Investment Automation Benefits Participants and Advisers

Plan advisers seeking to help participants make suitable investment decisions and execute those decisions efficiently over time often turn to automated solutions.

By Noel Couch | April 28, 2015
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Providing a cost-efficient and customizable approach to client service, automated investment solutions can act as a powerful mechanism for advisers to improve practice performance and client satisfaction.

When built over a well-constructed core investment menu, automated solutions can enhance flexibility, transparency and control for advisers, explains Jeremy Hersch, vice president, head of asset-allocation services at Transamerica Retirement Solutions.

“In addition, many advisers use automated investment solutions as a vehicle to grow and differentiate their practice,” Hersch explains, noting that automated tools offer critical efficiency when selecting and maintaining investments for large groups of plan participants. Such efficiency allows smaller advisory firms to punch above their weight, he notes, while larger advisories can free up staff to focus more on sales or client relationships.

Advisers are also better off using technology to streamline investment functions because they are presented with the opportunity to focus more on things like plan design and participant communications. Participants benefit from these automations as well, Hersch notes, and not just because automation reduces the amount of time and effort required for successful outcomes. The market’s leading tools drive helpful diversification and timely rebalancing, and can cut down on the likelihood that participants will engage in problematic trading or other damaging behaviors.  

“Automated investment solutions simplify the process for participants, giving them confidence in what is otherwise an intimidating situation,” says Hersch. “With regular and transparent reporting, automated solutions also create awareness of each individual’s investment stance at any point in time, and reassurance that they’re following a sound investment approach.”

The main challenge posed by automated solutions is to understand the quality and capabilities of the services offered by different providers, Hersch continues. A big part of this is evaluating the extent to which each provider can meet the specific needs and goals of the plan adviser and his unique plan sponsor and participant clients (see “Adviser Tech Seems at Once Peaceful and Threatening”).