PA: How do you see defined contribution [DC] plans evolving in the future?
Joe Ready: We’ve seen many great evolutions in retirement plans, the most recent being automation. Now we have auto-plans where we auto-enroll, auto-save, auto-invest. But largely these have been one size fits all. I think technology, the regulatory environment and regulatory changes, as well as the concept of “big data,” will drive another evolution—one more personalized and relevant to not only the accumulation but also the decumulation and risk-management side of the equation. It’ll focus on the four categories of participants as they progress through their retirement journey: early savers; those in mid-career with aging parents, kids in college: “How do I find more money to save?”; the near-retirees, who have way different needs; and the “living in” phase of retirement. There’s real opportunity to take people from Day One on the job all the way through retirement, and I think you’ll see services and products evolve that cater to each segment individually.
PA: How will technology play a role in the evolution?
Ready: If you inventory your plan against the four phases—whether in terms of plan design or investment services—and consider how you communicate with each and offer education and advice, you’ll see that much of it caters to early savers and mid-careers. There’s opportunity to evolve your plan toward near-retirees and retirees, to offer more plan information addressing where they’re at in their journey, so they have a better outcome.
PA: How is Wells Fargo using innovation to help both plan sponsors and participants with their retirement challenges?
Ready: We think innovation for sponsors and participants is about guiding them to the next best step they can take to drive a better outcome. At a sponsor level, it’s about presenting, through technology, real-time modeling, letting them do “what if” scenarios—“What if we add this plan design feature, what outcome might we expect? What might be the impact to participants in terms of savings rate, diversification, etc.?”—that can predict how something might improve overall plan health and utilization.
For participants, it’s how do I engage them at a personal level, make an emotional connection by leveraging technology? For example, is it a mobile alert that recognizes a birthday or a salary-increase date to get them to take that next best step? For near-retirees, it might be looking at their asset allocation as they enter their final accumulation phase, giving them investment ideas that helps them think through how to preserve principal.
PA: Are plan sponsors and participants showing interest in the technology?
Ready: People want value-added information, not just in terms of “Here is information and education” but “What’s my next best relevant step? How can I improve my outcome?” For example, with our Easy Enroll campaign, we personalized the message, engaged them at an emotional level and, most importantly, gave them a simple process—basically, by one click, they had an action go through and get executed. That really worked and resonated with them. That tells me there is definite interest in using the technology.
PA: What technology trends do you see on the horizon?
Ready: I think one of the biggest trends will be in how we use big data. We’ve learned a lot about individuals beyond just their age, gender and savings rate. We’ve learned about their preferences, and how they want to interface and interact with us, how they want to access different channels. We’ve learned about their spending habits and where we might help them find more money to save, versus just sending them a message saying to save more. We can leverage technology to drive that personalized, emotional connection to the next best step they can take and do that through different channels. In the mobile space, for example, we’ve just introduced quick enroll. Through receiving a text message, they just click on the link and enroll in a plan. We’ve gotten tremendous adoption, because they didn’t have to go through a five-step process, remember their user ID and password. That’s one example of how we’ll use technology to engage and empower. There’s much more we can do along those lines to improve the participant’s overall financial wellness and outcome.
PA: How is Wells Fargo broadly positioned to support innovation in the future?
Ready: Most middle-class Americans are saving for retirement. Outside of their home, their defined contribution 401(k) plan is their largest asset. We’re well-positioned to help them save through looking at both the asset and liability side of their financial equation. It’s not just about accumulation because if you go into retirement with all the right saving habits, but twice the amount of debt, you might not have the best outcome. So by leveraging the power of the broader Wells Fargo, we can help with their complete financial picture so that when they go into retirement, they’re financially fit.