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Just like every aspect of financial services, the retirement industry finds itself in a state of rapid change, spurred not only by the global impact of COVID-19, but also by shifting demographics, digital engagement, underserved segments and increased competition from traditional providers and new market entrants. With so many forces in play, retirement plan providers need to rethink traditional business models and accelerate growth planning that leverages modern technology, workflow processes and shared services to drive greater value.
Industry consolidation pressures the bottom line
According to McKinsey and Company’s recent “From Diligence to Delivery” report, given the abundance of competitors, pricing pressure and the IT-intensive nature of the business, it is no surprise that the retirement industry has consolidated over the past decade. The report points out that much of this consolidation has been organic and, as stronger competitors have emerged, they found success by leveraging competitive pricing, distribution excellence and superior experience for intermediaries, plan sponsors and participants to take share.
The retirement industry, according to McKinsey, is at a pivotal point and needs to innovate to create meaningful value by revolutionizing its cost structure to create long-term sustainability. In addition, the retirement marketplace is increasingly placing value on participant advice, communications and education to stay connected with users. As a result, retirement plan providers focused on a digital engagement strategy across plan sponsors and participants will be better positioned in this new normal.
Shifting traditional business models
Given the trend toward consolidation and commoditization, to remain relevant and profitable, retirement plan providers must focus on addressing certain elements of their strategy and operating model. Customer expectations have shifted, and competitors are getting creative about how they meet customer needs outside of their traditional business models. Partnering with a firm that can handle processes that are important—even vital, but not strategic—such as infrastructure, information security, application management and process automation can be a game changer.
The right partner can help you implement best practices, including advanced automation (robotics, artificial intelligence and workflows) and data management across the retirement plan life cycle. By collaborating with a strong partner with in-depth knowledge of the retirement market and access to the right proprietary technology, you can reduce your total cost of operations, gain improved operational performance and leverage borrowed scale to focus on new growth opportunities. This enables you to run operations cost-effectively by freeing you from the day-to-day routines of managing operational processes, allowing you to direct investments to the areas that matter most in marketplace. In order to compete more aggressively, thinking outside the normal operational structure could provide you the leverage to make that shift.
Outsourcing services can help you reduce costs and focus on clients
As retirement plan providers strategize on where to focus growth investments amid the pandemic and beyond, FIS™ is experiencing an increase in inquiries for outsourcing solutions. The ability to outsource some or all non-strategic operational business functions can be a key driver in helping plan providers redirect focus and resources to drive new business growth. Having a technology partner that provides a flexible, scalable way to operate in this new environment is critical to improve operational efficiency, reduce key person or talent risk, maintain agility and, most importantly, improve the bottom line.
We help our clients focus on providing a white-labeled, unified modern retirement solution that reduces operational overhead for our clients and drive a flexible and intuitive user experience.
The retirement industry is filled with strong competition and new entrants are frequently entering the space. All are chasing growth in a saturated, mature market. Delivering a great CX will be key to growth. This is no longer a nice to have strategy, but one that needs to be planned and implemented sooner rather than later. Barriers to growth also include legacy technology. It is time to replace older platforms with modern, more flexible systems that allow you to direct your time and investments to the areas that matter most in the marketplace.