How Can Advisors Deliver Better Retirement Advice?

I walked out of the NAPA 401(k) Summit on Tuesday feeling both tired and energized for the future. What an event, the best in the industry. Beyond the amazing planning and execution, what impressed me the most was the “let’s get #$@&& done” attitude that the environment fostered. I’m tired—not only from staying out way too late, but also from working hard and having a lot of great moments. Every conversation I had with key partners felt like we were moving forward on important collaborations that were both good for business and for plan participants. In keeping with the eclipse theme that thread its way through the event: Even with a few clouds to make things tough, the future is indeed bright.

I meant to capture my thoughts on the event on the plane ride home, but I quickly fell asleep, crumpled against the window the entire flight. After a few good naps and some much-needed rehydration, I’m finally ready to highlight my top five takeaways from the Summit.

In the recent past, conservations on “who owns the participant” or “who controls the data” and other questions that divided us were front and center. They made for good panel titles—and still do at some events—but not this week. The acknowledgement that true partnership leads to better participant outcomes and a stronger business came through loud and clear. Not just on panels, but in 1:1 conversations and meetings with recordkeepers, asset managers, RIAs, and broker dealers.

How will this partnership come to life? Democratization of data so all plan participants can get the advice they deserve, collaborative product launches that bring the strengths of multiple parties, fiduciary and advice platforms designed and tailored to the specific needs of the recordkeepers, RIA, and broker dealers—higher value for potentially lower cost.

The participant wins in all of this and it’s very exciting.

I think two things have happened. The first, Secure created a focus and some competition in the form of new, more tech-forward providers in the small plan space. Second, because of recent press and opinions by a small few, there’s now a high degree of pressure to prove to the rest of the world what we have known for years—that the 401(k) industry is an amazing wealth creator for all of those who have access to it.

We heard it and we’ve reacted. Every major player is working hard to make small plan creation easier. Recordkeepers and fiduciaries who have worked in this space for decades are innovating, expanding offerings, streamlining plan creation, along with making distribution, pricing, design, fiduciary coverage, and advice delivery easier and more broadly available. This isn’t just a PEP phenomenon. PEP is certainly a large part of the strategy for many, but there are many ways to cook an egg.

What was once some forward-thinking recordkeepers, RIAs, and Morningstar professionals beating the drum of personalization has now become a chorus—recordkeepers, asset managers, broker dealers, and RIAs alike can agree that customers are demanding personalization. The result is an expansion of offerings, advice on a broader set of goals, and a real chance to deliver personalized advice to more participants.

I’ll highlight a couple of things: First, more recordkeepers, RIAs, and broker dealers are putting advice and personalization at the center of their product strategy and value proposition. In my opinion, the result will be more participants getting advice and better outcomes. Second, personalized TDFs may be having a moment. All it takes is a handful of recordkeeper integrations, which looks to be happening in 2024. Last, dynamic QDIA is taking off—and seems to be where a lot of recordkeepers, RIAs, and broker dealers are landing. Now a clear strategy, one of the beauties of dynamic QDIA is its flexibility in implementation.

I don’t like to say it, because I’m passionate about the idea of delivering guaranteed income to those who need it—but it feels like we’re a bend in the river away from income getting the mindshare it needs to make it to the mainstream. In fact, we’re still in a land of constrained roadmaps, competing priorities that I’ve highlighted above, and emerging demand from advisors and sponsors. However, the successful launch of NAPA’s Retirement Income Bootcamp at the Forum will help move understanding and demand forward.

The positive, major recordkeepers are adding solutions with big announcements already in 2024 with possibly more to come later in the year. I think a transition to single product launches/integrations to a platform approach will help immensely. Adding onto that is the broad acknowledgement income advice is critical and the highly effective pairing of guaranteed income and managed accounts to help move the needle. As more recordkeepers and fiduciaries make advice a priority, a focus on income will be much easier to execute on and add as a feature.

So, we’ve agreed it takes a village, and we know advice and personalization are at the center of the collective strategy, but how does all this come to life? We understand that participants need different levels of advice—from simple to complex, from in-person to fully digital, and hundreds of variations in between. This includes advice on 401(k), HSA, IRA and after-tax, equity awards, insurance, income, debt reduction, budgeting, emergency savings, estate, and tax planning. All participants need all these things, but they all need a few of them in varying combinations.

How does the work get done? By leveraging the collective strengths of the firms positioned to help. We’re all good at a few of the things I listed above and have built services to deliver advice. The collective efforts of the recordkeeper, advice provider, plan advisor, and wealth advisor together with a committed plan sponsor has the potential to change the entire value proposition of the retirement industry. I’m very excited for Morningstar Retirement to be a key part of that success, especially with products like Advisor Managed Accounts helping advisors deliver retirement advice.

That’s a wrap. Big thanks to NAPA for absolutely crushing it and creating a forum for collaboration and progress—and to all the people new and old that I met over the three days of the event. I’m looking forward to helping more participants than ever, together.