“Everybody is after the plan sponsor’s portal,” says Theresa Martin, the chief Internet strategist for CitiStreet, the joint venture that links Citigroup’s and State Street Corp.'s 401(k) businesses.
By Jinny St. Goar
December 2000
Institutional Investor Magazine
Martin is referring to the Web-based doorway into a 401(k) plan that leads directly into participants, wallets.
At least that’s the hope of the industry. As Martin and many of her colleagues see it, whoever designs this entry will have an edge in managing the assets not only in employees, 401(k) plans, but in their IRAs, Keoghs, mutual funds and brokerage accounts as well.
Some companies are designing their own Web portals. Others are looking to their vendors, including Fidelity Investments, Vanguard Group, Hewitt Associates and CitiStreet. Still other plan sponsors are relying on software providers IBM Corp., Sun Microsystems, Microsoft Corp. and Hewlett-Packard Co. to develop and service their 401(k) portals. “Right now we have an explosion of products at the vendor level, but there,s an inevitable winnowing out in store,” says Richard Koski of Buck Consultants.
The North Carolina Retirement Systems Division, for example, with $560 million in 401(k) assets, is using Yahoo!'s portal design, developed in partnership with Hewlett-Packard. “Our employees can look at their 401(k) investments and also track their stockholdings and all mutual funds,” says North Carolina’s Sharon Hayes, the director of the portal project. In addition, state employees can use a retirement calculator on the site.
The current scramble over portal design reflects the maturing of the 401(k) industry’s use of the Web. “We are now getting 56 percent of our daily interactions through the Web,” reports Joseph LoRusso, president of Fidelity Investment Retirement Services Co., the Fidelity unit that works with 401(k) plans. The remaining 44 percent come in by telephone. As of June 1999, the telephone-to-Web breakdown was 63 percent to 37 percent.
Putnam Investments calls its doorway ibenefitcenter.com. “This is not just a 401(k) portal,” says Thomas Turpin, managing director for the firm,s defined-contribution-plan services. “We are trying to get to all other assets.” The portal is flexible enough so that plan sponsors can create another tab to get to the defined benefit plan or to the human resources department. But at this point the one-stop shopping doesn,t allow participants access to bank accounts through ibenefitcenter.com.
Extensive aggregation has been developing for years in consumer finance. For example, Citibank’s myciti.com portal allows individuals to pull together all their accounts on one Web page. “This idea is moving to benefit finance,” says Fidelity’s LoRusso. Fidelity now offers links, with a separate log-in, to an individual’s other benefits and payroll information that may come from another company.
Privacy and security safeguards remain works in progress. The North Carolina plan requires its employees to give both their Social Security number and a personal identification number to get to their accounts. Security is managed by the system,s administrator, BB&T Corp., a regional bank based in Winston-Salem, North Carolina. Using 128-bit encryption, the highest level currently available, BB&T checks on Social Security numbers that are kept on the bank’s Web server. PIN codes aren,t on the server; three efforts with the wrong PIN code, and the user is locked out of the system.
As they move deeper into the Web, plan sponsors must grapple with one knotty question: Should they allow advertising on their portal pages? While ads would provide a new source of revenues, some industry insiders worry that they would compromise the integrity of the sites, which, after all, aim to offer disinterested financial advice and services.
“This issue will come to a head over the next 18 months,” says consultant Koski.
