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Plan Participant Data Ownership Creates Concerns

Plan Participant Data

Plan Participant Data Ownership Creates Concerns

Plan participant data ownership is a confusing topic for retirement plan fiduciaries. Plan participant data ownership is unquestionably a sensitive issue as an agenda item at many retirement plan committee meetings.

At issue is the use of retirement plan participant data by financial advisors, recordkeepers and other service providers. Should anyone or any entity be permitted to use retirement plan participant data?  Should an investment advisor be directing investment deferrals based upon the number of years until a plan participant’s years to retirement?  That scenario sounds harmless. Should an investment advisor be marketing services, benefits or cross-selling participants non-retirement-plan-related products based upon the size of a participant’s account balance or marital status?  This scenario moves out of the harmless category and seems to cross into the “that sounds wrong” category.

InvestmentNews raises questions in a recent article, calling the use of participant data in the retirement industry “among the most contentious issues in the retirement plan market.”

Philip Chao, principal and chief investment officer at Chao & Co., who was quoted in the InvestmentNews article, calls the ownership of participant data “the next battleground” in the 401(k) industry. Moreover, InvestmentNews pointed out that the battle over participant data ownership spotlights broader global conversations about how technology companies like Facebook collect and use user data. The European Union has taken a strong position on data protection with the passing of their General Data Protection Regulation.  Unfortunately, the U.S. consumer privacy protection laws are fragmented and are not nearly as clear cut.  And the laws have not been easy to enforce. The 401kTV GENIE Awards will address this question and many more like it (for more information click on 401kTV GENIE Awards)

The use of retirement plan participant data within the retirement industry is bubbling-up in concert with recordkeepers and asset managers extolling the benefits of more personalized investing.  This includes the use of managed accounts and personalized financial advice as mechanisms to improve financial wellness. Retirement plan service providers argue that access to and using retirement plan participant data, such as asset size and age can, help advisers and service providers make more personalized investment and solution-based recommendations.   But there is a much larger question looming: Should retirement industry service providers be permitted to use participant data in this fashion? That is a question with many tentacles and few easy answers!  Retirement plan Committees and every plan fiduciary should begin discussing their responsibilities and their position on the topic of retirement plan participant data ownership.

Steff Chalk

Steff Chalk

Managing Editor at 401kTV
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff also serves as Executive Director of The Plan Sponsor University and is current faculty of The Retirement Adviser University.
Steff Chalk
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