The defined contribution (DC) retirement industry has been a space filled with innovation in its relatively brief history, with advances to help participation and savings levels, and game-changers such as target date funds and retirement income solutions. Making huge strides in improving the DC plan participant and sponsor experience through technology, however, has not exactly been its calling card. That is now changing, and not surprisingly the company leading the way is the record-keeper with the name that literally means to be at the forefront of a movement: Vanguard.
With disruption in its DNA, Vanguard is tearing itself free from the type of legacy mainframe technology that handcuffs so many firms in the investment industry. “That’s not where the innovation is taking place,” says Amber Czonstka, Principal and Head of Advice and Client Experience at Vanguard. “The innovation is happening in the cloud through ecosystems like AWS [Amazon Web Services], where through open APIs [application program interface] the leading companies in technology are not only able to build capabilities, but they can share them across sectors and with each other. We realized that our clients, both plan sponsors and participants, should expect the same from their retirement plan provider as they would from any other cutting-edge digital service provider. And the only way we were going to get there was by completely migrating to cloud where we could take advantage of fintech capabilities. We felt the industry was at an inflection point, and it was a matter of disrupt or be disrupted.”
Staying focused on core excellence
Vanguard is a trusted partner to nearly 1,500 plan sponsors and has $1.3 trillion* in assets under its fiduciary care. Those responsibilities are the priority for the firm, and a full-on move to a cloud-native platform enables Vanguard to remain focused on what it does best – investment, plan designs, providing advice, and improving participant behavior. To ensure a seamless transition and fully leverage emerging technology, Vanguard is working with Infosys, a global leader in next-generation digital services and consulting, with deep expertise in helping companies deploy transformative technologies to enhance their businesses. The goal: deliver a technology-driven approach to plan administration and fundamentally reshape the corporate retirement plan experience for DC sponsors and participants.
“For sponsors, we want to make their lives easier, empower them with more knowledge and information without extra work, and provide them with the level of integration that they’ve told us they want but that the industry has not been able to provide until now,” Czonstka says.
“Plan sponsors can now take advantage of technology capabilities like they would in other sectors and with other world-class digital providers,” says Czonstka. “Think about things such as real-time participant and plan analytics at their fingertips. Another example is participant sentiment tracking, so the sponsor has a pulse of what’s important to their participants and also what their participants are concerned about. Operationally, Vanguard will be able to handle more complex plan provisions than ever before.”
Making the day-to-day easier
Part of the plan to make life easier on plan sponsors is to automate processes that until now have required human intervention. Doing so will reduce manual administrative work, taking it off sponsors’ plates so that they can focus on more strategic tasks. Some examples of these task replacers include outlier analysis, where data will be served up to identify trends such as which participants or subset of participants have misallocations in their portfolios, or where they are out of compliance from a payroll perspective.
When it comes to helping sponsors make smarter decisions and take smarter action, the new experience will provide them with robust reporting and “take the concept of nudges that we’ve built in the participant experience and extend it to the plan sponsor experience, where we’re dynamically evaluating their plan and providing real-time insights that they can lean into,” says Czonstka. “For example, we’ll be able to track participant behavior in an omni-channel way, so if we notice that there’s a lot of high-net-worth participants on the website exploring Roth IRA options, or calling into the contact center to explore Roth capabilities, we’ll send a nudge to the plan sponsor to talk to their retirement consultant about making a backdoor Roth as a positive possible enhancement to their plan.”
An additional advantage of moving to the cloud is heightened integration with various benefit providers. Plan sponsors use many different tools and aggregating them all into an ecosystem can often be challenging if not impossible.
“We’re converting everything into open APIs and microservices, so we’ll be able to plug and play into the participant or the plan sponsor portal of choice,” Czonstka says. “We could set up a retirement plan module in a client’s HR/benefits management system, for example, if that’s where they choose to go to centralize everything. So, maybe a plan participant uses the client’s system to look at their pay stub. We are able to serve them a nudge in the system to increase their contribution into their retirement plan, and they can accept that nudge without ever having to log on to vanguard.com. We’re really excited about the possibilities when it comes to integration for the plan sponsor across their solution providers.”
Sponsors looking for more information on those possibilities can visit a custom Vanguard website on the subject.
*Source: Pensions & Investments as of June 1, 2020.
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