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Evolution of Retirement
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401(k) Record-Keepers Eager to Facilitate the Convergence of Wealth, Retirement and Benefits at Work

Observations from attendees of the RPA Edge Record-Keepers Roundtable and Think Tank.

In a historic gathering of senior leaders from 401(k) record-keepers serving retirement plan advisors, representing 85% of the plans, participants and assets, the discussions centered around the opportunities and challenges of the convergence of wealth, retirement and benefits at work.

As institutional providers try to work with individuals, learning lessons from the retail financial planning and wealth management industries, obvious issues arise, including:

  • How to scale institutional platforms to provide personalized participant services at reasonable costs?
  • How to provide access to data to partners while protecting privacy of participants and fending off cyberattacks?
  • How to leverage advanced wealthtech and artificial intelligence on relatively primitive and older record-keeping platforms?
  • How to service the coming explosion of small business plans as a result of government mandates and potential tax incentives, possibly leveraging PEPs, MEPs and GoPs?
  • Engaging wealth advisors with little interest in DC plans yet who have relationships with millions of business leaders.
  • Record-keepers offer products, but retirement income is a service. Can they adjust?

Some providers like Fidelity and Schwab are already leveraging participants in the DC plans, while others like Empower, with its acquisition of Personal Capital, are leaning in. Simple issues like getting participant emails can be easily addressed but are surprisingly missing.

Interesting comments and observations from attendees included:

  • Lori Commerford from Voya asked, “Who owns the [participant] data and how to best use it”?
  • T .Rowe Price’s Lee Stevens asked, “How do we collaborate on data?”
  • Fidelity’s Patrick Duffy commented that standardization is needed as clients are demanding more and better digital service.
  • Micah DiSalvo from American Trust cautioned that we need to provide data security while improving the participant experience.
  • Principal’s Kevin Morris advised that we need to help participants the way they want it especially around retirement income, which can be an issue when trying to scale it to tens of millions of workers and for providers who are used to building products.
  • Joe Smolen from Empower concurred—the industry needs to offer personalized advice and retirement income solutions with greater leverage of managed accounts.
  • Schwab’s Nathan Voris noted that financial advisors have been providing retirement income solutions for 50 years, which cannot be replicated with a product at scale.
  • Summing up the discussion, John Hancock’s Jack Barry said we need to leverage data to improve the service in a seamless digital experience.
  • Dan Campanelli from Paychex noted participation rates in small plans are still low.
  • Guideline’s Jeff Rosenberger commented that his firm has seen tremendous growth in the small market as a result of CalSavers while Vestwell CEO Aaron Schumm emphasized the importance of payroll integration and managed accounts used in 65% of its plans.
  • Carlo Cordasco from Nationwide’s Retirement Income Institute noted the importance of education and good content to better engage participants on when and how much they should save, like maximizing Social Security benefits.
  • There was consensus that lower-cost GoPs will be more popular than PEPs even though there is less fiduciary protection.
  • SPARK Institute’s Tim Rouse said plan sponsors are demanding wellness, but privacy is an issue, which is being investigated by the GAO.
  • Finally, Joe Smolen noted that we need to encourage the generalist financial advisor to work with DC plans, but Envestnet’s Sean Murray commented that we have to make it much easier to start and service.

Collaboration among providers and advisors is required in the DC industry. The group agreed we should start with standardizing data format and providing financial literacy education through an integrated campaign like the annuity industry does through its Alliance for Lifetime Income initiative.

The group asked, which now focuses on the RPA market but has deep roots and integration with wealth advisors, to try to get them to be more interested in DC plans, showing how there are opportunities to serve participants even if just the top 10% while highlighting that it has become easier to serve and sell plans through technology and PEPs, MEP and GoPs.

Great discussions and interesting juxtaposition to the Broker-Dealer Roundtable and Think Tank held right after, which addressed the same issues but from an entirely different perspective. Stay tuned for a recap of that program.

Fred Barstein is founder and CEO of TRAU, TPSU and 401kTV.

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