The challenge of offering more retirement services, but also reducing administrative fees leaves many recordkeepers wondering how did we get here? The main 3 drivers are:
- Increased fee disclosure which exposes fees offset with hidden asset charges. Administrators who heavily relied upon 12(b)1 type fees are struggling to compete with all the fees on the table. A few administrators kept separate and fair service fees and are doing fine, but most are going to have to make dramatic cost cuts in the next year or so. Previously subsidized administrative processes are now being forced to look at substantial and overdue rework.
- Supporting heavy internal software builds of custom modules. These modules were developed back in the day to support new services or prop up lagging vendors – a lot of good intentions. However, the functionality has evolved into a commodity but the administrator is still maintaining tangled custom code which is now strangling their ability to reduce costs and adopt new features.
- A massive paradigm change in infrastructure provisioning. The use of cloud environments and virtual servers is common and solid – the biggest and most secure companies are moving forward full throttle. The administrator who is trying to maintain a physical data center with blinking lights will not be able to provide the service or get control over their costs. The cloud provisioning of secure servers have moved these costs from thousands of dollars (fully loaded) to only a few dollar per month. And the uptime and performance far exceeds anything that the administrator has in their data center.
The solution is some basic restructuring and some correctly applied technology. This change must be attacked with a concerted effort, but it is often best implemented in a controlled and measured manner. Administrators who cannot address the key challenges will be out of business inside of 12 months.
- Push more self-service to the employer and the participant. This is typically done through newer, more flexible web portals. The employers and participants are growing smarter every day and want to take more control over their accounts. Many items always deemed as requiring administrator handling can now be totally handled on the web.
- Standardize the payroll on-boarding process to remove rework, manual intervention, and errors. Administrators are always surprised to see the incredible amount of rework that is actually happening in their back office payroll processing. This is the most expensive process in administration and unfortunately the area with the least amount of standard processes. A successful approach has been to actually pay employers to adopt a standard and complete interface – the key is to make the interface self-contained.
- Move quickly toward mobile Apps. The mobile App not only forces the administrator to look at what really matters on the screen, but it also get the participants more involved with their accounts on a daily basis. The web is passive but mobile Apps are active. In the next 12 months, the primary account access will move from web to mobile. The game has already changed.
- Deploy a common publishing database for all plan artifacts. This includes statements, documents, forms, and reports. The employers and participants are both looking for just in time delivery of the critical items needed – not sent but in a secure repository available when needed. Looking around the market, there are few tools which effectively do this in the context of employers, plans, and advisors (SharePoint is not the answer). The key is to have a file exchange mechanism where items can quickly and securely be published to any plan entity.
- Rework and rethink the web design. The pension webs evolved into a kitchen sink mentality with many pages, buttons, and icons – unfortunately most are never used. The winners will scale back their webs using a hierarchical approach to focus on the happy paths. And transition the language from industry jargon like ‘transactions’ to ‘life events’. The user experience will be more holistic and managed through easy to understand wizards. But the challenge is that the web screen sizes are changing from tablets to wide screen. This means the modern website will have to use ‘responsive coding’ to tailor itself to whatever screen size the user presents – this is not just scaling, but actually changing the layout, menus, and content.
Based upon working in the trenches for many years working with industry leading software and administrators, these are the challenges and the pitfalls. This has enabled a vision for the future and a pathway for 4 simple solutions. These solutions can be done without big bang technology rollouts or professional service engagements. But, it does often require a big internal cultural shift from the top down to adopt new ways of thinking and leave behind some pet projects.
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Trent Richardson's Blog 