AI Tech to Spot Fiduciary Risks in Coming Years
Artificial intelligence (AI) technology has been celebrated for minimizing administrative tasks, streamlining workplace benefits, and now, potentially helping companies identify fiduciary risk.
Research from Transamerica, the “Prescience 2030” report, finds that two-thirds of industry experts believe AI could recognize fiduciary risks for plan sponsors earlier than other methods.
“AI can help flag patterns that may indicate fiduciary risk, including unusual fund performance, hidden or inconsistent fees, administrative irregularities, and potential cybersecurity issues,” says Jodi L. Green, an ERISA and Employee Benefits attorney with Tatum Hillman & Powell, LLP, to 401(k) Specialist. Green also served as a respondent to Transamerica’s study. “It serves as an early indicator that something may require closer review, but it remains the committee’s responsibility to confirm and act on any findings.”
The study, which surveyed 50 retirement and financial wellbeing industry experts, forecasts that by 2030, AI will heavily influence retirement and financial wellbeing spaces with hyper personalized guidance, plan design, and employer competition. Ninety-four respondents to the survey reported anticipating the use of AI-generated content in retirement plan platforms in years ahead.
The technology will also be able to analyze behaviors on loan activity and retirement plan withdrawals, nudge participants on their budgeting and emergency savings goals, restructure plan design with real-time benchmarking, and influence investment decisions by applying market trend analysis and participant data, experts say.
Experts fluctuate on the value of “do-it-for-me” solutions with AI technology, as employees already rely on automated engagement tools rather than traditional financial education, Transamerica finds.
Outside of personalization tactics, AI’s capabilities could potentially spot fiduciary risks before they’re made, say experts. This could possibly reduce exposure to ERISA litigation, which has seen a steady rise in class action lawsuits ranging from excessive fees, plan forfeitures, investment selection, and prohibited transactions.
Despite its possible assistance, employers caution employers to avoid using the technology as a substitution for regular plan maintenance and oversight.
“Retirement plan leaders are approaching AI with a focus on practicality. They see AI as a way to support fiduciary oversight, not replace it,” Green added. “Committees are using AI tools to validate results and document how decisions are made. The aim is to use AI to strengthen their existing processes while supporting human judgment.”
Aside from AI implementation, experts identified additional strategies and trends they expect to see in the years ahead. This includes interconnecting health savings accounts (HSAs), emergency funds, and student loan assistance with financial wellness, and the expansion of private market options, collective investment trusts (CITs), and lifetime income solutions in investment menus.
Additional details on Transamerica’s “Prescience 2030” report can be found here.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
