Better Outcomes Through Better Websites?

Recordkeepers and other retirement plan service providers aren’t meeting client demand for online tools and reporting technologies shown to improve outcomes and ease administrative burdens.

That’s the conclusion drawn by Julia Binder, director of e-business research at the financial services consulting firm kasina, in two new white papers. Binder’s research examines both the participant-facing and sponsor-facing Web capabilities of a list of well-known providers. She tells PLANADVISER that, with a few notable exceptions, the majority of companies her firm examined could do substantially more with current technology to support both sponsors and participants.

And it's not just the latest data mining and visualization capabilities being skipped over by many providers, Binder says. Most defined contribution (DC) plan sponsor websites still have much room for improvement even in basic functionality to help fiduciaries analyze their plans and take action to improve them. And on the participant-facing side, the ubiquitous use of Internet devices and online information among all segments of the working population supports far greater use of interactive websites, social media and mobile applications for targeted communication and education.

“We’re hitting a point where user expectations, from the sponsors and the participants, is hitting a very high level for these types of technology-based experiences,” Binder says. “And at the same time, recordkeepers have access to more data than ever before, about the plan participants, about the participation rates and historic market data and everything going on in a plan.”

That should be the perfect formula for providers to add more digital capabilities into their retirement plan services, Binder says, but apart from a few notable leaders, many companies are lagging behind. She points to the example of data visualization technology to demonstrate the point.

In basic terms, data visualization tools help a sponsor or adviser pick out and analyze both positive and negative patterns in retirement plan usage among specific subsets of employee populations, such as inappropriate equity allocations per a participant’s specified risk tolerance or investing time horizon. Sponsors and advisers can also diagnose participants’ investing behaviors across metrics such as age, salary, geography, years of service, business line and employee role, among others. 

The most advanced technologies can automatically turn this data into easy-to-grasp, visually oriented reports. In an ideal plan, Binder says, data would be coming into the data visualization tools directly from the recordkeeper, asset custodians, and others in the investment chain in real time, giving fiduciaries a deeper appreciation for what’s happening in their plan. And by making the data and reporting available through sponsor and participant websites, providers could ensure it would be put to good use.

“That’s one of the factors that sets apart the top performers in our study,” Binder explains. “We’ve seen that Putnam Investments does this, and JP Morgan does this, and Vanguard to some extent. What you have at the top providers are tools that can quickly produce highly informative snapshots of different aspects of the plan.”

“For example, you would be able to look across the different age ranges in the plan and see where the clusters are of participants who are investing in different vehicles,” Binder says. “That could alert you to the fact that you have a large cluster of younger plan participants, say under 30, who are invested in a single bond fund, thereby missing out on the opportunity to increase their savings significantly through a more aggressive or diversified investment strategy.”

Binder says that, for sponsors and advisers, being able to use data mining tools to zero in on very particular participant insights is really attractive.  Once the trends are recognized, it becomes much easier for fiduciaries to plan what types of messages to send to different groups of participants. And, she says, participants seem to value messaging that is clearly directed towards their unique investing and savings outlook.

“The next step then would be to isolate the names of those participants that are inappropriately allocated and contact them,” she explains. “You can use the data to provide specific guidance and suggestions, that’s a key part of the plan sponsor’s role.”

In her reports, Binder is fairly scathing in her review of the recordkeeping industry at large. In analyzing 15 recordkeepers’ Web presence on three factors—availability, quality, and user experience—she gives scores averaging in the 60s for participant sites and the 50s for sponsor sites, out of a possible 100.

Binder says the poor results were not exactly surprising—as this is the fourth edition of her research, and retirement plan service providers are not exactly known as technology innovators compared with other industries. But she expects providers will continue to face mounting pressure to improve their offerings.

“This is very action-oriented business intelligence that we’re talking about,” she says. “You see where there is a gap or a shortfall or an opportunity to remedy a problem, and then you want to do something about it. You can’t do that as easily just looking at the spreadsheets, it’s something where the visualization and mining technology is really essential. And it’s there. The technology is ready, but it’s still something that recordkeepers need to make an effort to take advantage of.”