PLANADVISER Recordkeeper Services Guide


Keeping Up With the Intermediaries

Recordkeepers stay in step with demands of advisers and other plan distribution channels.

As seems to be the case everywhere, for the recordkeeping industry, the most significant area of development is data analytics. This is not just “big data,” says Jeff Acheson, divisional president of Independent Financial Partners (IFP) Plan Advisers in Tampa, Florida, but “good data.”

“Smart recordkeepers are analyzing the data they have on retirement plans and participants to be able to tell sponsors about the health of their retirement plan and to target those participants who need help,” Acheson says. “The information can be very instructive on whether a company should turn to automatic enrollment or escalation.”

Such analysis is “critically important,” he continues. “The recordkeepers have the data. They are in the best position to provide business intelligence that helps improve outcomes.”

Advancements in data analytics “allow us to provide plans [that are] designed for a specific plan sponsor and work force, not just an ‘in-the-box’ solution,” says Pat Murphy, CEO of John Hancock Retirement Plan Services in Boston. “Tailoring our services for sponsors is easier because of data analytics. The conversation is turning to what adds value for the customer.”

For instance, when recommending automatic solutions, John Hancock suggests different approaches, depending on the industry. “If it is a retail company with high turnover, where many people leave after only three to six months, we will have a conversation with the plan sponsor to help it understand when is the right time to automatically enroll participants, and then develop an approach that meets the needs of that customer,” he says. “For a retail company, perhaps it’s best to wait two to three years before automatically enrolling a participant, because he has indicated he wants to stay [at the company]—whereas at a manufacturing plant or a law firm, the best approach is to enroll participants immediately.”

In addition, John Hancock is starting to recommend “different deferral rates depending on the demographics of the employee, such as [the person’s] salary, tenure and gender, rather than just autoenrolling everyone at a 6% deferral rate,” Murphy adds. “Maybe younger employees carrying student loan debt should be automatically enrolled at 1% so they can focus on solving that problem.”

Technology Integration
Investment in data analytics provides not just results but ways for advisers, plan sponsors and participants to use them. “As the world has become more digital, major recordkeepers are investing in digital to deliver personalized solutions, starting with the use of a person’s name in communications and understanding that person and where he is on his journey to retirement,” says Amy Vaillancourt, senior vice president of client relationship management, small/ mid corporate markets, at Voya in Windsor, Connecticut.

For example, Voya provides personalized videos for participants. “We find more and more that video is a great way to reach participants, particularly younger people,” Vaillancourt says.

Jason Grantz, director of institutional retirement consultants at Unified Trust Co. in Lexington, Kentucky, says the retirement calculators that recordkeepers now offer “are more intuitive than the ones previously offered. They ask participants for a set of data, and that will algorithmically lead them to a set of questions tailored to their specific situation.”

Whereas in the past five years only a handful of recordkeepers offered mobile apps for participants, today these are far more common. “Most of the recordkeepers now have mobile-based apps,” says Janet Ganong, a partner and retirement plan consultant with The Kieck-hefer Group in Brookfield, Wisconsin. “That is really where the participant is connecting with the recordkeeper to do basic functions, such as looking at his balance and transaction history. Very few [apps] allow for transactions, due to security concerns.”

However, Voya’s mobile apps do allow participants to make transactions, Vaillancourt says.

Grantz agrees that “recordkeepers that are going to remain in business must offer digital apps and continue to develop new [ones].”

Financial wellness is also sometimes being included as part of an integrated package from recordkeepers. “Recordkeepers are providing more bells and whistles associated with financial wellness, such as calculators participants can use to make sure they are on track for a successful retirement,” Ganong says.

Voya has incorporated its financial wellness platform into its digital platform, and it allows participants to look at their entire financial life holistically, including budgeting, emergency savings, retirement and saving for other goals, Vaillancourt says.

Investment Accommodations
Recordkeepers continue to evolve their investment offerings as well. Whereas in the past, the majority offered only a limited number of investments, many today have open architecture platforms that permit a retirement plan adviser to select the best funds for a particular plan from the entire universe of mutual funds, says Jason Lumpkin, a shareholder with Schneider Downs & Co. Inc. in Pittsburgh.

“Recordkeepers are pushing their own target-date funds [TDFs] less than they used to, and open architecture is becoming more common,” agrees James Sullivan, vice president at Essex Financial in Essex, Connecticut.

In addition, many recordkeepers are offering collective investment trusts (CITs), which have lower fees, as well as platforms that allow advisers to build model portfolios, or managed accounts with more customized features, including downside protection, Acheson says.

“Many recordkeepers are considering being able to support lifetime income products,” says Tim Slavin, senior vice president, retirement, at Broadridge in New York City. “Many show participants on their statements how their balances will turn into projected lifetime income, and the natural next step is to offer annuities. I think you are going to see them offered from day one, rather than when a participant reaches his 50s. You’re seeing a lot of the larger insurance firms going down that route.”

As far as lifetime income products are concerned, John Hancock Retirement Plan Services has a group annuity platform that it offers to both defined benefit (DB) and defined contribution (DC) plans, Murphy says. The firm is also working on the next generation of managed accounts that will turn balances into lifetime income; these will be rolled out later this year, he says.

In addition, Voya, like a number of insurers, launched a lifetime income product following the Great Recession, Vaillancourt says.

Platforms will continue to evolve, as a requirement for surviving in such a competitive industry. “I have been in this business for 22 years, and I don’t remember a time when the competition has been as steep as it is,” Grantz says. “It has become harder to get a client to transition a plan from one recordkeeper to another. I expect that, due to consolidation and fee compression, within a few years, midsize recordkeepers will exit the business, and we will see a smaller number of ‘super recordkeepers’ with huge numbers of plans on their books.”

The industry is “extremely competitive,” Slavin agrees. “A lot of firms are doing roll ups and purchases. Large firms are getting larger. Technology is key when you’re in the recordkeeping business. Those investing heavily in technology will be the winners.” —Lee Barney

Art by Suharu Ogawa

Art by Suharu Ogawa