Products November 18, 2024

New AI Retirement Planning Tool Aims to Transform How Americans View Their Futures

The UCLA professor Shlomo Benartzi’s new visualization tool, unveiled at PLANADVISER’s national conference in November, is designed to inspire optimism in retirement.

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Photograph by Matt Kalinowski
Photograph by Matt Kalinowski

In a bid to reframe how Americans engage with retirement planning, UCLA Professor Emeritus and retirement industry innovator Shlomo Benartzi is preparing to test a new digital tool using artificial intelligence that uses visualization to inspire people to plan for retirement; he presented the  tool to an audience of advisers at the PLANADVISER 360 conference on Tuesday.

Designed to boost optimism and engagement, the AI-driven tool invites users to imagine their ideal retirement and then generates a visual representation of it, replacing traditional fear-based financial warnings with personalized, positive visions.

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“Instead of warning people they’ll face a bleak retirement if they don’t save enough, we’re encouraging them to visualize the life they want,” he explained during the presentation. “By flipping the conversation from negative to positive, we’re trying to give people hope and optimism.”

The tool, set for a trial with 300,000 participants in two weeks, uses visualization techniques to prompt users to describe their ideal retirement scenario. Benartzi demonstrated the concept with plan adviser George Fraser, who shared his own retirement dream of spending time on a boat with his family, relaxing on the beach and enjoying seafood. Fraser is senior partner of the Fraser Group, a BCG company owned by the Alera Group. Benartzi and he have collaborated on projects in the past.

Benartzi said his visualization tool integrates the work of Professor Hal Hershfield, an artist whose illustrations aim to bridge the gap between users’ current financial situations and their aspirations. Benartzi believes this more human-centered approach can make a real impact in the retirement planning industry.

“Rather than focusing on fear, we’re helping people see a path to the life they want,” he explained.

The pilot will test if this approach can meaningfully shift participants’ engagement and actions around retirement, potentially marking a major shift in the financial services industry toward hope-based planning.

Fraser highlighted the importance of optimism in retirement by sharing a story about a client who was initially fearful about his financial future. After suffering through life-altering setbacks, this person faced retirement with just $400 a month in discretionary income, leading him to feel embarrassed and anxious.

But Fraser guided him to imagine a fulfilling retirement: spending time on his boat and supplementing his income by taking others on boat tours through a rental platform.

By showing Sean how to generate extra income in a way that aligned with his dreams, Fraser said, “His life had changed in his eyes.”

Prompt: “I’d like to go fly fishing in Montana and spend quality time with my family.”
Source: The Retirement Visualizer, created by Shlomo Benartzi, Dan Goldstein, Hal Hershfield and Joseph Rieff.

Compliance November 15, 2024

Consumer Advocacy Groups Push Back On CIT Use by 403(b)s

Six groups are calling on the Senate to reject a proposal to allow 403(b) plans to invest in collective investment trusts.

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In a letter addressed to the Senate Banking Committee, six investor advocacy groups expressed their opposition to the Empowering Main Street in America Act of 2024, which includes a provision that would allow 403(b) plans to invest in collective investment trusts.

The bill, S.5139, would amend the Securities Act of 1933 and was introduced by Senator Tim Scott, R-South Carolina, the ranking member of the Senate Committee on Banking, Housing, and Urban Affairs, in September.

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Under Title II (“Responsibly Expanding Investment Opportunities for Retail Investors”) of the bill, Section 205 would allow investment in CITs by 403(b) plans. CITs can be cheaper and more flexible than mutual funds, in part because the instruments are not securities and do not need to be registered with the Securities and Exchange Commission. Instead, CITs are considered a bank product and regulated by the Office of the Comptroller of the Currency.

The bill would also require the Department of Labor to study, and report to several congressional committees within a year, whether private placements—securities not issued in public markets—should be permitted in defined contribution plans or for retail investors.

The six investor groups—Americans for Financial Reform, Consumer Action, Consumer Federation of America, Institute for Agriculture and Trade Policy, Private Equity Stakeholder Project, and Public Citizen—argued in the letter that by eliminating the Security and Exchange Commission’s regulatory oversight, the bill would “open the door to unregistered financial products with hidden risks and costs being sold to some of the most vulnerable retirement savers.”

Because some 403(b) plans are not governed by the Employee Retirement Income Security Act, the advocates believe removing SEC oversight would put these plans and employees at further financial risk.

As a whole, the consumer advocates argued that Titles I and II of the bill would “severely threaten” the transparency, integrity and accountability of U.S. securities markets, placing millions of investors at risk. They also argued that the bill would expose more investors to the risks of “illiquid, opaque, high-risk and often predatory private markets.”

“While marketed as a ‘capital formation’ bill, this legislative package is really a recipe for capital destruction,” the letter stated.

A separate bill that would allow 403(b) plans to include CIT investments was introduced in August by a bipartisan group of senators, including Katie Britt, R-Alabama; Gary Peters, D-Michigan; Bill Cassidy, R-Louisiana; and Raphael Warnock, D-Georgia. Similar to the Empowering Main Street in America Act, the Retirement Fairness to Charities and Educational Institutions Act of 2024 proposes to amend the Securities Act of 1933.

These various bills are a continuation of the effort begun in the SECURE 2.0 Act of 2022 to enable governmental 403(b) plans subject to ERISA to invest in instruments beyond the annuity contracts and mutual funds to which they are currently limited.

The American Retirement Association and the Investment Company Institute have come out in support of Senator Scott’s bill.

A spokesperson for Scott did not immediately respond to a request for comment.

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