4 Tech Trends Transforming 401(k)s

1. Advisors are more heavily using digital solutions to find leads.

While referrals remain their best source of leads, advisors also look to other valuable sources that can be tapped into via technology. According to the survey, 45% of advisors are finding social media more valuable now than they did in previous years.  Here’s how they rank tactics for finding leads:

• Social media: 25%.
• Events (webinars, roundtables, etc.): 23%.
• In-person meetings: 23%.
• Websites: 14%.

Digital advertising, email campaigns and cold calls each pulled 5%.

2. Plan advisors are demanding a digital solution for personalized wealth management.

Clients these days increasingly expect a more individualized approach when it comes to their retirement plans. Vestwell asked advisors what they believe clients are most interested in incorporating into their plans:

• Personalized advice, i.e., managed accounts: 66%.
• Guaranteed income solutions: 51%.
• 401(k) matching on student loan repayments: 50%.
• ESG funds: 46%.
• Cryptocurrencies: 41%.

Thanks to improved technology powering managed accounts, offering these solutions has become easier and more affordable, Vestwell said. According to the survey results, 68% of advisors who offer managed accounts said they have seen an uptick in adoption over the past year alone.

3. New technology can equal increased cybersecurity risk.

As cybercrimes have soared since early last year, 73% of advisors in the survey agreed that their clients care more about cybersecurity following a year of uncertainty. With the Department of Labor auditing plans to test whether they were following proper security protocols, advisors are feeling pressed to carefully vet and select secure technology providers.

Asked what the biggest challenge facing their practice going forward is, 42% said government regulation, 40% fee compression and 30% cybersecurity — which easily beat out prospecting and client retention, Vestwell said.

4. Plan sponsors undervalue solutions that tech can provide, and advisors know it.

Running a plan can be time-consuming for employers, but the right plan setup can drastically reduce that administrative burden, especially when it is backed by good technology. Advisors know this, but many plan sponsors seem not to. Thirty-nine percent of surveyed advisors said plan sponsors wrongfully undervalue design flexibility when selecting a plan, and 37% said they undervalue investment flexibility.

Vestwell noted that both of these are highly dependent on the record-keeper and other tech providers for a plan. These two features trailed behind only fiduciary oversight as the feature most undervalued by plan sponsors. 

Managing a plan depends on both a plan sponsor and a plan advisor, which means that the underlying technology powering these plans can make an advisor’s life easier or harder. According to the survey, 93% of advisors agreed that working with a tech-forward record-keeper will make it easier to manage their plans.

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