While workplace retirement plans are the only source of invested assets for the majority of Americans, most plans are still delivered on recordkeeping technology built before the Internet even existed.
It makes efficiency and scale near impossible, a recent session at the Excel 401(k) 2020 Digital Series noted, especially in certain market segments.
“By transforming the underlying architecture of recordkeeping, advisors are finally able to pull themselves from non-value-added activities to focus on the more qualitative aspects of plan management,” Tony Fiore, Senior Vice President DCIO Sales, PGIM Investments, said at the discussion’s outset. “This future state also opens up the doors to everything from wellness and managed accounts, to next best dollar allocation, guaranteed income, and more all under one ecosystem.”
Fiore was joined by Troy Hammond, President and CEO of Pensionmark, and Aaron Schumm, Founder and CEO of Vestwell.
“We know advisors want to be more efficient while providing great service to their clients, how are you leveraging technology to accomplish this,” he began.
Non-revenue generating activity is a sticking point, Hammond answered, and advisors are “knocking the pins down and getting our work done.”
Noting that he was a computer science major in college, he came into the industry with a direction toward efficiency and technology.
“We used to have a room with about 10 people in it that would make phone calls to trade participant accounts,” Hammond explained. “They would turn in change forms to us and we would actually pick up the phone and call the mutual fund families and make the trades on a quarterly basis. How inefficient is that? How much room for error is that?”
Fast-forward to today, and technology has now made Pensionmark “massively scalable” and is able to be centralized to provide support to advisors.
Adding that aggregation in the industry is “the name of the game in our industry and most advisors, if they haven’t joined an aggregator are thinking about it, leveraging the technology and centralized support model.”
He listed the firm’s 70 advisor locations, 300 advisors and staff, 4500 institutional clients, and hundreds of thousands of individuals.
“How in the world could we do that in the old days of sitting in a room, picking up the phone and moving money around? We have to rely on technology, especially with non-revenue-generating activities, to take it off the advisor’s plate.”
Pre-Internet problems
Recordkeeping technology hasn’t changed in decades, Fiore argued and asked Schumm if advisors and consultants should be thinking about recordkeeping technology.
Reiterating that it’s a non-revenue generating aspect of the business and a cost component, he said from a tech aspect, recordkeeping was built pre-Internet.
“You can reskin it and pretty it up, but on the backside of it, you’re still dealing with a lot of manual aspects that increase the cost to serve that don’t allow the advisors to engage at the level they want or the experience the sponsors and participants expect,” Schumm said.
Although advisors should care about recordkeeping, “ultimately people shouldn’t care about recordkeeping, and recordkeeping shouldn’t matter. We’re tried to create a platform that is recordkeeping, but recordkeeping-less. We want Troy and his team to be able to do want they do best and we want PGIM to do want they do best and we want the advisors to be out there doing what they do best. How do we bring that forward in a tech-centric way without creating that operational burden behind the scenes that ultimately someone is going to pay for? If you can do that you create a baseline for everyone to take it to the next level.”
More from the Excel 401(k) 2020 Digital Series:
- Convincing Plan Sponsors of the Value of Financial Wellness
- How to ‘Excel’ at Digital Client Meetings
- Scaramucci Speaks, Stout Named 2020 TAPO Honoree
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
