5 tech trends that will shape the retirement plan industry in 2022

The pandemic has impacted tech adoption around the world and across sectors. Like all other industries, retirement planning is being reshaped by new technologies and the transformative opportunities they present.

Retirement plan providers that see the pandemic as an opportunity to enhance their systems and adopt a cloud-first strategy to offer their stakeholders an end-to-end digital experience will be more competitive than their peers. The sooner the plan providers adopt technology, the greater the advantage.

There are several ways in which tech can be used in the retirement planning industry. Here are a few emerging trends that we expect to see in 2022.

1. Improved recordkeeping technology

Across the industry, margins are tightening for businesses of all sizes. One reason is outdated recordkeeping technology, which leads to administrative issues, higher costs, and inflexible plan design. 

Over 90% of enterprises using legacy recordkeeping technology systems believe that their monolithic applications are a significant impediment to achieving IT effectiveness and driving business outcomes. The underlying value of high-quality recordkeeping tech is inarguable. With the increase in record system interactivity, advanced analytics can identify the path to improved outcomes.

2. Adoption of robo-advisors

As a result of unprecedented digital literacy and retirement planning awareness, the virtual retirement coach, or robo-advisor, is rapidly gaining popularity. More than 70% of respondents to an Accenture study wanted more education about their retirement planning, and 46% would like to use a digital retirement coach - however, only 11% have been offered one. 

Robo-advisors are automated online services that use computer algorithms to provide financial advice and manage customers' investment portfolios to provide people access to the data they need to make smart retirement plans at a meager cost. Their algorithms can advise users on how much to save, when to claim Social Security, how to plan decumulation and lifelong income, and much more.

Decumulation can often be an emotional process, as individuals sell homes and assets accumulated over the years. With a robo-advisor, the emotion is eliminated, resulting in more objective financial decisions.

3. Easier delivery of personalized solutions

Today's retirement plans use machine learning (ML) to model essential information about each individual's finances and leverage artificial intelligence (AI) to transform these insights into a series of recommended actions. This results in the creation of custom strategies that work better based on the rules of behavioral finance.

This kind of personalization and personalized advice, and fund management are something that most participants greatly value, partly because our financial lives are becoming increasingly complex. Plan participants also demand personalized communication and other services. Providers can transform into trusted coaches and financial partners by delivering on this expectation.

4. Holistic one-window visualization

Visualization of one's finances is easier when all financial accounts are consolidated in one place. There is a demand in the market for a one-window solution through which users can understand their entire financial position. This kind of consolidation improves comprehension and aids in decision-making.

Another way to better visualize one's finances is through extended reality. Augmented reality and virtual reality visuals can be highly engaging and intuitively understandable. Using these immersive experiential technologies allows clients to explore and simulate various scenarios, making visualization and planning easier. 

5. Even greater adoption of digital communication

Retirement planners have always depended on face-to-face meetings for lead generation and client interaction. However, the pandemic has accelerated the move to hybrid engagement, and advisors have begun using digital solutions for communication.

Beyond converting prospects to clients, advisors also rely on digital media to interact with and engage their clients. Scalable, relevant, personalized, educative online communication is key here.

While current usage is low, respondents expressed interest in using webinars, mobile apps, mobile alerts and web chats to learn more and receive information. However, only 30% consider their providers/advisors effective in using emerging tech to improve their services.

While there is a solid case to be made for adopting a hybrid approach, proceed with caution! Fintech firms have high client acquisition costs because each segment of their audience – different groups by age, gender, and culture – have different needs. A broad-based solution and solves as many problems as possible is more likely to succeed.

Gathering data for a financial services company naturally comes with regulatory and security priorities. During development, ensure that strong privacy and cybersecurity protections are implemented.

The article is authored by Sagar Shankaranarayanan, AVP, Product Management, Congruent Solutions