3 Areas of Focus for Future 401k Growth

Regulatory attention to investment fees seen as top industry risk

401k, financial, State Street, Fourth of JulyWe know where 401ks and finance have been, but where is it headed?

State Street’s gotten quite a bit of mileage from “Fearless Girl” recently, but here’s a bit of trivia to coincide with America’s birthday—the company is only 16 years younger than the country itself.

The second oldest financial institution in the U.S. (behind the Bank of New York, founded by some guy named Alexander Hamilton in 1784), State Street celebrated a spry 255 years with the release in late June of a detailed report that looks to the future of financial services, with implications specifically for 401k and similar retirement plans .

Titled A New Climate for Growth: Cultivating Asset Intelligence to Thrive, it outlines what it describes as “a new model for future growth that will allow industry participants to 1) compete at scale; 2) align technology with ambition, and 3) cultivate the power of asset intelligence.”

According to the study, two-thirds of the 500-plus global asset managers and asset owners surveyed believe it’s becoming more challenging to achieve growth in the current market environment.

Unsurprisingly given recent headlines, it found while 43 percent of North American respondents deem regulatory attention to investment fees as a top risk.

Globally, only a minority of respondents feel they have the right strategy, operating model and technology infrastructure in place to reach their full growth potential given these conditions.

“While digitization remains a priority in order to address growth concerns –with the understanding that it has the potential to streamline operations, create efficiencies, and optimize performance and risk management—institutions are struggling to keep pace as the rate of change accelerates, with only 43 percent stating they are adapting to technology quickly enough to support business growth needs.

Based on the research findings, State Street outlined areas on which financial services stakeholders should focus for future growth:

  1. Compete at scale:
  • Consolidate to compete on cost and capability
  • Outsource to focus on differentiation
  • Co-invest to access new opportunities
  1. Align technology with ambition:
  • Acquire to onboard innovation
  • Integrate systems for a unified view of performance and risk
  • Expand distribution with mobile and robo
  1. Cultivate the power of asset intelligence:
  • Marry advanced digital intelligence with human experience and insights
  • Build new employee skill sets
  • Embed a culture of doing things differently

“We believe the financial industry is at of the beginning of a new, digital era,” Jeff Conway, chief executive officer of State Street, said in a statement. “In a world where data is the new currency, assets backed by intelligence will change how institutions will deliver on their investment objectives and risk management needs.”

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