John James, managing director and head of Vanguard Institutional Investor Group (IIG)—defined contribution (DC) recordkeeping, defined contribution investment only (DCIO) and outsourced chief investment officer (OCIO)/traditional institutional management—started in the retirement plan industry in 1990 in Australia. Recounting his many roles over the past 30 years, he says his time working as a plan sponsor has helped him in his provider roles.
And now James says he thinks the retirement plan industry is ripe for disruption.
“There are two main reasons,” he says. “First is recordkeeping platforms. Traditional platforms are monolith and clunky. They take a lot of investment over the years and, in some ways, they are slow and costly.” James says Vanguard made the decision to be bold and move to a cloud platform.
Last summer, the firm announced that Infosys would assume day-to-day operations for Vanguard’s defined contribution (DC) plan recordkeeping business, including software platforms, administration and associated processes.
“It completely changes the speed of processing and how quickly we can add products and services,” James says. “Data is kept in a secure cloud; from an information and security standpoint, it enhances our abilities.”
The firms said their partnership would provide greater insights and unprecedented personalization to help deliver better outcomes for participants and plan sponsors. That personalization is the second reason James says the industry is ripe for disruption.
“It’s the next evolution from offering top-performing funds for participants’ retirement accounts: the ability for participants to get advice,” he says. “Participants want situational point-in-time advice. They want ongoing advice. So we have digital advice available to participants on an ongoing basis.”
James adds that Vanguard offers a personal advice service, with not only digital advice but access to advisers to talk through situations. “Top investment performance—and we want to offer that at the lowest price possible—plus advice, gives participants better outcomes,” he says.
To better serve retirement savers in the future, Vanguard is working on the new platform to enable it to do a range of things. “We want to double participants’ next best actions—increasing contributions or improving investments,” James says. “Seventy percent of the participant experience is being redesigned. We want them to really be engaged with their retirement readiness. And the experience is digital; they don’t have to make phone calls.”
James says Vanguard hasn’t forgotten about the plan sponsor experience. “If the platform operates well, that benefits both participants and plan sponsors. And plan sponsors will get better information and data analytics,” he says.
James says he would call on the retirement plan industry to encourage people to invest more for retirement, through policy and tax benefits. “That should be a constant focus of the industry,” he says.
In addition, James says, plan sponsors need to support the end-to-end experience of participants, emphasizing again that it must include advice. “We’ve done a lot of modeling and know advice has a big impact on outcomes,” he says.
James says the common thread across all these efforts is looking out for investors and making sure everyone gets a fair shake at the best chance for success. He says that’s one reason Vanguard supports efforts to allow 403(b) plans to offer collective investment trusts (CITs). “Our numbers show the cost savings to 403(b) participants in plans that offer CITs could amount to as much as $250 million per year,” he says.
“We’ve really doubled down on the retirement industry sector as a company because retirement accounts are at the core of individual investment success,” James says. “With an elite recordkeeping system and great access to low cost investments and advice, we couldn’t be more committed.”
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