labor fiduciary regulations.

Explaining the rollout to PLANADVISER, Capital One Investing President Yvette Butler says the new offering is built primarily around two products. First is Advisor Connect, “a new service that provides phone-based investing advice to customers in all 50 states, designed to help investors invest on their terms.” And through Advisor Connect, Capital One clients further gain access to the Capital One Advisors Managed Portfolios, a digitally powered advice solution built with exchange-traded funds (ETFs) and automated portfolio monitoring and rebalancing.

According to Capital One Investing, each portfolio is comprised of low-cost, third-party ETFs, not proprietary funds. “We feel that sets us apart and prepares us for the future of advice and portfolio management,” Butler adds. “The brokerage industry is rapidly evolving as players are figuring out how best to provide investors with unbiased financial advice tailored to their long-term goals.”

Importantly, Butler explains Advisor Connect advisers “are not compensated based on the products they sell, nor do they sell proprietary funds. This keeps the pathways of compensation clear, which is very important in the new fiduciary environment.” One other details to note: The managed portfolios have a 90 basis points fee, while requiring a $25,000 minimum investment.

Giving some additional context to the new product releases, Butler is quick to add that “this actually is not a direct response to the DOL fiduciary rulemaking. It’s representative of the trends we have been following and responding to for at least five years or longer.”

The idea goes back to the firm’s original identity as the only bank formed after the year 2000 that is in the top 10 for assets under management, Butler suggests. “We are a still a pretty new broker/dealer. If you recall,” she explains. “We started out primarily in the credit business but moved step by step into regional banking. With each bank we acquired, they all had a broker/dealer that we brought into the fold. The ING purchase really accelerated this, with the addition of ShareBuilder.”  

Eventually came the rebrand to Capital One Investing, Butler explains. “It’s something of a complicated story, how we got to this point, but it goes to show the way we have been thinking about the future of asset management and financial advice, and positioning ourselves accordingly.” As evidence of this, Butler cites her firm’s enthusiasm about the ongoing changes to the fiduciary standard, aimed at tamping down on conflicts of interest standing between advisers and clients.

“Like many others in the asset management industry we have been seeing this coming, but unlike some of the others we feel well positioned for the new fiduciary rule,” she says. “More than five years ago we decided to take a step back and ask, what’s the DNA of an adviser we really want to have working for us and serving our clients. What’s the interaction going to feel like? How do we get rid of barriers that might prevent trust and loyalty?”

Up until the last year or so the conversation was much more relaxed, she concludes, but “now it’s a real driver of discussion and decisionmaking. “For us, it’s been a long process and we’re very pleased with where we have ended up,” Butler says. “The whole spirit of the rule, we agree with and believe in it. As such, the general design of our compensation model is a significant salary. We also rely on very clear cut bonus options based on net promoter scores from clients, built around satisfaction and willingness to recommend us to others. Our advisers have to be able to say yes to all three of these things.”

More information about the new product launches is at www.capitaloneinvesting.com.