More Than Half of Plan Advisers Expect to Use AI

Artificial intelligence use may move from idea to reality in the next 12 months in plan advisement, with more than half (53%) of advisers planning to implement AI in some fashion, according to BlackRock Inc.’s “2024 Read on Retirement: Advisor Outlook,” released Tuesday.

If those predictions come true, it will be a significant jump from the 9% of advisers that report currently using AI tools in their practices.

“We see this taking place in the near future for advisers in a few specific areas,” says Carrie Schroen, head of BlackRock’s U.S. defined contribution intermediary business.

One area is using AI tools to “minimize everyday inefficiencies,” Schroen says. That could be using AI to help complete client requests for proposal, to analyze fee disclosure documents or to run in the background of customer relationship management systems and generate meeting agendas or create prompts for follow-up.

Schroen, who leads BlackRock’s DC adviser practice management program, says AI tools may also be used in advisers’ work with plan sponsor clients and participants. AI tools can help personalize communication across a client base or to identify specific needs and risks that could prompt participant outreach.

Finally, she sees it being used with service providers such as recordkeepers and third-party administrators. AI, for instance, may support identifying cybersecurity threats across platforms or finding improvements in plan design.

BlackRock’s survey, which drew on responses from 300 retirement plan advisers, also found a surge in interest from advisers in retirement income options and a focus on having active investment management be part of the investment strategy for plan sponsor clients.

Retirement Income

According to the survey, 81% of retirement plan advisers have discussed retirement income options with DC clients; another 82% either have recommended a retirement income solution or are likely to recommend one in the next 12 months.

“Part of what is driving this interest and acceleration of demand is that people are living longer, and we’ve lost that security that a pension once provided,” Schroen says. “The first generation of Baby Boomers retiring this year is doing so without that safety net that our parents’ generation had.”

She notes BlackRock’s recently launched DC guaranteed income product, LifePath Paycheck, as proof that such solutions are getting traction, noting that plans with $27 billion in target date assets are making the option available to 500,000 participants. Meanwhile, she says 60% of plan advisers say plan sponsor clients lean on them for communicating with and educating participants on retirement income issues.

“No one wants to solve this problem [of retirement income] more than advisers,” she says. “They are the ones who are hearing about it from plan sponsors and participants about just how concerned they are about their retirement futures.”

Active Focus

The survey also asked advisers about their use of active and passive investments in DC plans. More than half (55%) of plan advisers see active managers as consistently outperforming the market due to: their access to more investment options (59%), protect against losses (47%) and investment sector choices (44%).

While BlackRock is often associated with index-based passive investing, Schroen points to its blended LifePath Dynamic Funds as using both active and passive strategies, something advisers are seeking particularly as markets have grown more volatile in 2024.

“They see the benefits of diversification, manager experience and, lastly, that fee-efficient alpha,” she says.

Finally, the survey also showed that about 55% of plan advisers differentiate their practices by the education they provide on areas such as retirement readiness.

Schroen, who has been meeting with advisers around the country since taking her new position earlier this year, says the findings reflect what she has been hearing about practice management areas of interest.

“Our survey results here affirm … the top priorities for advisers: practice growth and prospecting new clients,” she says. “Our program aims to make their business management more efficient … specifically around client service and their business.”