The emerging role of AI in the Retirement Plan Industry

By Arvind Venkatraman, CTO, Congruent Solutions

The retirement plan industry deals with a humongous database on a daily basis and AI has already made a huge difference in how the ecosystem operates. AI and ML have helped the space in streamlining all the processes, protecting assets and improving customer service. The industry has rapidly embraced AI in terms of chatbots, automatic fraud notifications, and mobile check deposits that are supported by this technology. Here’s how the retirement plan industry can capitalize on AI to elevate customer experience:

#1 Chatbots maximizes participant engagement
Not a lot of customers seek professional advice before buying a plan. Also, not many are aware that they could seek help or even evaluate their investment options. It becomes the responsibility of the retirement providers to help educate participants and make their retirement plan journey meaningful. AI is an essential tool to just do that. Algorithm-based technologies such as chatbots and robo-advisors, can educate participants from the comfort of their homes on their demand. For example, chatbots can predict or analyze when participants reduce contributions. They can then intercede and initiate a conversation with the participant educating them on the suitable plan.

#2 Intelligent insights help in personalizing plans
Every customer has their unique needs and matching up to their exact requirements could be a challenge. Retirement goals vary from person to person and the life stage they are at. This makes it essential for plan providers to be able to design plans to meet the requirements of different customers. Any communication from the provider needs to be personalized to their situation. Despite digitization, the retirement plan industry still relies on processes that are paper-based and this doesn’t help with customization. It is also very expensive as digitizing communication can generate as much as $500 million in aggregate savings annually. AI can help providers record and leverage big data if incorporated into their customer relationship management (CRM) systems. With the help of AI, retirement plan advisors can analyze emails and text messages in order to understand the needs of the participants better. Gradually, predictive analytics can be used to strategize proactive marketing and communication with the participants.

#3 Automation helps to streamline back-office tasks
The asset-weighted average expense ratio of Defined Contribution (DC) plans fell from 0.57% to 0.41% in just the past ten years and this downward trend is expected to continue. With increased fee disclosure, fee compression, tightened fiduciary focus, and change in payment modes, recordkeepers are hit the hardest. So, in order to prevent fee leakage, retirement providers must streamline backend operations to minimize errors and AI/ML enables just this.
● Workflow automation eliminates manual work and redirects man-hours for more significant participant engagement.
● Chatbots and robotic assistants help with training advisors in order to educate customers.
● Predictive analytics helps in increasing conversions by sending personalized campaigns to participants
● Natural language processing helps build minute customer profiles for better service by taking information from participant interactions like texts, emails and even phone calls.

Plan participants have gained control over the past few years as they look to access required information on-demand, via their convenient channel. As the future workforce becomes more proficient at technology, it’s important for the retirement plan industry to cater to their customers’ needs. The ultimate goal of plan sponsors, providers, and asset managers is to ensure that each employee gets a tailor-made solution to suit their individual behaviors and characteristics. And technologies like AI and ML play a major role in achieving this at a faster rate.

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