By Steve McCoy, CEO of iJoin and Alan Gross, President of GSM Marketing
The one constant we know about the retirement plan industry is that change is always around the corner. How we anticipate it, plan for it, and execute against it affect the fortunes of firms large and small.
Every year brings its own challenges to the status quo. Some years bring particularly impactful regulatory changes like the passage of the SECURE Act. Some years bring sea changes in what we expect of technology and how we deliver excellence to our customers. Some changes create great opportunity while others impose new operational and financial burdens – not to mention risk.
As we close the book on 2021, we thought we’d dust off our crystal ball for a moment and share our perspective about the things we believe will have an outsized impact on growth and competitiveness next year. So, let’s go.
Gravity: Rocks will Keep Rolling Down Hill
Well, it doesn’t exactly take a crystal ball to predict that merger and acquisition activity among recordkeepers, TPAs, and advisors will continue in 2022. If anything, the pace may quicken as more players struggle to rationalize the investment needed to meet ever-expanding cybersecurity requirements, achieve the cost efficiencies that come with scale, build or maintain a national distribution network, or be technologically nimble enough to adapt and deliver new products and services. Observing this evolving reality seems more like watching rocks rolling downhill than making new predictions, but we can be confident these stresses will continue to impact business models large and small.
Managed Accounts Will Take Center Stage
In nearly every participant survey you read, a significant majority of people say they would welcome help in choosing and managing their investments, but most have never seen a “manage-it-for-me” option in their retirement plan. For too long Managed Account Programs have been expensive and inflexible. The work iJoin and others are doing is dramatically reducing delivery costs while rapidly expanding customer choice among investment methodologies, employee engagement, and coaching services. The equation is tilting in favor of these new lean, advisor managed account programs that are democratizing access to professional advice and represents a real opportunity to differentiate. 2022 will be the year Managed Account Programs become broadly available with personalization and competitive costs to challenge for the QDIA slot in plan investment lineups.
Deep Personalization is No Longer an Aspiration. It’s a Requirement.
Industry leaders agree that an evolved participant experience presents individualized enrollment, advice, education, and wellness offerings tied to the user’s unique story, situation, and path. Some refer to this as “hyper” personalized. With access to deep, real-time data, you can present a true goals-based savings model, managed account program, and suggest specific optimizations to help people succeed. Without this access, organizations are left generalizing or engaging based on incomplete or stale information. In 2022, firms and technologies that deploy nimble, modern architectures to connect and share data will be better able to deliver truly personalized experiences and will separate and accelerate from the pack as they differentiate by their ability to deliver value to employers and employees.
In 2022, deep personalization of the participant experience is no longer an aspiration. Either you deliver it or you risk getting left behind.
Group Plans Reach New Audiences. Finally?
Scale matters, but only if it helps you drive outcomes. In 2022, cost efficiencies via scale through automation, plan design (MEPS, PEPs, and other group plan arrangements) will be tested in new ways. The differentiator and success driver will be the extent to which these investments expand coverage opportunities and drive better outcomes.
Many SECURE Act-inspired MEPs, PEPs, and other group plan arrangements will come online in 2022. Those that come to market to reach the tens of millions of workers without a workplace retirement savings plan today will be the real disruptors and will enjoy the fastest opportunity in recent history to gain significant market share and reshape the future of the industry. Their work will be fueled by modern technology architectures, data-enabled personalization, and highly efficient investment management programs. Those who sponsor PEPs largely to convince existing individual sponsors to join group plans, will likely see short-term benefits as the equilibrium of their overall coverage picture remains much the same.
Guaranteed Retirement Income Becomes a Natural Extension of the Participant Experience.
401(k) and other defined contribution plans have long focused on the accumulation years of working people and left concerns about protecting retirement income to others. While annuity products are anything but new, the market’s consciousness about the benefits of de-risking individual investor portfolios to create guaranteed income streams in retirement is growing. In 2022, we expect to see rapid growth in a technology-enabled marketplace to make offering such products more transparent, cost-effective, and more broadly available to advisors and their clients.
2022 will be a year to drive — or — be driven by others. The key is to be crystal clear (pun intended) about how you deliver value to your partners and customers. We believe recordkeepers, advisors, and investment managers who lead in this new wave will enjoy an outsized opportunity to gain market share and solidify their future.
All of us at iJoin wish you great success in the year ahead. Make it your best ever.
Steve McCoy is CEO of iJoin; Alan Gross is President of GSM Marketing