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tiktok-app-phone-screen.jpg LIONEL BONAVENTURE / Contributor / AFP

ChatGPT, Amazon, TikTok Are Coming for RPAs

401(k) advisors and providers have yet to realize their real competition for plan participants.

The big story in the defined contribution industry is the potential competition between advisors, who sell a 401(k) plan, and the record keepers, with which they partner over who gets to serve and monetize the over 80 million participants with 110 million accounts.

But while advisors and providers may be squaring off against each other, there are much more daunting competitors looming in the form of social media giants like Tik Tok, Facebook and Instagram as well as masters of personalization and data like Google, Amazon, Microsoft and Apple all spending billions on AI like ChatGPT.

The DC industry has been anticipating these tech giants will compete to manage or advice the plans but why would they ever want to enter arenas that have low margins and high barriers to entry not to mention daunting regulations? Instead, they are more likely go directly to the participants, most of whom are clients they touch frequently, and bypass the heavy lift of being an SEC-approved money manager, DC record keeper or regulated financial advisor.

Granted, people might have more trust in their employer and providers have better access at work, but that access is becoming easier through firms like Pontera as well as embedded financial advice within other popular apps. And what about the gig economy growing exponentially when there is no employer?

History tells us people want to interact with humans to get advice, not robo advisors or insuretech. But advisors and providers that do not adapt and embrace technology, especially AI becoming content and data masters, will be left behind. Just as plan sponsors tasked with being a prudent expert outsource much of the work, advisors need to do the same.

Even the more tech savvy and wealth advisors face the same issues—when Venmo allows people to transfer money almost instantly, it makes even the most sophisticated financial advisor look bad. How about transferring money out of 401(k) plan to an IRA or to another plan that can take countless hours frustrating even the most diligent and knowledgeable participant?

The tech trends that financial service companies and advisors must be aware of and adapt to, according to Dani Fava, head of product innovation for Envestnet, at their recent advisor conference include:

  1. Data Personalization – People are willing to share their data if and only if they can get value in return. Offers made must be customized meeting or even anticipating their immediate needs.
  2. Strangers – People pay extra not to have to speak to strangers, which is why Uber now has the option for riders not to have to talk to drivers. How can the DC industry create better self-serve tech interfaces?
  3. Be Quick – People now have a shorter attention span than goldfish—measured at 8.25 seconds and prefer videos, which need to be 60 seconds or less, and infographics, over text. Which means people want one-page simple financial plans probably with graphics and personalized embedded videos. Dani advises, “Be quick and constant.”
  4. No More Gatekeepers – There is a democratization of information and access to services and products like fractional shares previously unavailable to the masses. 401(k) plans have brought Wall Street to the 97% of DC participants without access previously—how do we bring them scalable and affordable financial advice beyond IRA rollovers and target date funds?

So no, advisors are not competing against each other or record keepers for participants. They will be competing with ChatGPT, Amazon, TikTok and all the embedded financial apps in the technology they use today on their smart phones customized to them not just reacting to their immediate needs but actually anticipating them.

Expectations of DC participants, especially younger ones, are something all financial advisors struggle with, not to mention RPAs who must rely on record keepers built on 1990s technology to share data. And if Pontera can provide a path to client-permissioned DC account management, others will follow.

Who will lead?

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

TAGS: Technology
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