In recent years, retirement plan record keepers have been forced to sit on the sidelines while most financial services firms reaped the business benefits of full-blown digital rejuvenation efforts. Record keepers simply had no funding for these investments. Over the last five to six years, retirement recordkeeping organizations have been increasingly constrained by inflexible legacy technology platforms and the need to continually cut cost per participant (CPP) as fee revenue decreases.
Meanwhile, the pace of regulatory changes (such as the SECURE Act and the CARES Act) has accelerated, driving the need for greater operational flexibility. Record keepers are challenged to provide holistic advice and self-service capabilities to plan participants, as well as offering plan sponsors capabilities such as seamless approvals, processing of participant files for plan onboarding, eligibility checks, contribution assessments and other data needs. Without digital technologies to enable flexible and cost-effective new capabilities, record keepers risk losing business. Something has to give.
Record keepers need digital technology to help them balance these imperatives while holding down CPP. The good news: CPP can be brought down significantly at the same time record keepers enable the improved capabilities plan sponsors and participants expect. The choice is not and should not be one vs. the other.
Six engagements that delivered lower cost while driving business goals
Retirement providers do not have to forgo the benefits brought by digital due to cost considerations. It is possible to optimize both sides of this equation, if you tackle one area at a time.
Small changes add up to big benefits, as results from six of our recent client engagements reveal.
- We helped a retirement provider grow new business and participation for 15% to 20% of its plan base through the introduction of self-service capabilities. The project included implementation of digital business rules that helped plan participants participate and contribute to their retirement plans. The project reduced the load on the provider’s core recordkeeping platform and reduced servicing CPP.
- Another retirement provider migrated to a digital recordkeeping platform with revamped operating model and processes, reducing CPP servicing cost by a reported 25% while also offering plan participants the ability to seek advice and recommendations by engaging with plan advisors online.
- A recent engagement focused on implementing a digital contact center, which reduced the volume of information-only calls by an estimated 15% and provided tools to service reps for efficiently handling and addressing participant transaction requests. Categorizing calls to information-only and transactional calls helped triage and offer self-serve tools. DEVI Installing the chatbot supported the reduction in call volume while improving customer experience by offering 24x7 service. Overall, the project reduced the call-handling time by more than a minute.
- An insurance provider was seeking digital engagement with plan participants through videos and similar tools to provide plan education to help them make more informed choices. This resulted in a 10% to 12% increase in client retention, according to the client, while reducing support calls. The digital tools had a higher Net Promoter Score (NPS) than traditional communications as these helped the participants engage and understand their goals and plan offerings.
- A record keeper was looking to do further workflow automation to improve the efficiency of its servicing team, and to enable transparency in tracking and reporting transaction status for all stakeholders. The project helped reduced the client’s CPP via process optimization driven by usage of bots.
- We enabled automated advice in another engagement, helping to improve the participant’s financial readiness via digital tools that gauged and tracked participants’ readiness for retirement. Features included peer analysis and the ability to seek advice to improve financial wellness with virtual capabilities to improve communication with plan participants.
An incremental approach to transformation
In our experience working with clients in the retirement industry, we have seen “big bang” projects fail as there is no easy way to correct the course once underway. An incremental approach to transitioning from a legacy to a digital environment allows for the creation of better services and capabilities without significantly raising the CPP. We align with the four pathways for digital transformation suggested by the MIT Center for Information Systems Research (CISR). We also espouse a “fail fast and learn fast” approach aligned with Agile principles, which helps in transformation execution.
The engagement begins with an assessment, which helps identify and map the record keeper’s capability adoption and transformational ability and identify a digital pathway to achieving its goals.
In our experience, record keepers should work first on the business capabilities that will best serve their organization. For example, in a recent engagement we started with an assessment of our client’s transactional capabilities (such as making loans, withdrawals or terminations), but quickly discovered a larger benefit was within reach if the top priority was to focus on new business (including front-sales capabilities and the addition of new services). We helped the company put together a business capability model-based assessment (see graphic) that helped it identify the areas in its value chain that most needed help.