2016 Top Trends
Executives from Voya Financial and MassMutual discussed 10
developments in the retirement planning industry.
First and foremost are new regulations and policies, led by
the new fiduciary rule, said Charles Nelson, chief executive officer of
retirement at Voya Financial. “Each company will approach it differently,” he
said. “Some may utilize the best interest contract (BIC) exemption or retreat
from offering certain services.”
Second, is the growing recognition of the cost of employees
not being retirement ready. “Many years ago, companies sought to limit their
liabilities by freezing their defined benefit plans,” said Tina Wilson, senior
vice president, head of retirement solutions innovation at MassMutual. “But
that liability still exists if employees don’t have sufficient funds to retire
and are financially trapped.”
Third is the need to engineer a retirement plan for success.
“401(k) plans were designed to be supplemental,” Nelson. Use automatic
enrollment, automatic escalation and reenrollment, he said, paired with
qualified default investment alternatives (QDIAs).
Fourth is the value of investments in driving outcomes.
MassMutual has studied outcomes in detail and has learned for “savers early on,
investments are irrelevant,” Wilson said. “Instead, it’s about how much you
save. But at age 40, 45, investments become critical.” That’s why people at
this age and older need to be invested in “target-date funds, managed accounts
or custom portfolios,” she said.
Fifth, it is important to apply behavioral science to
retirement innovation. Choose different platforms” for different enrollment
touch points, Nelson said.
Sixth, are data-driven asset allocation solutions. By this,
Wilson said, the industry needs to embrace smart data platforms where
demographics are tailored to “individualized circumstances to select [a
certain] glidepath or custom allocation.”
Seventh is weighing income replacement versus account
balances. “Income is the new outcome,” Nelson said.
Eighth is finding solutions for income. “Income is also very
personal,” Wilson said. “Solutions need to work for each individual. No one
size fits all.”
Ninth is financial wellness that extends beyond the defined
contribution plan. This means “holistic solutions to solve income stream
needs,” Nelson said.
Finally, participants need help navigating healthcare costs
and building true financial wellness, Wilson said.