Artificial intelligence (AI) is making a splash in the retirement world, with huge potential to irrevocably change the industry. In fact, 17% of pension experts believe AI will revolutionize the industry a great deal, while 60% say it will to some extent, according to a recent survey from Professional Pensions, cited in BenefitsPro.
In that context, BenefitsPro also recapped the EBRI-Milken Institute’s 2024 panel, “Innovations and FinTech: Developments that Can Enhance Financial Security, Retirement Planning and Spending Down Assets,” which discussed AI’s influence in the retirement planning process. The panel included several leaders from various fintech and financial wellness companies.
Large language modeling is a primary use case. Yon Perullo, CEO of RiXtrema Inc., which creates software for financial advisors, said his company uses AI in two ways: in risk management and on the retirement advisor side. They use AI with specialty large language adaptations that help understand specific information. Laurel Taylor, founder and CEO of Candidly, a financial wellness platform related to student debt, said her company is also using AI in a large language capacity and marrying the technology with portfolio optimization, making in her words, “significant impact.”
Charlie, another fintech firm, has also embraced AI, mostly around fraud issues related to retirees. The company monitors customer activity, and if that activity doesn’t match with the customer’s behaviors, Charlie uses AI to try to stop the action from happening.
One of the biggest issues with AI technology is getting people to trust it, according to Candidly’s Taylor. She added that there is a lack of awareness around solutions, but she believes the budgets exist and that AI technology brings the right people plan sponsors want to participate in the plan.
As the technology evolves, cost will likely be the chief driver for the retirement industry when it comes to adopting AI. The technology has the potential to reduce operating costs—an appealing factor for many companies in this space. That’s according to a Mercer CFA Institute study cited in BenefitsPro: “By automating various aspects of pension management from data analysis to investment decision-making, AI minimizes the need for extensive human intervention. These savings can then be passed on to pension holders, enhancing their overall returns.”
Indeed, it appears AI is here to stay, and it is making waves in the pension world. Gaining an understanding of the technology can help retirement plan sponsors and advisors make informed decisions about the various solutions that are available in the marketplace. Doing this due diligence is a smart first step in fulfilling fiduciary responsibility to the plan and participants.
