Technology and economic conditions are transforming America’s finances, and that’s impacting retirement plan sponsors and participants. In light of these trends, a new study from Marsh McLennan highlighted four key issues employers should focus on when managing retirement plan options in 2024:
- generative AI,
- fraud/cyber concerns,
- inflation, and
- a convergence of retirement planning and wealth management.
The Marsh McLennan report, cited in BenefitsPro, explored what these issues mean for retirement plan fiduciaries. The report’s authors cited AI’s disruptive nature, and urged retirement plan sponsors to have a generative AI strategy. According to the report,
“‘In personal finance, generative AI can personalize investment recommendations, analyze market data and propose new trading strategies by simulating different scenarios… This has the potential to make investing more accessible and personalized for individuals, democratizing access to financial advice and investment opportunities.’”
Financial advisors can leverage their understanding of client’s personal financial goals and situation and use generative AI to tailor advice to their clients’ specific needs. The upside is advisors offer human oversight, ensuring that the AI recommendations dovetail with clients’ risk tolerance and long-term goals.
Despite its benefits, AI also introduces risk, particularly when it comes to fraud and cyber threats. Phishing attacks, deep fakes and false reports about financial markets are sources for concern. Plan sponsors used to think they could outsource their cybersecurity to third party vendors without oversight. Guidance issued from the DOL in 2021 changed that. Plan sponsors must monitor vendors very carefully, and work with their retirement plan advisors to manage threats and protect retirement plan assets from fraud and cybersecurity vulnerabilities.
Inflation has proven to be a barrier to retirement savings – many workers have put a pause on setting money aside or tapped into their retirement savings to cover short-term needs as prices have soared in recent years. Moreover, some younger participants are turning to online platforms and robo advisors for financial guidance, which can lead to poor decisions, the Marsh McLennan report noted. To mitigate these “DYI risks,” plan sponsors should provide employees with access to financial advisors who can help them navigate their finances more knowledgeably so they can make better-informed decisions.
Finally, financial advisors are moving toward a holistic wealth management approach that accounts for a client’s total financial picture. More financial advisors are focused on financial wellness, a key component in helping individuals make smart money decisions, regardless of their life stage.
These four trends are important for plan sponsors to focus on as they consider ways to make their retirement plans more competitive and effective to help set today’s workforce up for future financial stability. Working with a financial advisor can be beneficial as sponsors explore varying avenues to manage these and other prevailing trends while helping workers improve their overall financial wellbeing.
