The market forces driving change in
the retirement industry started before the Department of Labor (DOL)
issued its final fiduciary rule and will continue, regardless of the
effect of the rule by the new presidential administration, according to
Broadridge identified three trends driving
change in the retirement industry, including a shifting model of advice.
Firms are shifting business models from commission-based fee structures
to fee-for-service (or percentage of assets). Some of these trends were
already under way, but they have been accelerated by the DOL Conflict
of Interest Rule.
Broadridge also noted a trend toward passive
investments and lower-cost funds. The general growth in exchange-traded
funds (ETFs), combined with pressure on 12b-1 fees and the shifting of
fund lineups and offerings, point toward retirement investors changing
where they put their money. For instance, for the first three quarters
of 2016, 80% of net new assets that flowed into funds went to passive
versus active products.
In addition, the demands of consumers for
integrated experiences across channels and devices are putting pressure
on retirement providers to offer new ways to interact with
participants. Expectations of how information is delivered and the ease
of transactions from retailers such as Amazon and Apple are bleeding
over into all industries. The ability to store and retrieve important
financial information directly from the cloud is accelerating, pushing
retirement communications to transform as well. Therefore, firms need to
arm participants with communication tools that give them the power and
flexibility to meet their needs “whenever and wherever” they want.
NEXT: Fiduciary rule could confuse already started trends