What's Ahead for Institutional Retirement Plan Providers
Welcome to our inaugural edition of Partnering for Growth.
Today, we're taking a quick look at three trends prompting many institutional retirement plan providers to rethink how their operating models can better serve their overall businesses as they look to 2025 and beyond.
Three key trends shaping the future of institutional retirement plan providers
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Pace and pressure of legislative and regulatory changes
Staying up-to-date and compliant with ever-evolving legislative and regulatory actions can add to the cost and complexity of offering retirement plan solutions - compromising potential direct and indirect revenue.
SECURE Act 2.0 and state mandates, both of which focus on expanding retirement plan coverage, are expected to drive a wave of new small to midsize businesses to the retirement plan market. The increase in volume may mean more revenue, but only if the recordkeeping technology can efficiently and effectively keep up. For many institutional retirement plan providers, it’s simply out of the realm of budgets - including critical specialized expertise - to allocate in-house resources to accommodate both potential sales volume and service and operations requirements.
For these and other reasons, institutional retirement plan providers are increasingly moving towards partnerships made possible through technology innovations applied strategically to retirement plans. Generative AI is more than just a buzz phrase. When applied to retirement plan operations, it can automatically prioritize, resolve, and escalate customer inquiries resulting in more rapid resolution of issues and freeing client service representatives to focus on more complex tasks and key relationships. This integration of AI is essential as it complements traditional systems development, ensuring that providers can keep up with the growing market demands.
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Digital experience as a driver of participant outcomes
The bar for seamless digital experiences is high and client tolerance for manual or delayed experiences is increasingly low. While much of this pressure is coming from tech-savvy plan participants who expect the same ease of engagement they routinely receive elsewhere in their lives, intuitive experiences are just as critical to gain and retain non-tech savvy savers.
The most successful retirement plan providers will be those that meet participants where they are in their retirement journey. This includes experiences that enable savers to view their retirement outlooks as holistically and realistically as possible.
Shifts in consumer attitudes about sharing data are a catalyst in driving this trend forward. A recent study by Cerulli that looked across different generations of 401(k) participants found that younger age groups were more open to sharing personal data than older ones. When combined with predictive analytics, this shift could deepen our understanding of plan participant behaviors and preferences and help to drive even more customized tools and communications to help more savers save more. However, not all firms are equipped to capitalize on this trend with a view to the future state of retirement planning. Organizations without the resources and expertise to invest in retirement-focused data and predictive analytics effectively, will have a harder time gaining and servicing new participants.
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Industry consolidation offers challenges – and opportunities
Not surprisingly, when faced with challenges across the retirement plan experience, some institutional retirement plan providers are looking at this need for increased specialization at scale as a critical business juncture. The decision becomes whether to modernize (and maintain) to meet the requirements and expectations of an evolving industry that is not their core competency or to entrust some (or all) of their clients’ retirement plan experience to a retirement plan specialist.
The second option, a partnership, can be explored through a new lens of flexible, technology-enabled models – freeing capital and resources to focus on more strategically opportune business relationships and objectives. Factors driving this decision include the desire to:
- Redeploy resources and capital to strategic non-retirement businesses
- Leverage a third-party’s retirement-focused cybersecurity capabilities to stay current
- Deliver competitive digital experiences to retirement plan advisors, clients, and savers
To learn more about the value of recordkeeping in the retirement plan value chain and how a strategic growth partnership can deliver operational efficiencies and other benefits, click here for a copy of our recent Insights piece Rethinking Outsourcing: The Value of Tech-Enabled, Strategic Growth Partnerships and visit our Institutional Partnerships page.
