DC Participant Experience Will Change Regardless of DOL Rule

Broadridge identified three trends driving change in the retirement industry.

The market forces driving change in the retirement industry started before the Department of Labor (DOL) issued its final fiduciary rule and will continue, regardless of the effect of the rule by the new presidential administration, according to Broadridge research.

Broadridge identified three trends driving change in the retirement industry, including a shifting model of advice. Firms are shifting business models from commission-based fee structures to fee-for-service (or percentage of assets). Some of these trends were already under way, but they have been accelerated by the DOL Conflict of Interest Rule.

Broadridge also noted a trend toward passive investments and lower-cost funds. The general growth in exchange-traded funds (ETFs), combined with pressure on 12b-1 fees and the shifting of fund lineups and offerings, point toward retirement investors changing where they put their money. For instance, for the first three quarters of 2016, 80% of net new assets that flowed into funds went to passive versus active products.

In addition, the demands of consumers for integrated experiences across channels and devices are putting pressure on retirement providers to offer new ways to interact with participants. Expectations of how information is delivered and the ease of transactions from retailers such as Amazon and Apple are bleeding over into all industries. The ability to store and retrieve important financial information directly from the cloud is accelerating, pushing retirement communications to transform as well. Therefore, firms need to arm participants with communication tools that give them the power and flexibility to meet their needs “whenever and wherever” they want.

NEXT: Fiduciary rule could confuse already started trends

Fifty-nine percent of respondents to Broadridge’s survey agreed that the industry was making progress in improving participant experiences prior to the announcement of the DOL fiduciary rule. Before the rule came out, Broadridge identified 10 best practices that retirement providers were putting in place, from automatic programs to people-like-me benchmarks to personalized campaigns that included life-stage content and messaging.

Nearly 60% of respondents believe the DOL rule will have a positive (30%) or neutral (29%) impact on participant experience design. This reinforces the idea that the industry was already preparing to provide more transparency and changes in business models designed to mitigate conflicts of interest.

Nearly 70% of respondents believe retirement plan participants are likely to be confused by changes implemented by the industry as a result of the DOL rule. Taken out of the context of the participant experience, changes made simply to comply with the new regulations could easily cause confusion.

The new DOL Conflict of Interest Rule requires that firms ensure that their customer touchpoints, contracts, and disclosures all spell out new relationships with regard to the meaning of advice and what it means to be a fiduciary. All this must be explained in light of shifting models of advice, changing preference for low-cost investments, and the growth of digital platforms, Broadridge says. These trends must be driven by a singular goal for the industry—ensuring that participants have better retirement outcomes.