The demands facing today’s retirement plan providers are similar to those facing any data-driven organization: integrate data seamlessly from outside sources, provide access to it from anywhere, and do it all as rapidly and cost-effectively as possible. However, the nature of retirement planning – including the overriding need to protect retirees’ investments amid increasing levels of regulation and oversight – creates unique challenges. With this in mind, North Highland recently held a roundtable with leaders of six major plan providers for a candid discussion on this key issue, exploring industry trends, challenges and opportunities to address it.
Data Integration – Essential But Not Easy
The individual investment data associated with retirement plan products and services is extremely complex, and under the best of circumstances, contributes significantly to the three years or more required for new plans to become profitable. Thus, accurate and efficient data integration is critical. Several participants stated that the lack of a consistent standard for individual investment data creates challenges for them and the industry as a whole. One firm representative noted, “We’re starting to evaluate the option of being more aggressive up front and ensuring that the data arrives in a certain format and that elements are outlined in a certain way.” Another roundtable participant said, “I would like to see us move more towards pushing a standard format on plans valued at $25 million and below.”
At the same time, the roundtable attendees acknowledged that most retirement plan providers are unlikely to change their current flexible stance in accepting participant data – in whatever format it is provided. Indeed, many retirement plans see integration and data scrubbing as a key component of their client service. Clients appreciate being able to keep data in a familiar format – and the process delivers other benefits, too. One roundtable participant noted that a comprehensive transition and data scrubbing process can highlight problems that the company investing in the plan might not even know they have. By highlighting these issues for their clients, plan providers add value to their services.
Equally important, identifying potential issues early is a smart business decision. One plan provider participant pointed out that if issues are not identified until after the transition is complete, “it ends up being the provider’s problem when in reality, it’s a client issue.” All participants recognized the inherent challenges associated with migrating multiple plans into a single plan. “When you look at your original cost-benefit analysis, it looks so good on paper,” explained one participant. “Then you get into the details of the project and it will always be far more complicated.” Likewise, all advocated the need for excellent change management processes, pointing out that adding the newest, most sophisticated technology alone won’t make an old, inefficient process more effective.
Of course, these are some of the challenges, but what are some of the solutions? First, plan providers need to make sure they are taking advantage of technological advances and bringing in experienced support to help manage big conversions. Existing processes could also be reviewed to identify strengths, fill gaps and make improvements without reinventing the wheel. There are also industry best practices that can be implemented – from scrubbing and alignment of data to building a governance structure to ensure data integrity.
At North Highland, we know that the topic of data integration in the retirement plan industry isn’t going to go away anytime soon. We’ll continue to share industry insights on our blog, so check back for updates and follow us on Twitter @NHighlandFIN. If you would like to learn more about North Highland’s retirement plan or financial services expertise or participate in upcoming roundtables, include a comment below.