Artificial intelligence (AI) could transform the 401(k) industry in a way similar to the impact behavioral finance has had on retirement planning. While the industry has traditionally focused on logical products like retirement income solutions and target date funds (TDFs), significant advancements have come by addressing human behavior. For instance, auto-enrollment greatly increased TDF adoption, highlighting that appealing to behavior can be as crucial as the product itself.
Fred Barstein suggests that AI, especially through large language models, could offer the next breakthrough by streamlining compliance, scaling advisory services, and tailoring financial plans. By automating routine tasks, AI allows human advisors to focus on more complex issues and provide unbiased recommendations. This approach can help plan sponsors and participants make well-informed decisions, potentially boosting adoption of retirement solutions such as health savings accounts (HSAs) and managed accounts. Early adopters of AI could secure a substantial competitive edge in the retirement plan sector, much like the initial adopters of TDFs did in previous years.
Read more of Fred Barstein’s insights in this week’s WealthManagement.com column, “How AI Could Revolutionize 401(k) Plans.”
