It’s been said before and bears repeating (a lot)—participant data is important, useful, and incredibly profitable if used right.
New research from Cerulli Associates illustrates just how true that is.
“Plan sponsors and providers are capitalizing, [and]dedicating significant resources to helping participants address their financial situations more holistically …”
Defined contribution (DC) recordkeepers have access to more participant data than ever before, Cerulli notes. By leveraging this data, providers and fiduciaries can make more informed decisions that not only resonate with participants but also address their broader financial needs beyond saving for retirement.
“Retirement providers are uniquely positioned to help participants with recommendations beyond saving for retirement,” according to the report, U.S. Retirement Markets 2021: Solidifying Relationships with Plan Sponsors and Participants.
It shows the majority of participants consider their retirement provider to be at least a somewhat trustworthy source of advice (40% consider their retirement plan provider very trustworthy), suggesting participants may be comfortable giving their retirement plan providers a greater presence in their financial lives, rather than vet alternative providers.
“Since participants already have their DC assets with their recordkeeper, they may view their recordkeeper as a path of least resistance for their other financial needs and may appreciate the simplicity that comes with having many or all of their saving accounts, products, and advisory services through one financial institution,” Shawn O’Brien, Cerulli senior analyst, said in a statement.
Plan sponsors and providers are capitalizing on the opportunity, dedicating significant resources to helping participants address their financial situations more holistically, providing solutions for their “next dollar” problems.
This includes addressing financial planning subjects, such as budgeting, debt management, and short-term saving objectives. Providers must gather a variety of participant-level data points to piece together comprehensive financial profiles of the participants on their platforms and deliver effective, actionable guidance that is tailored to the financial circumstances of the participant.
Cerulli recommends recordkeepers use participant engagements, both virtual and phone-based, as opportunities to further build participant profiles.
Within this context, providers can ask thoughtful questions about participants’ financial concerns and goals, and recent life changes to update their existing profiles. Answers to these questions also prompt opportunities for providers to raise awareness of potentially useful products or services in real-time.
“With more accurate and complete participant profiles, providers can make participants aware of investment products, savings accounts and services that are likely to address their needs at that point in their life, further integrating themselves into the financial lives of their participants,” O’Brien concludes. “Providers should strive to make these engagements objective and educational, outlining the pros and cons of the savings accounts, advisory services, or financial products under discussion.”
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.
