Compliance September 26, 2019

Senate Confirms Eugene Scalia as Labor Secretary

Eugene Scalia is known for having worked in the trenches of a number of labor issues for many years, and experts suggest he could have a big influence on the DOL’s agenda.

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The Republican-lead U.S. Senate voted Thursday to approve President Trump’s nomination of Eugene Scalia, son of the late Supreme Court Justice Antonin Scalia and a former Department of Labor (DOL) Solicitor General, to the role of Labor Secretary.  

Having served in the high-ranking DOL position under the Bush Administration, experts suggest, Eugene Scalia will likely hit the ground running as a Labor Secretary with a markedly conservative agenda.

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Speaking with PLANADVISER in August following Scalia’s nomination, Brian Netter, a partner in the Washington office of Mayer Brown’s litigation and dispute resolution practice, said Scalia is known for having worked in the trenches of a large number of labor issues for many years.

“He would, therefore, bring to the post a significant level of personal understanding of how to enact President Trump’s deregulatory agenda,” Netter said, adding that, if confirmed, he thought Scalia could potentially have a big influence on the retirement planning marketplace.

“All of the President’s cabinet secretaries have substantial authority to promulgate regulations and then to interpret and enforce them,” Netter explained. “This means they can individually have a big impact on regulated entities. The DOL Secretary, in particular, has control over a large swath of players in the U.S. economy. The decisions made by the Secretary are often felt by workers and business owners quite directly.”

When Scalia was nominated, Jamie Hopkins, director of retirement research at Carson Group, told PLANADVISER the now-confirmed Labor Secretary has engaged in a very successful litigation practice since his first gig at DOL.

“He has been extremely pro-business, anti-labor and anti-consumer protection,” Hopkins reflected. “The reality is he has fought hard against consumer protections and fiduciary standards.”

According to Hopkins and Netter, the DOL’s position on promulgating new regulations to address advisory industry conflict of interests is likely to remain murky for some time to come. They further suggested that, given Scalia’s recent litigation experience representing clients opposed to the establishment of stricter conflict of interest standards, he would likely be called on by some parties to recuse himself from working on fiduciary issues under the Employee Retirement Income Security Act (ERISA). For his part, Hopkins thinks the DOL under Eugene Scalia could be more active in this area than some other observers expect.

Also notable is the fact that, effective October 1, the DOL’s Employee Benefits Security Administration (EBSA) will have three deputy assistant secretaries who report directly to EBSA Head Preston Rutledge, who in turn will now report to Secretary Scalia. After that date, oversight responsibilities will be allocated differently among the deputy assistant secretaries. Traditionally, the two EBSA assistant secretaries were split between a political appointee and a member of the career staff. The new deputy assistant secretary for regional offices will be filled by a career staffer, according to a Labor Department spokesman.

Client Service September 26, 2019

AI Being Used in the Retirement Planning Industry

Chatbots, automated voice services, smart CRM systems and data mining are the main ways that retirement plan advisers today are using artificial intelligence.

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A survey that Nationwide Advisory Solutions conducted last year found that 33% of registered investment advisers (RIAs) and fee-based advisers are currently using Artificial Intelligence (AI) in some capacity. Among this group, 37% said they expect their profitability would expand substantially over the next year, whereas only 22% of advisers not using AI said the same.

So, how are advisers, specifically retirement plan advisers, using AI? They are using chatbot or voice services like Alexa that can answer typical client questions, says Mark Rieder, head of innovation of NFP in Austin, Texas.

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Indeed, Dream Forward, a provider of turnkey 401(k) and 403(b) services for small and medium-sized businesses and nonprofits, recently rolled out a conversational AI chatbot to address plan participant questions. To the plan participant, the chatbot looks like an online chat with customer service.

“Artificial intelligence is still in its nascent stage within the wealth management industry, but it has some exciting applications, especially when applied to client servicing,” says Ken Thompson, CEO and president at TD Private Client Wealth in New York. “The most active players continue to explore opportunities to enhance, rather than replace, the person-to-person interaction. This includes investment in robotic process automation (RPA), where repeatable, non-judgmental tasks like client meeting preparation can be augmented by a machine. What could take an hour or more to put together in preparation for the meeting can now be delivered in minutes through RPA.”

AI can also be used to provide automated education for retirement plan participants, says Tyler Fondrk, a consultant with the wealth practice at Buck in Pittsburgh. For example, AI could “automatically notify participants who are not contributing enough to get the full company match and provide them with a quick and easy method of increasing their deferral,” Fondrk says. “It could also analyze data [on the participant] to determine a financial wellness score that is compared to the scores of others in the company and/or the industry.”

Retirement plan advisers are also using customer relationship management (CRM) systems that have integrated AI, says Craig Hawley, head of Nationwide Advisory Solutions in Louisville, Kentucky. “With the right CRM and a strategy to capture more high-quality data, advisers can develop predictive profiles using AI tools that are widely available, such as Saleforce’s Einstein and EIM’s Watson.”

As an example of this, Redtail Technology recently added AI to its CRM system, which can now analyze emails, notes and text messages to predict client needs. Specifically, the CRM system looks for client sentiment by identifying and categorizing their opinions, so that advisers can then mitigate any issues that arise.

“Advisers can also use machine learning, prescriptive analysis, meta-language processing, natural language processing and robotic process automation to streamline mundane back-room and repetitive activities so that they can focus more on strategic initiatives,” Rieder says. “In light of the fee pressure retirement plan advisers are facing while at the same time being asked to deliver more for their clients, the only way to meet these needs is by embracing technology.”

Recordkeepers, as well, have embraced data analytics, AI and machine learning to provide a more customized experience for each retirement plan participant and to help them make better decisions to improve their retirement readiness.

“The use of AI and machine learning is becoming increasingly important among recordkeepers, to find insights into participants,” says Jason Grantz, director of institutional retirement consulting at Unified Trust Co., N.A., in Highland Park, New Jersey. “They’re sitting on a treasure trove of data. As AI becomes more sophisticated, you’ll see them improve their understanding of participants and offer better suites of services.”

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