How AI Will Change the Retirement Industry, and How It Won’t

One could make the argument that 2023 was the year AI fully entered the public consciousness as a technology that will permanently alter our lives and our livelihoods. It’s understandable if artificial intelligence was relegated to science fiction in the minds of most people before OpenAI launched ChatGPT in November 2022, regardless of what Siri or Alexa had to say about it.

As ChatGPT took off and dominated headlines, it created both excitement and anxiety about how AI could streamline tasks that had always been left to humans. In other words, it’s great that it can make things easier and more profitable for companies, but at what cost to humans?

Darren Conner

There is little doubt that AI innovations are going to reshape companies across nearly every industry, some faster than others. This includes the retirement business, where third-party administrators will be able to utilize AI to increase efficiency in ways previously unavailable.

One doesn’t have to be a Luddite to react to these technological innovations with a sense of doom and gloom, fearing that robots will come for our jobs. But to gain a more nuanced perspective on these developments, it is important to look at the ways AI will change the industry, how it won’t, and the challenge facing many TPAs to incorporate this new technology into their business.

Increased Automation and Accuracy

Certain tasks have already been automated for the retirement industry through a combination of machine learning and programming, including the way a recordkeeper can deliver quarterly statements to a plan sponsor for all its participants. There is a bot that logs into the website, understands what’s on the website, scrapes it and then pulls the information and downloads a PDF. But a human engineer is telling it how to connect the dots, how to read the document and how to look for the account number by using optical character recognition—OCR—to read the characters from the PDF.

With the introduction of AI, humans no longer need to tell the bot where the account number is on the statement. It will read the document, interpret the values on the page and understand the field and its value.

This goes beyond traditional automation where it was humans programming machines and then the machine executing it repeatedly. AI removes the human element from this process. The bot has an extremely low error rate, with nearly 100% accuracy, whereas a human has an increased possibility of making a mistake. That’s a boon for recordkeepers seeking accuracy, speed and efficiency.

Working in Tandem

While AI will remove the human element from some tasks, humans will still be necessary for many parts of the processes. AI will be a productivity add-on for every line of business, not a way of replacing administrators, advisers or other professionals in the retirement business. Although bots are much better at memorization than we will ever be, we are much better at making new decisions and interpreting things. A bot also lacks the human emotional context that will always be important to the retirement industry.

Where we see AI having the biggest impact in the near term is digesting communication with your clients. When someone calls you, the AI program can look up their phone number, sift through previous communication and remind you what you discussed the last time you talked to them. It surfaces all this information to make your conversation with the client more relevant. It lessens the time you need to prepare for a call, reducing your prep time to basically zero.

What an AI solution becomes, then, is a good assistant whispering relevant information in your ear.

Democratizing Innovation

If any firm had the scale to implement more automation, it would do so, to make its business more efficient and cost-effective. But if you don’t have enough scale, then implementing these technological upgrades becomes nearly impossible. The scale of the implementation matters tremendously in whether people overcome the capital expenditure to get something like this off the ground.

Most TPAs are small. Automation has already been around for years, but traditionally it has only been available to huge companies with lots of resources.

But large companies like Microsoft are democratizing this technology for smaller companies by giving it to you essentially as a utility. For PC users, most communication is done these days through Microsoft 365, and Microsoft is already baking in AI with its AI-powered Copilot feature. It’s just a matter of people embracing it and making it a part of their firm’s infrastructure.

At PensionPro, we have partnered with experts to deliver this cutting-edge, AI-based automation for early adopters. Additionally, PensionPro is continually researching AI developments to find ways to deliver effective solutions that harness these incredible new technologies.

Whenever there is a lot of hype surrounding a new technological innovation, it can be difficult to gain perspective amid so much noise. But while the hype attached to AI is mostly warranted, a lot of the doom and gloom is overblown.

There are currently and will continue to be AI solutions that will make the retirement business more efficient and more cost-effective. But humans will continue to be crucial to planning and execution across all facets of the retirement business. Innovations in AI will just make it easier for you to do your job. 

Darren Conner is the chief operating officer at PensionPro, an AmericanTCS business.